Australian stocks rebounded from a two-year low as trading volume swelled and the nation’s biggest banks climbed with Pacific Brands Ltd.
The S&P/ASX 200 Index gained 2.7 percent to 5,137.30 at the close in Sydney, with volume double the 30-day average. The gauge fell as much as 1.5 percent in the first 10 minutes of trading before reversing. Westpac Banking Corp. and its three largest competitors, which slid at least 22 percent from the market’s April peak through Monday, all advanced.
More than $8 trillion has been wiped from global stock markets since China’s unexpected devaluation of the yuan on Aug. 11, with losses intensifying Monday. Australian shares on Monday capped their steepest drop since the height of the global financial crisis.
“You’re getting some bargain hunting,” said Savanth Sebastian, a Sydney-based analyst at Commonwealth Bank of Australia’s securities unit. “Australian corporates that are reporting earnings results are pretty solid. Banking stocks are paying fully-franked dividends above 7 percent, which is amazing in an environment” of low interest rates.
Pacific Brands soared 16 percent, the largest gain on the S&P/ASX 200, as the consumer-brands firm said it plans to resume paying a dividend. Spotless Group Holdings Ltd. surged 6 percent after the cleaning services firm said next year’s results would materially exceed those in 2015.
Commonwealth Bank of Australia climbed 3.6 percent and Australia & New Zealand Banking Group Ltd. rose 4 percent. Westpac gained 4.9 percent and National Australia Bank Ltd. rallied 4.6 percent. Banks pay an average dividend yield of 6.4 percent, according to data compiled by Bloomberg. Local investors receive additional tax benefits, known as franking credits, on top of that.
The S&P/ASX 200 trades at 15 times estimated earnings, compared with its five-year average of 14.1.
“The markets are overstating the growth risks given the low interest-rate environment and the stimulatory measures that have already been put in place,” said Martin Lakos, division director at Macquarie Private Wealth in Sydney. “There is a likelihood of more stimulatory measures from the Chinese, and the Federal Reserve looks likely to delay its rate rise until December.”