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However, there was a nice trading development that begun to form on Wednesday afternoon that gives me a little more confidence heading into next week.
The ASX 200 appears to be settling on a new support level at 5610 points. It has crossed that level twice but found exhaustion as the buying overwhelmed the bears. The main reasoning for the index collapse in the past six week has been the banks and they continue to pull the ASX into a new trading range.
So far, all the banks have technically corrected (10%) and more The most savage selling has been seen in Westpac down 20.1% (which is technically a bear market) since its April high of $40.07 to the close of business yesterday.
CBA is down 13.6% from its intraday high, ANZ is down 13.5% while NAB has lost 14.9% which includes the 2 for 23 rights issue announced at its half year numbers. The banks make up 26% of the ASX and that kind of sustained selling on a quarter of the index will always drag trading lower.
I have argued of late that until the banks find support, the ASX will remain under pressure and that seems to be holding true. The issue as I see it is fundamentally, based on current estimates the big four banks still appear to be offering a premium price.
Here are the stats that matter
Commonwealth Bank (CBA)
Earnings per share FY16 estimate - $5.52
Full year dividend - $4.01 = Yield of 4.8% based on the COB price
Price to earnings ratio 15.1 times FY15, estimated at 14.68 FY16
Price to book ratio 2.66 times FY15 estimates at 2.51 times FY16
Earnings per share FY16 estimate - $2.54
Full year dividend - $1.82 = Yield of 5.57% based on the COB price
Price to earnings ratio 13.3 times FY15, estimated at 12.86 FY16
Price to book ratio 1.98 times FY15 estimates at 1.88 times FY16
ANZ Banking Corp (ANZ)
Earnings per share FY16 estimate - $2.76
Full year dividend - $1.78 = Yield of 5.52% based on the COB price
Price to earnings ratio 12.2 times FY15, estimated at 11.67 FY16
Price to book ratio 1.67 times FY15 estimates at 1.58 times FY16
National Australia Bank (NAB)
Earnings per share FY16 estimate - $2.68
Full year dividend - $1.98 = Yield of 5.93% based on the COB price
Price to earnings ratio 12.38 times FY15, estimated at 12.42 FY16
Price to book ratio 1.64 times FY15 estimates at 1.59 times FY16