By Sneha Kumar and Shivangi Lahiri
March 6 (Reuters) – Some A$130 billion ($91.4 billion) in market value has been wiped from Australia’s share market this week, with investors on edge amid a widening Middle East conflict, hot on the heels of record earnings season volatility.
The S&P/ASX 200 index has slumped 3.8% since the weekend – when the United States and Israel began bombarding Iran – giving up about half of its gains for all of February. The benchmark slid 1% on Friday with most blue-chip stocks in the red.
“Global downturns always hit Australia harder than other jurisdictions, and I think we could see a real downturn if the war goes on for too long,” said Nick Twidale, chief market strategist at ATFX Global.
“Australia has got more topside to come once the conflict is resolved. But unfortunately, at the moment, it seems to be rolling on.”
Stock markets worldwide are careening towards their worst weekly losses in three years, with bonds also tumbling sharply as investors worry about rising oil prices stoking inflation.
“A prolonged war would be a negative for asset prices globally, and Australia won’t be immune from that,” said Phil Cornet, a portfolio manager at Atlas Funds Management.
This week’s sell-off comes hard on the back of Australia’s half-year earnings season, which was punctuated by wild swings, with profit beats rewarded while negative surprises were severely punished.
More than a third of the ASX 200 companies moved by more than three standard deviations on their reporting day, the highest proportion since JPMorgan began tracking the metric in 2015.
“February’s results season delivered another record for single-stock volatility,” JPMorgan’s Australia equity strategists, led by Jason Steed, wrote in a report.
The top 20 companies in Australia, which make up close to two-thirds of the benchmark ASX 200 index, had the most volatile February in six years, according to LSEG data.
Biotechnology giant CSL tanked as much as 12% after reporting an 81% drop in first-half profit, and the country’s No. 2 grocer, Coles, slumped more than 7% after flagging a sluggish start to the second half.
Companies that extract resources, drill oil or operate as licensed, regulated financial institutions are seen as more disruption-resistant, said Cameron Gleeson, a senior investment strategist at Betashares.
BHP Group, the world’s largest listed miner, surged 7% to notch a record high, while Commonwealth Bank of Australia rallied more than 8% in its best session since March 2020 following consensus-beating earnings reports.
($1 = 1.4225 Australian dollars)
(Reporting by Sneha Kumar, Shivangi Lahiri and Kumar Tanishk in Bengaluru; Editing by Sameer Manekar, Praveen Menon and Kevin Buckland)
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