Super hit in $50bn shares fall

Australian super savings are on track for their worst results in seven years after $50bn was wiped from the stockmarket yesterday.

A trader on Wall Street feels the pressure during the sell-off. Picture: AP

Australian superannuation savings are on track for their worst performance in seven years after $50 billion was wiped from the stockmarket yesterday, pushing shares down to a 12-month low.

The benchmark S&P/ASX 200 dived 2.83 per cent to 5664.1 points, hit by a renewed slump on Wall Street as big-name technology stocks dived, stoking fears that global markets were heading into bearish territory.

Australian shares have fallen 10.8 per cent since August, marking the start of an official correction for the first time since the bull market began in early 2016, while US shares are also now close to crossing that mark.

In an increasingly volatile year globally, the US market has now turned negative since January 1, while Australian shares have fallen deeper into the red. After its worst day since February, the S&P/ASX 200 is now down almost 7 per cent this year. It had been up almost 5 per cent by late August.

The latest sell-off had shown “capitulation in too many stocks”, said Bell Potter director of institutional sales and trading Richard Coppleson. “If the US continues to melt down, we will simply be dragged down with them.”

Adding to yesterday’s worries was the stunning implosion of ­financial services giant AMP, which fell 25 per cent to a record low of $2.50 after a messy exit from its life-insurance business.

 

Australian Prudential Regulation Authority chairman Wayne Byres labelled the risk of a sharp correction in financial markets as “possible” and warned that Australia may be due for a downturn.

“One of our jobs is just to remind people that when things are going pretty well, that actually they don’t stay that way forever,” Mr Byres told a Senate estimates committee in Canberra.

“It’s been 10 years since the GFC (and) there are concerns building about whether markets are due for a correction.”

Mr Byres, who oversees the nat­ion’s banking watchdog, said the financial system was vulnerable to offshore risks.

Losses carried through to Asia, with Japan’s Nikkei 225 falling ­almost 4 per cent. China’s Shanghai Composite was down 2.8 per cent during the day but closed 0.2 per cent higher amid suspected state intervention. Wall Street’s Dow Jones Industrial Average fell 2.4 per cent while the tech-heavy Nasdaq fell 4.4 per cent.

Local technology stocks and those offshore bore the brunt of the selldown as US giants posted the deepest losses. Netflix was off ­almost 10 per cent, Facebook fell 5.4 per cent while Google’s owner ­Alphabet fell 4.8 per cent.

Local tech names such as Xero, Afterpay and WiseTech were also sold down heavily. For Australian super funds, the widely held “balanced fund” is down about 2.5 per cent this financial year to date. This marks the worst performance since 2011 when super returns dropped 4.9 per cent over the same period, according to research house SuperRatings.

An investor who is exclusively invested in shares would have lost about $7500 for every $100,000 invested since the end of August, according to SuperRatings figures.

Even so, the losses come on the back of exceptional super fund returns, with many reporting double-digit performance as synchronised global growth and low inflation meant most asset classes posted better-than-average historical returns. In the year to July 31 last year, the average balanced fund posted a 9.2 per cent return.

However, as leading fund managers, including Future Fund chairman Peter Costello, have warned, good returns are going to be harder to achieve.

Inside the nation’s largest super funds, the biggest problem is that local shares and global shares — especially those in the US — are now all falling at the same time.

“In most cases we will see members in a balanced option drop maybe 4 per cent after this downturn,” said Jeff Bresnahan, the managing director of SuperRatings.

Compounding losses, private investors are also facing a weakening residential property market, especially in Sydney and Melbourne. Residential property prices in Sydney have fallen 6.1 per cent over the past year while Melbourne is 3.4 per cent lower, according to property researcher CoreLogic.

Industry super funds, which have outperformed all competition, will now be tested as some have had higher exposure to equities over fixed-interest investments.

The Australian dollar proved resilient yesterday. The local currency rose US0.15c to US70.75c in local trading, remaining above a 2½ -year low of US70.41c hit two weeks ago. In a similar vein, the price of gold — which normally benefits from such uncertainty — slipped ­$US1.50 to $US1232 an ounce.

Additional reporting: Michael Roddan