Australia shares fall on weak China sentiment; NZ up

[BENGALURU] Australian shares declined on Friday as a slump in the Chinese stock market weighed on investor risk appetite, with financials dragging on the index and nine out of 10 sectors in the red.

The S&P/ASX 200 index fell 0.3 per cent or 15.895 points to 5,970.100 by 0134 GMT. The index is up 0.2 per cent for the week, on track for a third session of gains in four. The benchmark ended flat on Thursday.

Chinese blue chips registered their worst one-day loss in nearly 18 months on Thursday as concerns about a sustained bond sell-off in the world's second-largest economy bled into the country's stock markets.

"The trade-weighted index has fallen substantially and is highly correlated with Chinese equities and demand for commodities. It is basically falling because of the deleveraging and shadow banking restrictions," said Mathan Somasundaram, Market Portfolio Strategist at Blue Ocean Equities.

China is Australia's largest trading partner and sharp market moves there often trigger a response in the Australian dollar, and affects broad sentiment.

Risk sentiment is also being affected by Australia's conservative coalition government being at risk of losing power after a new poll revealed the opposition Labor Party is neck-and-neck in a knife-edge by-election triggered by a constitutional crisis.

"There are going to be a number of by-elections playing out. Each of them is important because the government is sitting on a one-seat majority. Any loss would mean we could go into a July election pretty much straight away next year," Somasundaram added.

Financials were the biggest drag on the benchmark, with the "Big Four" banks - Westpac Banking Corp, Commonwealth Bank of Australia, National Australia Bank Ltd and Australia and New Zealand Banking Group Ltd - all registering losses.

The financial sector accounts for about 40 per cent of the benchmark based on market value.

Industrials followed closely, with the Australian industrials index falling 0.7 per cent.

Qantas Airways Ltd dipped as much as 1.8 per cent to its lowest since Sept. 5, on track for a third consecutive session of losses, while Transurban Group declined slightly.

Meanwhile, material stocks also fell despite the rise in metal prices.

Heavyweight BHP declined 0.4 per cent and was one of the biggest drags on the benchmark, while its rival Rio Tinto Ltd fell slightly.

New Zealand's benchmark S&P/NZX 50 index rose 0.3 per cent or 22.7000 points to 8,124.650.

Healthcare stocks accounted for most of the gains, with Ryman Healthcare Ltd leading the upward charge as it climbed 2.7 per cent to rise to its highest since Oct 18, on track for a third consecutive session of gains.

Medical device maker Fisher & Paykel Healthcare Corporation Ltd rose 1.1 per cent.

REUTERS