Australian shares fell 3 per cent to a six-week low on Friday, with financial firms leading declines, on fears that more credit market problems would tip the US into a recession and drag global economies down with it.
THE Australian share market is in a quandary with confidence badly sapped by bad news about careless lending and investment here and overseas, leaving all but the bravest investors on the sidelines in a week when share losses approached $114 billion.
As another volatile session stripped 3.2 per cent from the S&P/ASX 200 Index yesterday, stock advisers were at a loss to explain the steep drops, saying investor resilience had been shot to pieces with an absence of institutional buying, made worse by hedge fund short selling continuing to feed off the dismal sentiment.
The benchmark S&P/ASX 200 index dropped 163.6 points to 5,271.9 by 0044 GMT, its lowest level seen January 23 and after rising 1.1 per cent in the previous session.
New Zealand's benchmark NZX-50 index fell 1.6 per cent, or 56.11 points, to 3,547.72. Top stock Telecom Corp Ltd was down 2.5 per cent at NZ$3.83.
Australia's stocks fell, rounding out the Australian All Ordinaries Index's biggest weekly loss in two decades, after U.S. foreclosures reached a record and commodity prices dropped.
National Australia Bank Ltd. tumbled to a three-year low, leading financial companies lower, on concern home-loan defaults will provoke more credit losses. BHP Billiton slumped for the first time in four days after a decline in metals prices.
THE share market is in freefall, with $114 billion lost on the share market this week and more losses to come as panic takes over.
WESTPAC last night became the second big bank to raise rates on variable home loan by more than the RBA rate hike as mortgage rates near 10pc.
MARGIN calls and hedge fund selling are driving share prices down of finance stocks including Babcock & Brown and there's no end in sight.
Asian stocks fell, completing the biggest weekly drop since August, as record home foreclosures in the U.S. fueled speculation global loan defaults will increase.
Financial stocks led the decline. National Australia Bank Ltd. fell to the lowest in more than three years in Sydney and Sumitomo Mitsui Financial Group Inc. dropped in Tokyo as gauges of credit risk in the region rose to records. Sony Corp. and Nintendo Co. led declines among companies reliant on U.S. sales. BHP Billiton, the world's largest mining company, retreated on lower metal prices.
``All the uncertainty in the U.S. and surrounding the credit crunch is bearing down again on markets around the world,'' said Shane Oliver, who helps manage the equivalent of $113 billion at AMP Capital Investors in Sydney. ``Asian markets look like they're going to re-test their January lows.''
The MSCI Asia Pacific Index slumped 2.6 percent to 140.18 as of 7:20 p.m. in Tokyo, taking its loss in the past five days to 5 percent. The benchmark has declined 11 percent this year and touched a 14-month low on Jan. 22, on concern a housing slump will drag the U.S. into a recession.
The MSCI index's weekly loss is the most since the period ended Aug. 17, when stocks fell amid speculation U.S. mortgage lender Countrywide Financial Corp. would go bankrupt.
Japan's Nikkei 225 Stock Average retreated 3.3 percent to 12,782.80. It declined 6 percent the past five days, the biggest loss since the week ended Aug. 17. Australia's S&P/ASX 200 Index tumbled 3.2 percent, the most in a month.
Financial companies: National Australia Bank Ltd. (NAB AU), the country's largest bank, slipped A$1.53, or 5.4 percent, to A$26.93, its weakest close in more than three years. Commonwealth Bank of Australia (CBA AU), the second-largest, declined A$1.22, or 3 percent, to A$39.35, its lowest close since October 2005.
Macquarie Group Ltd. (MQG AU), Australia's biggest securities firm, dropped for a seventh straight day, sliding A$1.57, or 3.3 percent, to A$45.43, ending the week 15 percent lower. Babcock & Brown Ltd. (BNB AU), Australia's second-largest investment bank, plunged A$1.54, or 9.9 percent, to A$13.96, its biggest decline in seven weeks.
Mining, materials companies: BHP Billiton (BHP AU), the world's largest mining company, fell 92 cents, or 2.3 percent, to A$38.88, the biggest decline in the S&P/ASX 200's group of materials-related stocks. Rio Tinto Ltd. (RIO AU), which is resisting a takeover by BHP, declined A$4.8, or 3.5 percent, to A$131.20, the lowest since Feb. 13. Bluescope Steel Ltd. (BSL AU), Australia's largest steelmaker, decreased 38 cents, or 3.5 percent, to A$10.40, the lowest since Feb. 12.