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ANZ Raises Capital From Shareholders, How Will Aus Banks Respond? – Weekly Outlook with Peter Esho

Join Peter Esho as he details the key market events for the week ahead and the critical macro economic data for the week starting 10th of AugustĀ 2015.

ANZ surprised the markets last week by coming out and raising up to $3 billion from shareholders. We think it is the right decision to recapitalise the balance share and prepare for tougher times ahead.

The Australian banks have actually seen a very small amount of bad debts over the past few years as interest rates have fallen the amount of bad debt charges going through the bank’s profit and loss statement has been below trend.And we actually think that it will increase over the next three to five years.So it is a very good sign to be seen.

Banks like ANZ going out recapitalising their balance share in anticipation of that increase. Some might say there is a buying opportunity, we think it is actually a start of a further downward trend across all the Australian banks.

As interest rates fell, the Australian banks were seeing as dividend havenstheir commitment to paying out those dividends had been a major driver in increasing their share prices.

All eyes are on the Commonwealth Bank of Australia this week to see how its earnings stacked up to expectations and also it will also come out and seek more capital. There is mounting evidence that it will also need to do so but by a greater factor.

So we see continuing downward pressure on the share prices of Australian banks. We have picked this topic this week because the Australian banks are very statistically significant to the ASX200 index. In fact, Commonwealth bank alone is slightly in excess of 10% of the entire ASX200 index.
The other banks, National Australia bank,Westpac and ANZ coming out last week are also significant combinedthere an excess of one fifth of the entire ASX 200 index and that is why last week we saw huge downward pressure on the index back below 5500 on the ASX200.

We think the trend downward will continue if not over the next week or so then definitely over the next few months but we really need to see on the ASX200 is a pickup in the material stocks. We saw a glimpse of that from Rio Tinto last week coming out slightly ahead of expectations but that is not enough.BHP is still on the pressure, the iron ore stocks are still on the pressure, energy prices are still falling and that means that the ASX200 index and the Australian market is locked to a trend lower.

This brings us to Invast portfolio select platform where we pick actual trends regardless of where the index is to make investing. We are picking investment themes right around the world. We think it is a better way to invest and we articulate those views on our blog on a weekly basis.

Traders involved in the market always need to know what events are unfolding and how that might affect the decisions they make in their portfolio. Therefore it is essential to get a snapshot of what will likely move the market this week.

Irrespective of whether you trade the ASX stocks, Forex, Indices, Commodities or international markets, you’ll get a great perspective on what to expect this week.

These are our initial impressions only, for further details please do not hesitate to get in touch via the details below:

Peter Esho

Chief Market Analyst
@PeterEsho

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