Shares plunge as panic strikes
September 18, 2008 - 1:39PM
Australian shares have plunged in the latest wave of weakness, lopping off $38 billion in value, as fears from the bankruptcies and bailouts on Wall Street this week gathered momentum.
The benchmark S&P/ASX200 index was 170.1 points, or 3.6%, lower at 4552.1 in mid-afternoon trading, taking the share market down to 18-month lows, while the broader All Ordinaries fell 166.6 points, or 3.49%, to 4603.1.
Macquarie Bank traded down $5.73, or 16.9%, to $28.20, after ratings agency Standard & Poor's downgraded the outlook for the company's rating from stable to negative. Shares in the Macquarie had dropped as much as 20.8 in early trade.
Investors had no stomach for any similarities between Australia's no. 1 investment bank's business model and those of the stricken US investment banks.
"Macquarie Group has been savagely de-rated since the onset of the global credit crunch from July 2007 but more recently the de-rating has been even more extreme in the wake of the numerous problems recently emerging in global capital markets," according to a report yesterday by JP Morgan.
"In this environment, with the hedge funds driving the agenda, it is hard to identify a catalyst to turn Macquarie's price direction around but we note that massive binges of short selling in Macquarie have previously been followed by commensurate bouts of short covering."
Babcock & Brown, with a business model in the mould of Macquarie's, fell 19 cents, or 20.6%, to 73 cents.
No bank spared
The financial sector has been in the cross-hairs of investors, with the big investment banks losing more than a fifth of their market cap.
The Commonwealth Bank shed $1.48, or 3.6%, to $39.62, NAB dropped $1.46, or 7%, to $19.24, while ANZ fell 60 cents, or 3.75%, to $15.40.
Westpac slumped $1.03 cents, or 4.5%, St George Bank sank $1.39, or 4.6%, to $28.76.
"We've been waiting for this market to capitulate,'' said James McGlew, senior dealer at Argonaut Securities. "Until the news overnight, there had been a degree of denial.''
Wall Street plunged more than 4% overnight after the US government rescued insurance behemoth American International Group for $107 billion dollars.
"We're getting to the capitulation stage,'' he said. "People are just lining up and throwing the baby out with the bathwater.''
"I went through the 1987 crash and you need to get to a point where the fear flushes the market out.''
The share market took another massive beating today, but managed to claw back some of the losses in late trading.
At the close, the benchmark S&P/ASX 200 index was down 2.4%, or 114.9 points, to 4607.3, after dropping by more than 4% intra-day.
Leading the losses was Macquarie Bank, which plummeted 23.2%, or $7.88, to close at $26.05, only slightly better than its intra-day low. Fellow investment bank Babcock & Brown lost 17.4%, or 16 cents, to 76 cents.
Elsewhere in the financial sector, ANZ Bank was down 3.44%, or 55 cents, to $15.45, the Commonwealth Bank was down 2.5%, or $1.02, to $40.08, NAB lost 5.3%, or $1.10, to $19.60, Westpac was down 4.4%, or $1.01, to $22.00 and St george losst 5.2%, or $1.56, to $28.59.
Insurer Suncorp-Metway closed 5.8%, or 51 cents, lower at $8.35 after earlier losing more than 19% of it share value.
The big miners were also lower, with BHP losing 1.8%, or 65 cents, to $35.00 and Rio Tinto losing 3.5%, or $3.60, to $98.40.
The gold sector was the big winner on the day - Lihir Gold gained 15.9%, or 34 cents, to $2.48 and Newcrest Mining gained 14.5%, or $3.11, to close at $24.50.
Energy stocks were mixed, with Woodside Petroleum up 0.67%, or 34 cents, to $51.40 and Santos down 1.4%, or 25 cents, to $17.75.
The big retailers were also mixed. Woolworths was down 0.56%, or 16 cents, to $28.24, but Wesfarmers was up 1.26%, or 36 cents, to $29.99.
More to come ...