Australia shares set for downbeat end to cheery 2017; NZ slips

[BENGALURU] Australian shares fell to their lowest in 10 days on Friday as investors took profits, but the benchmark index remained on course to end 2017 with its best performance in four years.

"Nobody wants to be exposed when you are going into a long weekend so there is a bit of profit taking," said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

"Generally January is a weak month in the US so the market is probably feeding into that a bit."

The S&P/ASX 200 index fell 0.3 per cent, or 19.8 points, to 6,068.3 by 0100 GMT, with all 10 sectors apart from materials lower. The benchmark added 0.3 per cent on Thursday.

Until Thursday's close, it had risen about 7.5 per cent, a performance which has led it to trade at a price-to-earnings (PE) ratio of 16.25, according to Thomson Reuters data.

"If valuations matter more in 2018, and they have not mattered a huge amount in 2017 to be honest, but if they do, earnings are going to have to come from somewhere," said Chris Weston, institutional lender at IG Markets on Thursday.

"Where we are at the moment, there needs to be some earnings growth to come thorough, otherwise implied earnings growth at the moment means that multiples are too expensive."

Lender Westpac Banking Corp contributed the most to Friday's index losses, falling as much as 1.1 per cent.

Financial stocks pulled the main index down the most as they fell as much as 0.7 per cent to their lowest in more than 10 days and were on track to end the year lower for the first time in five years.

Australia's banks have been troubled by instances of money laundering and rate-rigging over the course of 2017.

"(In 2018) I would expect most of them to tinker up, it is not gonna be shooting the lights out stuff but the point of view is overall in US and Europe, financials are doing quite well because their economies are picking up quite a bit and that should drag up financials here," added Blue Ocean Equities' Mr Somasundaram.

Materials stocks rose to their highest since March 2013 as benchmark copper on the London Metal Exchange ended up 0.7 per cent on Thursday, while aluminium closed up 1.4 per cent, the highest since March 2012.

Global miner BHP was trading 0.3 per cent higher after touching its highest since May 2015 while peer Rio Tinto climbed as much as 0.8 per cent to touch a more than six-year high.

Stocks in the Australian mining sector have gained about 22 per cent in 2017, on track to close their second straight year higher.

"I think there is risk in all asset classes because all asset prices have gone up, so I do not think it is just in equities. I think the trick is how we manage the cycles," said Mr Somasundaram.

"My gut feel is that we will have a relatively okay (2018), but you will get a lot more volatility."

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index fell as much as 0.2 per cent to 8,391.57 on the year's last trading day as consumer staples and industrials stocks pulled the index lower.

The benchmark has gained more than 22 per cent this year and hit multiple record-highs during the period.

The index's biggest drag on Friday was Auckland International Airport Ltd which fell as much as 1.3 per cent to its lowest in three weeks.

Shares of a2 Milk Company Ltd fell as much as 0.9 per cent, the most in nine days. In the year to Thursday's close, the multinational dairy company had gained more than 280 per cent.

REUTERS