Australia shares flat awaiting bank capital changes, NZ hits record high

By Hanna Paul

July 17 (Reuters) – Australian shares were flat on Monday,
as weakness in financial institutions dragged on more upbeat
material stocks while investors braced for a possible expansion
in capital rules for banks amid mounting concerns over risky
lending.

The S&P/ASX 200 index dithered on either side of
flat but was up 2.08 points, or 0.04 percent, at 5,767.2 by 0311
GMT. The benchmark rose 0.5 percent on Friday.

Three of the ‘Big Four’ banks dragged most on the financial
sector, falling 0.4 to 0.5 percent, followed by insurers
Medibank Private Ltd and Insurance Australia Group
.

“Financials are struggling to get into positive territory
and investors will continue to look out for the APRA
announcement on what’s happening with the banks capital
requirements,” said Tony Farnham, an economist with Patersons
Securities.

Local media is speculating the Australian Prudential
Regulatory Authority (APRA) will announce new capital rules this
week for major banks. The government is looking at expanding the
powers of the country’s prudential regulator to include non-bank
lenders amid worry of financial stability in the economy.

Giving into pressure from regulators, major banks have cut
back on home loans and institutional lending to real estate
investors in recent months, giving non-bank lenders an
opportunity to expand their loan books.

This development has stoked concerns as the country’s
sky-high household debt and accelerating property prices prevail
while wage growth has been slow.

Financial stocks were also depressed by subdued rate hike
prospects in the United States following weak retail sales data.

Telstra sagged 1.2 percent, on track for its fifth
day in the red, on the prospects it may slash dividends.
Investors are awaiting such a move as the telecom giant faces
growing competition and a pressure on its earnings, according to
the Australian Financial Review. [http://bit.ly/2vsrxy9
]

Meanwhile, the materials sector led by diversified miner
South32 Ltd rising more than 2.9 percent, provided some
cheer.

Aluminium prices notched their best single-day rise on
Friday while oil and copper prices remained
upbeat.

Index heavyweights Rio Tinto and Fortescue Metals
Group edged up as much as 1 percent and 2.5 percent,
respectively.

New Zealand’s benchmark S&P/NZX 50 index gained 0.4
percent, touching at one point its highest intraday level on
record, led by industrial and healthcare sectors.

The country’s net foreign liabilities are at their lowest
as a percentage of gross domestic product since the late 1980’s,
making the country less vulnerable to shocks, according to the
Reserve Bank of New Zealand Deputy Governor Geoff Bascand.

Retirement village operators Summerset Holdings and
Metlife Care were the biggest gainers in the benchmark,
up 2.3 percent and 1.8 percent.
(Reporting by Hanna Paul; Additional Reporting by Urvashi
Goenka; Editing by Jacqueline Wong)

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