DJ UPDATE: Australia Shares Dip on Report of Bank Levy
By David Rogers
SYDNEY--Australian shares dipped Thursday as banks were buffeted by a report that the federal government will announce a deposit insurance levy on banks in its economic statement on Friday. After initially saying the ruling center-left government plans to charge banks between 0.5% and 1.0% on protected deposits, The Australian Financial Review altered the numbers to 0.01%-0.05%, implying the charge would be 10 times less than originally reported. At 0200 GMT, the benchmark S&P/ASX 200 was flat at 5051.1 after falling to 5030.1. "All we are talking about today is this potential bank tax," said Shaw Stockbroking senior investment adviser Shawn Hickman. Commonwealth Bank of Australia, Westpac, ANZ and National Australia Bank were down 0.9%-1.6% after falling 2.1%-2.8% before The Australian Financial Review changed its report. Analysts stressed any bank tax was likely to be contingent on the outcome of the federal election, which must be held by the end of November. "With the upcoming election, this doesn't appear a particularly strong vote-winning idea, given it's likely to drive lower deposit rates, lower bank stock prices and the rise of banking sector lobbying," Macquarie analysts said. "Likewise, it may never see the light of day, given this would require the ALP (Australian Labor Party) to win the upcoming election." A lower Australian dollar and strong manufacturing data from China initially boosted Australian shares as resources stocks rallied. The domestic bourse spiked up to 5092.3 after the Australian dollar hit a fresh two-year low of 0.8926 and China said its Purchasing Managers' Index rose to 50.3 in July, exceeding market expectations of a fall to 49.8. However, HSBC's final PMI remained at 47.7, suggesting that manufacturing in Australia's biggest trading partner and the world's third-biggest economy continued to contract. BHP Billiton shares were up 0.9% after rising 1.4% to a two-month high of A$35.14 after China's official PMI data were released. "Resources shares have had a great run and I think they can pull back," Shaw's Mr. Hickman said. "But I think resources will outperform the banks."
