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Australia shares edge lower on weaker bank stocks, NZ upbeat

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  1. An investor and a pedestrian talking on their phones are seen in a window where a board displays stock prices at the Australian Securities Exchange (ASX) in Sydney, Australia, February 8, 2017.

    (Updates to close)

    July 17 (Reuters) - Australian shares slipped on Monday as weak financial stocks offset gains from material ones as investors braced for a possible expansion in capital rules for banks amid rising concerns over risky lending.

    The S&P/ASX 200 index (xjo) dropped 0.2 percent, or 9.619 points, to 5,755.5 at the close of trade. The benchmark rose 0.5 percent on Friday.

    Shares of the "Big Four" banks led sector losses that pulled the benchmark into negative territory. The financials index .AXFJ, down 0.9 percent at one point, ended the day off 0.4 percent.

    Domestic media is speculating the Australian Prudential Regulatory Authority (APRA) will announce new capital rules this week for major banks. The government is looking at expanding the regulator's powers to include non-bank lenders.

    "Financials are struggling to get into positive territory and investors will continue to look out for the APRA announcement," said Tony Farnham, an economist with Patersons Securities.

    Giving into pressure from regulators, major banks have cut back on home loans and institutional lending to real estate investors in recent months, giving non-bank lenders an opportunity to expand their loan books.

    This has stoked concerns as the country's sky-high household debt and accelerating property prices prevail while wage growth remains slow.

    Financial stocks were also depressed by subdued rate hike prospects in the United States following weak retail sales data. [.N]

    One big loser on Monday was Telstra (TLS), which tumbled 1.9 percent, its biggest one-day loss in nearly 13 weeks.

    Investors are worried that the telcom giant, whose shares have fallen five straight days, will slash dividends as it faces growing competition and earnings pressure, according to the Australian Financial Review. [http://bit.ly/2vsrxy9]

    Material stocks were supported by firmer oil and iron ore prices and surging copper prices, which hit a two-week peak. [O/R][IRONORE/]

    Index heavyweights South32 and Fortescue Metals Group (FMG) rose 4.7 percent and 1.9 percent, respectively.

    New Zealand's benchmark S&P/NZX 50 index (nz50) closed 0.7 percent or 49.8 points higher to finish at 7,699.57. At one point, the benchmark touched a record high intraday level.

    Discuss this via XFJ | TLS | S32 | FMG

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