MARKETS SPECTATOR: Bank slide begins

The long bull run for bank stocks appears to be slowing and the money is flowing back to resources.

Slip, sliding away.

That seems to be what is happening to bank stocks. The S&P/ASX200 Finance Index has slid 2.6 per cent this month. ANZ Bank shares are down 8 per cent this month, Commonwealth Bank has dropped 2.4 per cent, NAB has fallen 3.8 per cent and Westpac has eased 8.7 per cent.

Brokers expect, as one put it, that “money rolls out of the banks” as the stocks go ex-dividend. Such a disparity may pull more money into resources stocks, particularly if fund managers spot a trend that may leave them little choice but to go along with the money flow if they don’t want their returns to look bad compared to their peers.  

In contrast, the miners are up. The S&P/ASX 200 Materials Index has gained 4 per cent this month. BHP Billiton shares yesterday rose 44 cents, or 1.3 per cent, to $35.27. The stock has risen for three consecutive trading days and is up 7.9 per cent this month. Rio Tinto’s shares yesterday added $1, or 1.8 per cent, to $56.30.

Mining stocks are also doing better than the market. The S&P/ASX 200 Index has dropped 0.5 per cent this month.

But the S&P/ASX 200 Materials Index is trading at a 30.30 PE with a dividend yield of 2.99, according to Bloomberg data. The S&P/ASX200 Finance Index is trading at a PE of 16.47 with a dividend yield of 5.06.

Moreover mining services stocks, perhaps a bellwether for the resources sector, have put out a series of profit warnings. UGL, Transfield and WorleyParsons have all cut their earnings forecasts.

Andrew Buckley, chief executive of Cardno, an infrastructure and environmental services company, says business conditions in Australia’s mining sector are worse than any other part of the world. Cardno, which garners about 10 per cent of its $1 billion annual revenue from mining, has forecast net profit for the 12 months to June 30 at $73-$77 million. Broker estimates were $81-$82 million.

Telecommunication stocks may be ripe for the picking. The S&P/ASX 200 Index has gained 19 per cent in the year to date and 45 per cent in the last 12 months. Telstra’s shares have surged 43 per cent in the last 12 months and 18 per cent this year. The stock is trading above the market’s PE at 16.91 forecast 2013 earnings, according to Bloomberg data.