Bull market dead and buried with market down more than 26pc from its recent peak

A closer look at Qantas tells us much about the wider sentiment across the ASX. Picture: iStock

The bull market is not just dead, but buried at the crossroads with a stake through its heart.

Traders stripped another 7.4 per cent off the ASX on Thursday taking the market down more than 26 per cent from its recent peak with special treatment for Qantas where a 10 per cent fall means the national airline is now half the price it was at the start of the year.

Indeed, share markets appeared to be entirely resistant to economic stimulus measures - at least initially - as coronavirus fears continues to grip both investors and the wider public.

Locally, traders had hoped for more immediate stimulus measures from the Morrison government while the US government’s muted stimulus package appears to have been neutralised by the Trump administration’s ban on inbound travel from Europe.

As the blue chip stock at the epicentre of the market crisis, a closer look at Qantas tells us much about the wider sentiment across the ASX.

At $3.64 the stock, which is widely seen as very well managed industrial, is now on a yield of more than 10 per cent (against a market average of close to 5 per cent).

Similarly, the Qantas price earnings ratio is around 6.6 times (against 16.5 times for the wider market). Nevertheless, bargain hunters for the airline stock are very thin on the ground.

The same lack of support goes for all the major banks, which now offer 10 per cent yields, low p/es and operate in a government protected oligopoly. Commonwealth Bank fell 7.9 per cent in the session, the rest of the banks were slightly worse ANZ down 8.5 per cent, NAB down 8.3 per cent and Westpac down 8.8 per cent.

In a week where records continue to be broken for all the wrong reasons (Thursday was the worst drop since the GFC - the record had only held since Monday) few corners of the market are now undamaged with the exception of gold stocks and some special funds.

From a year to date perspective the worst affected ASX sector is energy, which was double hit by the surprise drop in oil prices coupled with the broader market malaise. Energy stocks have now dropped by up to 40 per cent since January.

Meanwhile, that 16.5 times price earnings ratio for the wider market means we are back closer to the long-term average - it has dropped from more than 18.

If there is any direction to this week’s trading, the markets are moving from panic to signs of paralysis as a string of capital raising are abandoned. It is highly likely in the weeks ahead that new floats and IPOs will also be abandoned or postponed for a considerable period.

Merger and acquisition deals which have already been announced are very likely to be suspended or substantially recalculated to recognise the changed valuations of the last month.

One of the very few consolations emerging is the prospect of even better income from blue chip stocks as cash rates dwindle.

It’s not just the banks offering big fat yields now - a huge swag of industrials are showing indicative yields of 10 per cent or more, including BHP (down 8 per cent), is now on a yield of 12 per cent while Rio - down 6 per cent - is on a yield of 11 per cent.

Hey, even CSL’s p/e has dropped to a not completely crazy 38 times and the dividend yield has climbed to the dizzy heights of 1.08 per cent.