Read the story here. Advertise at Before It's News here.
Profile image
By silveristhenew (Reporter)
Contributor profile | More stories
Story Views
Last hour:
Last 24 hours:

Are Australia’s Banks Going Bust in a Loud Boom? All of the Signs Point That Way!

% of readers think this story is Fact. Add your two cents.

As 2016 drew to a close, even as US bank stocks posted some of the biggest gains since Mr. Trump got elected, it seemed their counterparts down-under aren’t doing that well! All signs point to a huge weakening in Aussie bank stocks in 2017. But the bigger question is: Will we hear a loud boom as banks down under go bust?


There are ominous performance lags in Australia’s premier stock index, the S&P ASX/200 (AS51:IND), when compared to the  iShares MSCI ACWI ex-US ETF (ACWX:US). If you plot the two over a graph and analyse performance over a 5-year period, you can clearly see that they are moving in harmony – not necessarily in convergence, but definitely in the same direction. 

These lock-step moves indicated that there was a strong co-relationship between the two comparators. The equity market down under seemed to be working in tandem with most of the world. All was well until now!

A shorter term (1-year) view of these same two comparators reveals a whole new story, however. While the lock-step journey continued until around mid-December 2016, with the AS51:IND even outperforming the ACWX:US for a brief while; all that came to an abrupt end by mid-January 2017. There now appears a clear divergence, with the AS51:IND racking up a -26.88 differential as of the time of this writing.

The tight co-relation between the ASX and the rest of the world is clearly decoupling!


The underlying causes for this apparent divergence can be summed up in two words: Australia’s banks!

Australia’s financials index (AXFJ), which comprises over a 3rd of the ASX 200, had been ticking along merrily over the last 1 year or so, gaining a healthy 12.22%. This lead the broader S&P/ASX 200 to a nearly 13% gain during the 1-year period.  However, since the beginning of 2017, the ASX 200 is down nearly 1.94% (at the time of this writing), largely on a 3.55% decline of its financials component.

Analysts are convinced that the Australian Banks are largely responsible for the dismal YTD performance of the broader benchmark; and yet again there’s a 2-word explanation for the underlying cause: Interest rates.

The US banks continue to deliver steady improvements in their performance, largely driven by the gradually improving US economy, and powered by the recent Fed rate increases. The prospect of an additional two (for sure), and probably three increases over the next 12 months is also putting wind in the sails of the US banks.

With Australian banks however, it’s a whole different ballgame!

With no imminent Australian central bank rate increases in sight – the odds are just 15% that there will be even a single hike, the spreads between borrowing and lending rates are compressing even further. This is then putting huge pressure on profitability and future outlook for growth in bank stocks. 

Because of the comparatively lower premium (compared to U.S Treasuries) offered by Australian debt instruments, it would appear that the financial sector in Australia could be destined for darker times.  

The Australian stock market is clearly diverging from its previous charted course in line with broader global equity markets. Leading the downward spiral are Australia’s banks. The question is: Will the banks go bust with a loud boom? That is the million dollar question!


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!

Order by Phone at 888-809-8385 or online at M - F 9am to 5pm EST

Order by Phone at 888-388-7003 or online at M - F 9am to 5pm EST

Order by Phone at 888-388-7003 or online at M - F 9am to 5pm EST

Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen! 
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover -  Reduces Smart Meter radiation by 96%!  (See Video)

Immusist Beverage Concentrate - Proprietary blend, formulated to reduce inflammation while hydrating and oxygenating the cells.

Report abuse


    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    Load more ...




    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.