Australian Dollar and Stocks Face Perfect Storm

Marcus Jacob
25 Sep, 2014
New York City

Australian banks led the latest decline in stocks after the Aussie dollar dropped to the yearly low on the unwinding of yield-trade. Australia is facing weakening commodities prices, falling Aussie dollar and the exit of international investors.

[R]5:00 PM Sydney, Australia – Australian banks led the latest decline in stocks after the Aussie dollar dropped to the yearly low on the unwinding of yield-trade. Australia is facing weakening commodities prices, falling Aussie dollar and the exit of international investors.[/R]

Selling in financial stocks led the decliners in Australian markets and benchmark indexes pared gains.

The Australian dollar drifted to the low of the year as traders continued to unwind yield-trade positions and sold Aussie dollar.

The China led full-scale commodities slowdown has begun to grip currency market, commodities and stocks.

Banks led the decliners on the worry that the falling Aussie dollar, rising interest rate and overheated housing market may shake valuation in the sector.

Australian indexes have nearly wiped out all the gains in the year-so-far as international investors continue to pull capital away from markets.

ASX 200 index edged up 6.40 to 5,382.20 and the broader All Ordinaries index rose 6.50 to 5,382.40.

Stocks in Review

BHP Billiton Limited rose 0.3% to $34.79 after the mining company plans to list its soon to be separated company in London and Sydney and a secondary listing in South Africa.

Brickworks Limited rose 0.4% to $13.55 after the building material maker reported revenue in the year ending in July jumped 10.5% to $670.3 million from $606.5 million.

Net profit in the year soared 20.7% to $102.8 million compared to $85.2 million and diluted earning per share jumped to 69.4 cents from 57.6 cents a year earlier.

Lynas Corporation Limited closed unchanged at 11.5 cents after the rare earth minerals producer renegotiated a US $225 million loan with two Japanese groups.

RedHill Education Limited closed unchanged at $1.40 after the education service provider stated revenue in the year ending in June surged 19% to $19.2 million from $16.1 million.

Net in the year swung to a profit $4.8 million compared to loss of $0.874 million and diluted profit per share swung to 15.94 cents from diluted loss per share of 2.99 cents a year earlier.