SYDNEY: Australian stocks fell from the highest level in seven years, reversing gains, after the country’s central bank refrained from further loosening monetary policy.
The S&P/ASX 200 Index lost as much as 0.9 percent, having earlier risen 0.6 percent, to close 0.4 percent lower at 5,933.90 in Sydney. The gauge closed yesterday at the highest level since January 2008. Reserve Bank of Australia Governor Glenn Stevens held the overnight cash rate target at 2.25 percent.
Australian equities have surged almost 10 percent this year as banks and shares with high dividend yields climbed amid prospects for lower borrowing costs. The central bank cut its key rate to a record low last month, joining a wave of monetary policy loosening.
“We’ve had a strong rally of Aussie shares on the back of lower rates this year and a strong relative outperformance,” Nader Naeimi, who helps manage about $118 billion as Sydney-based head of dynamic asset allocation at AMP Capital Investors, said by phone. “The market was expecting another cut and because that didn’t come through, and given that the RBA didn’t deliver, you’re getting a selloff. The market has run really hard, so needs a period of consolidation and this is providing the trigger.”
The Standard & Poor’s 500 Index rose 2.8 percent in 2015 through yesterday.