australia bank stocks mask risks

Australia bank stocks mask risks
• by: Cynthia Koons
• From: The Wall Street Journal
• July 20, 201211:53AM
• Increase Text Size
• Decrease Text Size
• Print
• Email
• Share
o Add to Digg
o Add to del.icio.us
o Add to Facebook
o Add to Kwoff
o Add to Myspace
o Add to Newsvine
o What are these?
•
• Tweet this
SHARES in Australia's major banks are on a tear. Yet business confidence is deteriorating, unemployment is rising and the housing market is stuck in a rut. Something's gotta give.
Shares in Commonwealth Bank, ANZ, Westpac and National Australia Bank have risen by between 7 per cent and 12 per cent since the start of June, outperforming the domestic market.
The optimism contrasts with the mood in the economy, where Australia's mining boom masks underlying problems.
Business confidence in Australia is well below long-term averages, NAB's quarterly survey of business sentiment showed yesterday. Sectors like manufacturing and construction are especially hurting. The unemployment rate ticked up in June and it's expected to continue rising. Residential building activity has been contracting for four consecutive quarters.
A spate of recent secondary equity raisings by major companies may be a leading indicator of a pickup in loan defaults. Already the number of incorporated businesses going into administration in the first quarter is 17 per cent higher than a year ago and 55 per cent higher than in the first quarter of 2007, Nomura points out.