Australia’s share market has experienced the ripple effect of the US GameStop controversy, closing lower for a third consecutive day as US hedge funds sold stock to recover huge losses.
The ASX indices were higher by 0.6 per cent at 1200 AEDT after a good lead from Wall Street, but fell in the second half of Friday’s session.
The S&P/ASX200 benchmark index closed lower by 42.3 points, or 0.64 per cent, to 6607.4.
The All Ordinaries closed lower by 46.7 points, or 0.68 per cent, at 6870.9.
Tribeca Investment Partners portfolio manager Jun Bei Liu said she was a little surprised by the result and believed US hedge funds’ selling due to the GameStop controversy was part of the reason.
“In Australia and Asia, we all felt the ripple effect,” she said.
“Hedge funds are global businesses, and when they unwind they have to sell some winners. There is a bit of a continuation of that today.”
Hedge funds were forced to cover huge losses after short-selling of some companies on US markets, notably video game retailer GameStop, expecting they would struggle.
Retail investors rallied online, took on the professionals and sent stocks such as GameStop soaring.
Trading platforms blocked buying some stocks, prompting a debate about who they are protecting.
Ms Liu said the hedge funds were forced to sell widely to make money and buy back the stock they sold.
“It’s almost a forced liquidation of some of our best companies,” she said.
The biggest ASX sectors, materials and financials, closed down by more than one per cent.
A weakness in resources, and concerns about a tightening of credit in China, also contributed to ASX losses, Ms Liu said.
Investors gained 0.31 per cent for January on the ASX200, the weakest month since September.
Australia’s economy should benefit from Sydney residents gaining some reprieve from coronavirus restrictions.
They will be able to travel to the ACT, Queensland, South Australia and Victoria without quarantine by Monday.
New South Wales had no local infections for a 13th consecutive day.
The reprieve also applies to people from the Blue Mountains, Central Coast and Wollongong.
All were allowed more guests at cafes, hotels and restaurants, and outdoor gatherings.
On the ASX, novated leasing provider McMillan Shakespeare was a top performer.
Shares closed higher by 9.88 per cent per cent to $12.68.
The company said underlying net profit for its first half was expected to be $42.7 million.
In banking, National Australia Bank will buy the online-only minnow bank 86400 for about $220 million.
NAB said it will combine 86400 with its online bank, UBank, after regulatory approval.
The 86400 bank has $375 million in deposits and $270 million in home loans.
NAB closed lower by 1.59 per cent to $23.54.
Among chief rivals, ANZ lost 2.11 per cent to $23.71, the Commonwealth shed 1.91 per cent to $83.51 and Westpac lost 1.54 per cent to $21.13.
Fortescue fell heaviest of the big miners, down 4.14 per cent to $21.79.
Next week is busy for the Reserve Bank.
On Tuesday, the board will for the first time this year meet to discuss any change to the record low cash rate of 0.1 per cent.
Governor Philip Lowe on Wednesday will speak about the year ahead at the National Press Club in Canberra.
On Friday, the bank will give its statement on monetary policy. Mr Lowe will talk with a parliamentary economics committee.
On the ASX, financial asset manager Janus Henderson will give its full-year earnings at 2000 AEDT on Thursday.
The Aussie dollar was buying 76.56 US cents at 1727 AEDT, higher from 76.34 US cents at Thursday’s close.
ON THE ASX
* The S&P/ASX200 benchmark index closed lower by 42.3 points, or 0.64 per cent, to 6607.4 on Friday.
* The All Ordinaries closed lower by 46.7 points, or 0.68 per cent, at 6870.9.
* At 1727 AEDT, the SPI200 futures index was higher by one point, or 0.02 per cent, at 6542 points.
One Australian dollar buys:
* 76.56 US cents, from 76.34 cents on Thursday
* 79.98 Japanese yen, from 79.55 yen
* 63.26 Euro cents, from 63.07 cents
* 55.86 British pence, from 55.80 pence
* 106.91 NZ cents, from 106.94 cents.