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Sydney Morning Herald

April 8, 2020

ASX hit by credit rating downgrades on banking sector


Lucy Battersby

Weak sentiment surrounding the big bank stocks outweighed optimism among real estate stocks on Wednesday, leading to a 0.9 per cent decline on the S&P/ASX 200.

Stocks for shopping centre owners rallied as much as 10 per cent as landlords called for clarity on whether retailers really need to close as part of the coronavirus shut down.

However, the banks were downgraded by a ratings agency, which put pressure on share prices and led to falls of more than 5 per cent in Westpac. The S&P/ASX 200 Index closed at 5206 points, a one-day decline of 0.9 per cent. It is now 14.5 per cent higher than the low-point reached on March 23 after a sharp one-month fall.

A near-empty Chadstone shopping centre on March 20. The mall's owners, Vacinity Centres, gained 10.6 per cent on Wednesday as commercial landlords called for governments to ease shopping restrictions. JOE ARMAO

Chief investment officer at Munro Partners, Nick Griffin, said his firm made money during the March downturn thanks to put options and short-selling. Munro mainly invests in the United States, especially in the technology sector. “We were very bullish on aerospace for many years. But we cut them very quickly in the crisis," Mr Griffin said. Munro Partners has also "stepped to the sidelines" on luxury and climate investments.

“The sad thing is, when economic times get tough, I generally find we can’t afford to do climate change investments."

Mr Griffin got through the 2008 global financial crisis and says investors need to be patient and not worry about picking the bottom of the market.

“The opportunities will present themselves. Sometimes it just takes a bit of time to work its way through. You will probably miss the bottom and that’s fine because the bull market after the financial crisis went for 10years."

Banking stocks were under pressure on Wednesday after the Australian Prudential Regulation Authority asked them to suspend dividends and ratings agency Fitch downgraded the banks' credit rating, which could lead to increased funding costs.

Westpac shares fell the most of the big four banks, down 5.4 per cent, or 85¢, to $15.25. The share price dipped from $15.50 to $15.25 during the final settlement period. Commonwealth Bank dropped 3.3 per cent to $59.81, ANZ and NAB both fell about 4.9 per cent to $15.52 and $15.35 respectively.

The biggest moves of the day were gains of 12.5 per cent in Virgin Money, 10.9 per cent in Unibail-Rodamco-Westfield, and 10.6 per cent in Vicinity Centres. Stockland and Scentre Group both gained more than 7 per cent.

The biggest decline was a fall of 8.1 per cent in Jumbo Interactive, followed by a decline of 6.4 per cent in Shopping Centres Australiasia (SCA), and 5.6 per cent in Afterpay.

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