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Australian shares tumbled on Thursday as jittery investors considered the implications of rising bond yields, while some of the country’s best known blue chips started trading without their dividends.
The ASX200 closed down 0.8 per cent to 6760.7, with the tech sector receiving an early hammering similar to that of Wall Street stocks overnight.
Afterpay was hit in early trade on Thursday.Credit:Attila Csaszar
The US market closed down across its major indices on Wednesday as 10 year US treasury bond yields rose to 1.47 per cent, with tech investors in particular worried about rising inflation.
On the ASX, shares in Afterpay had lost 2 per cent by 4:00pm to $118.32, while Zip Co was down 4.3 per cent to $10.09. Small business accounting firm Xero was down 2.61 per cent to $115.90 despite unveiling its largest acquisition to date, a $284 million purchase of European workplace platform Planday.
Meanwhile, blue chip stocks trading ex-dividend proved a major drag on the index, with CSL down 4.2 per cent for the session, while BHP added a further drag of 3.1 per cent. CSL’s performance dragged the healthcare sector 3.5 per cent lower for the session, with fellow household names Cochlear and ResMed also finishing the session down.
Investors and analysts remained bullish on the outlook for local stocks despite the choppy conditions, however. Credit Suisse’s director and portfolio manager of Australian equities, Mike Jenneke, said in a presentation on Thursday morning that while bond yield rises are starting to gain attention, they won’t affect all stocks.
“Probably the implications in the Australian market are more for sectors that are on high P/E [ratios] and low yields, where perhaps there is going to be pressure on their valuations,” he said.
Mr Jenneke said investors must remember that based on February’s reporting season, the ASX is looking at one of its swiftest rebounds from a crisis ever.
“Corporate balance sheets across the market are in excellent shape.”
The financials sector saw selling at the market open but banks bounced back throughout the session, 0.7 per cent higher in the last half hour of trading. ANZ gained 2.6 per cent, with Goldman Sachs upgrading the stock to a buy, based on better than expected margins.
The firm re-rated the stock based on solid balance sheet momentum and solid lending growth. “We believe ANZ will be able to sustain this momentum and currently forecast 4% total loan growth in FY21E,” Andrew Lyons wrote in a note.