MARKETS SPECTATOR: Japan heads home

Japanese investors came, invested and are now leaving. That’s bad news for stocks, bonds and the Australian dollar.

Attracted to the triple-A credit of Commonwealth bonds and bank and Telstra shares that offered yields they could only dream of, Japanese investors are now selling their Australian securities amid volatile bond and stock markets back home that have seen the Topix fall about 17 per cent from its May high.

The repatriation of money back into Japan has caused the Australian dollar and the US greenback to weaken against the yen. The yen advanced 2.2 per cent against the greenback yesterday, its steepest rise since May 2010. The Australian dollar fell to US94.35 yesterday, its weakest level since October 4, 2011.

Since May 14, when the benchmark S&P/ASX200 Index rose to a 52-week high of 5220.987, the index has declined 9 per cent in the wake of Japanese and other offshore-based fund manager selling. Japan and other foreign investors’ decision to sell has been reinforced by a deteriorating Australian economy. Gross domestic product expanded 2.5 per cent in the first quarter this year from a year earlier, its slowest annual pace in almost two years.  

Banks, largely leveraged to the health of the domestic economy, have largely continued their share price declines today while the two biggest mining stocks – BHP and Rio Tinto – have also declined amid gloomy prospects for the global economy. At 1205 AEST BHP shares had fallen 74 cents, or 2.2 per cent, to $33.03. Rio shares had declined $1.11, or 2.1 per cent, to $52.95.

At 1204 AEST ANZ shares, down 16 per cent, since April 30 when they were at a 52-week high of $31.84, were unchanged at $26.86. Commonwealth Bank stock, down 11 per cent since its May 20 52-week high of $73.49, declined 66 cents, or 1 per cent, to $65.45. 

National Australia Bank shares, down 16 per cent since their 52-week high on April 30, of $34, slipped 28 cents, or 1 per cent, to $28.47. Westpac stock, down 18 per cent since its 52-week high of $34.06 May 1, rose 11.5 cents, or 0.4 per cent, to $27.825.

Telstra shares, down 11 per cent from a May 22 52-week high of $5.14, fell half a cent, or 0.1 per cent, to $4.595.

The S&P/ASX200 Index at 1210 AEST was down 45.672, or 1 per cent, to 4735.50.