Australia shares rise as bank stocks surge on new capital rules, NZ flat

[SYDNEY] Australian shares moved back into the black on Wednesday as gains by the 'Big Four' banks, who declared comfort with new capital rules, outweighed a tumble for BHP Billiton.

The S&P/ASX 200 index rose 37.91 points, or 0.7 per cent, to 5,725.3 at 0237 GMT. The benchmark fell 1.1 per cent on Tuesday.

The 'Big Four' banks, which account for more than 80 per cent of the country's lending, leapt between 2.9 to 3.8 per cent to touch their highest intra-day peaks in eight months after the Australian Prudential Regulation Authority (APRA) unveiled new rules designed to make the banks "unquestionably strong".

The authority said they were required to raise common equity Tier 1 ratio, a key gauge of a lender's strength, to at least 10.5 per cent by Jan 2020.

The banks said they were well placed to meet the capital requirements.

Ric Spooner, chief market strategist at CMC Markets, said it was positive that banks get options for raising equity capital,"creating a bit of certainty for the market".

"This removes some of the worse concerns about the possibility that the banks will have to go to shareholders for additional capital in the near future," he said.

Financial stocks accounted for nearly three-quarters of the gains on the bourse and the benchmark index of financial stocks at one point was up 2.7 per cent, its biggest intraday gain in nearly 36 weeks.

Weighing down the benchmark the most was global miner BHP Billiton. At one point, it dropped 2.6 per cent to its lowest in four weeks, after reporting output declines in coal and petroleum for the year and flagging exceptional items of US$546 million for the second half.

Material stocks sagged as Rio Tinto extended losses, falling as much as 1.9 per cent from the previous day after reporting disappointing production results.

New Zealand's benchmark S&P/NZX 50 index inched up 4.14 points, or 0.1 per cent, to 5,725.5 at 0237 GMT.

The benchmark was little changed as losses consumer staples offset gains in financial and industrial sectors. A2 Milk was the biggest decliner while Australia and New Zealand Banking Group and Westpac Banking Corp led gainers.

REUTERS