ASX loses ground over bank dividends debate

Fear of dividend cuts rattled the major banks on Wednesday, ultimately pulling the benchmark ASX to a 0.9pc loss.

Bank dividends were in focus.

Fear of dividend cuts rattled the major banks on Wednesday, ultimately pulling the benchmark ASX to a 0.9 per cent loss.

Shares slipped as much as 2.5 per cent at the open and a steady afternoon climb put the S&P/ASX 200 on track for a positive close, but it was not meant to be, the benchmark falling sharply at the final match to close down 45 points, or 0.86 per cent, at 5206.9.

Meanwhile, the All Ords gave up 43 points, or 0.8 per cent, to 5258.8.

By the close, all sectors bar consumer discretionary and real estate were trading in the red.

Bank dividends were in focus after APRA urged the sector to “seriously consider” suspending dividends to shore up capital as the COVID-19 crisis plays out.

Westpac, National Australia Bank and ANZ were key concerns, as they rule off their year on March 31, while Commonwealth Bank already sent out dividends last week.

As such, Commonwealth fared best at the close, slipping by 3.3 per cent to $59.81 as Westpac lost 5.3 per cent to $15.25, ANZ took a 4.9 per cent hit to close at $15.52 while NAB slipped by 4.8 per cent to $15.35.

IG Markets analyst Kyle Rodda noted that the market had likely progressed past the peak fear levels, with a risk premium now built into prices.

“We’re now, quite likely, at the point in the market where the slow grind begins, whereby the capitulation in the underlying economy shows up in corporate guidance and company earnings,” he said.

“The heightened risk of a cut to bank dividends portends the beginning of this stage of a bear market. Even if the “P” in price-to-earnings has come down to considerable levels, the “E” is still to catch up to reality.

“If the economy does contract on a Great Depression like scale, then earnings, and this bear-market, might still have some downside in it.”

The Aussie dollar was 0.6 per cent weaker against the US dollar, buying US61.29c at the local close.

Across the rest of the financials sector, Macquarie noted the APRA warning and said it would make a decision when it released earnings in May. Shares in the bank bucked the sector weakness, adding 0.5 per cent to $92.89.

Bank of Queensland released its interim results and deferred its dividend, sending its shares lower by 2.1 per cent to $5.03.

Bendigo and Adelaide Bank finished down 2.9 per cent at $6.11 while QBE, who also noted the APRA notice, edged up 0.6 per cent to $8.90 for the day.

On a positive note, real estate trusts rebounded by 3.1 per cent after heavy selling in the sector recently.

Unibail Rodamco Westfield – the owner of Westfield’s offshore sites – outperformed with a 10.9 per cent jump to $4.99 as local owner Scentre added 7.4 per cent to $1.88.

Vicinity Centres rose by 10.6 per cent to $1.31 while SCA Property slipped by 6.4 per cent to $2.21 after completing a $250m placement to capitalise on opportunities amid the coronavirus downturn.

In the major miners, BHP lost 1.2 per cent to $31.32, Rio Tinto finished down 1.5 per cent to $89.26 as it posted a profit surge at its Singaporean marketing hub and Fortescue gave up 1.5 per cent to $11.25.

Energy stocks slipped 1.3 per cent even as oil futures rebounded slightly. At the close of local trade, WTI crude futures were trading up 4.95 per cent.

Oil Search settled lower by 5.9 per cent to $2.57 as it completed its $1.1bn equity raise, reportedly receiving interest significantly in excess of the offer.

Woodside gave up 0.8 per cent to $21.03 as Santos traded lower by 0.2 per cent to $4.44 and Origin lost 0.4 per cent to $4.86.