Local sharemarket falls as bank stocks weigh

The local sharemarket sinks into the red as financials endure a selloff on fears of a federal budget bank levy.

Commonwealth Bank shares sunk 3.9 per cent following its quarterly update.

Almost $14 billion was wiped off the big four Australian banks today as investors scattered amid fears of a levy directed at the lenders in the federal budget.

The financial sector, which is the largest on the local market by far, dropped 2.4 per cent while most other sector saw solid gains.

Weighed down by the banking giants, the S&P/ASX 200 closed in negative territory for the fifth time in six sessions, giving up 0.53 per cent to 5839.9 points.

Commonwealth Bank fell 3.9 per cent on Tuesday to $82.02, Westpac gave up 3.5 per cent to $32.88, ANZ dropped 2.6 per cent to $29.16 and NAB fell 2.1 per cent to $32.42. The collective fall in dollars and cents works out to be around $13.8 billion.

“CBA’s numbers were a little bit soft, that was the other thing, but of course the talk of taxes… the market is a little troubled on the back of all these things,” Macquarie division director Lucinda Chan told The Australian.

“All the banks have now come out with their numbers and they haven’t done too badly, really.”

When asked if the banks were overvalued and due for this pullback, Ms Chan said it all hinges on dividends.

“So long as [the banks] pay the dividends as the market expects then they are ultimately going to get the support.”

And with Credit Suisse predicting on Tuesday that Telstra will cut its dividend from 31 cents to 25 cents per share this year, yield-hungry investors could focus their attention further on the banks.

Retailers also suffered during the session following weaker-than-expected retail sales data released by the ABS at 11:30am AEST, and continuing concerns about the impact of Amazon and TK Maxx’s looming arrival.

JB Hi-Fi was the worst performing stock on the ASX 200, down 4.4 per cent to $23.98, while Harvey Norman fell 3.5 per cent to $4.13.

Elsewhere, BHP Billiton and Rio Tinto rose 0.8 per cent and 0.5 per cent, respectively. Wesfarmers rose 0.5 per cent, while Woolworths edged 0.2 per cent higher.

Telstra saw a solid 2.3 per cent gain and gold miners were well represented in the ASX 200 best-performers column.

The Australian dollar, meanwhile, was trading US73.40 cents –its lowest level in four months – as local stocks closed for the day.