MARKETS SPECTATOR: Banking on a comeback

Fund managers have begun putting money back into banks after taking profits during the month of May.

Banks seem to be this year’s siren-call for fund managers.

After ANZ’s 14 per cent decline since May 1, Commonwealth Bank’s 9.6 per cent drop, National Bank of Australia’s 15 per cent slide and Westpac’s 17 per cent fall, some are seeing value in the big four.

Their collective yields have risen to about 7 per cent from about 5 per cent, making them much more attractive as their valuations have cheapened. As goes the banks, which comprises about 30 per cent of the market’s value, so goes the index. If the banks begin to rise so will the benchmak S&P/ASX200 Index which has fallen 7.1 per cent since May 14 when foreign selling began in earnest.

But the market now is about 400 points lower than it was mid-May and that means Perpetual fund manager Nathan Parkin has been buying stocks.

“I’m more bullish now then when the market was 400 points higher,” says Parkin. “I’m reasonably happy buying things as the outlook is better than it has been for a couple of years.”

Parkin says in 2012 earnings were mixed. This year many more companies will report profit growth and if they can report revenue growth then investors will be much more optimistic despite Australia’s cloudy economic picture.

Still, there is continued evidence offshore fund managers are continuing to sell Australian stocks. The Australian dollar at 1525 AEST had fallen to 96.40 cents against the US dollar from 96.74 cents yesterday, according to Bloomberg data.

The S&P/ASX500 Index was down 51.408, or 1.1 per cent, to 4,849.40. ANZ shares slid 58.5 cents, or 2.1 per cent, to $27.325. Commonwealth Bank had dropped 84 cents, or 1.3 per cent, to $66.31. National Australia Bank had fallen 53 cents, or 1.8 per cent, to $29.08. Westpac had slipped 69 cents, or 2.4 per cent, to $28.26.