MARKET CRISIS Investors flock back to banking stocks as market surges October 13, 2008 AP
Investors have flocked back to Australia's largest banks, pushing their shares more than six per cent higher on Monday, after the federal government guaranteed savings deposits and bank wholesale borrowings.
"The banks are definitely leading this market higher and it's all in reaction to the guarantee plans that have been announced by the federal government," EL&C Baillieu director Richard Morrow said.
A two-day emergency meeting of senior government officials and bureaucrats, headed by Prime Minister Kevin Rudd, over the weekend nutted out a three-point plan that included guaranteeing bank deposits for three years.
The plan will also guarantee the borrowings of Australian banks in international credit markets and extend a program to shore up the mortgage market through the purchase of an extra $4 billion in residential mortgage-backed securities.
Spill-over from forced selling at the close of Friday's trade had also buoyed the wider market on Monday, Bell Potter Securities senior client adviser Stuart Smith said.
Friday's big market sell-off was partially caused by the Australian Securities Exchange ordering interim margin calls from brokers to make sure the brokers' liquidity was in order, he added.
"The margin calls really proliferated on Friday so you've seen one of the effects of the derisking of leverage and today we've got the rebound".
Bank shares that had previously been under downward pressure led the rebound in the market sector Monday.
National Australia Bank Ltd had surged 9.86 per cent or $2.05 to $22.85 at 1127 AEDT, and ANZ Banking Group Ltd jumped 9.8 per cent or $1.50 to $16.80.
"NAB is the strongest rebound and Westpac is the slowest rebound," Mr Smith said.
Westpac Banking Corporation advanced 8.87 per cent or $1.70 to $21.98 and Commonwealth Bank of Australia Ltd put on 6.7 per cent or $2.65 to $42.20.
Takeover target St George Bank Ltd leaped 10.32 per cent or $2.60 to $27.70, and Suncorp Metway Ltd added 4.85 per cent or 45 cents to $9.72.
The federal government's decision to guarantee all savings deposits for three years was "a win to nothing" for the government, Mr Smith said.
"Our banks are the best in the world - there's no doubt about that. It was a comforting thing."
Confidence was expected to return to the market Monday given the scope and the size of stabilisation action taken by the global governments over the weekend, Mr Morrow said.
Finance ministers from the world's 20 largest economies, the G20, pledged to take all steps necessary to combat the global financial crisis.
The International Monetary Fund (IMF) warned the banking system was on the "brink of systemic meltdown".
But there was little reaction to the IMF's comment in the Australian market, Mr Smith said.
"The IMF says our banks are also rated the best."
At 1200 AEDT, the benchmark S&P/ASX200 index was up 4.81 per cent, or 190.6 points, at 4151.3.
Volumes on the local bourse were also at good levels, brokers said, especially since forced sellers had been taken out.
Mr Smith expects the S&P/ASX200 to climb to 4600 this week.
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