Greek political wrangling causing nerves in the markets; Westpac Bank reports today

<p>Asian shares are expected to open lower today as more question marks over Europe’s sovereign debt deal going through emerge. The latest round of Greek […]</p>

Asian shares are expected to open lower today as more question marks over Europe’s sovereign debt deal going through emerge. The latest round of Greek political wrangling is causing nerves across the market.

For the Asian region, we think local data is perhaps more of a talking point. Yesterday’s Chinese PMI numbers are being closely discussed, with the pace of the slowdown now clearly evident.

Australian banks can be a good indicator of regional fortunes. ANZ Bank is perhaps a great read into Asian economic health, with its report due out tomorrow. Its return on equity is among the highest banks in the region, but admittedly this is boosted by its legacy Australian operations. Westpac reported this morning, it has less Asian exposure than ANZ but is a good read on Australian financial healthy either way.

Our bottom line on Westpac is that its fully franked final dividend of 80 cents per share is slightly ahead of market estimates, but we think the banks overall will find weakness after they go ex-dividend, Westpac perhaps even more than the others.

If there is one area which the market will like it will probably be on asset quality. Loan arrears are surprisingly improving. Past due 90 day loans in Australia were down from $3.36bn in March to $2.84bn in September for Westpac. There is no doubt yesterday’s rate cut will help cushion the impact even further going into the first half of 2012.


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