Whilst I'm not normally one to use emotive words like 'meltdown' to describe the day-to-day fluctuation so the ASX stock market, today's moves are probably an exception.
At the close of trading today, the S&P/ASX 200 (ASX: XJO) lost a nasty 7.33% to finish the day at 5,760.6 points. That's not a normal move – in fact it's the worst day the ASX has had since the GFC over a decade ago. Hence the reluctant use of the word 'meltdown'.
The biggest drivers of today's market woes were the 'big four' ASX banks. As Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) are amongst the largest companies in Australia, they tend to move the ASX 200 index significantly.
And when they move in lockstep (as they did today), it usually causes the index to follow suit.
How did the banks perform today?
Frankly (no pun intended), it was a brutal day for ASX bank shareholders. Commonwealth was down 6.47% to $69.15. NAB had a shocker with an 8.45% drop to $20.14. ANZ was just as bad with an 8.45% fall to $20.27. But Westpac took the cake with an 8.57% drop to $19.52.
NAB, Westpac and ANZ are now at multi-year lows and close to their GFC-era share price depths.
CommBank isn't quite at that level (CBA shares were going for $24 in 2009) but are still nursing heavy losses.
Is this a massive buying opportunity for the ASX banks?
On the surface, it might seem so. This is a bloodbath for the ASX banking sector and raw starting dividend yields for all four major banks are pushing on record highs – Westpac, for instance, is offering a starting yield of 8.91% (or 12.73% grossed-up).
But these moves are happening for a reason. With the Reserve Bank of Australia's decision to slash interest rates to a new record low of 0.5% last week, all four banks will struggle to not go backward in profitability for the next few years, let alone just in 2020 (in my opinion, anyway). I'm not expecting any of the big four to spare their shareholders a dividend trim in 2020 as a result.
The full economic effects of the coronavirus are also unknown at this point. But there is the very real possibility that Australian house prices will be adversely affected, which would further dampen the banks' profits.
Foolish Takeaway
The ASX banks' share prices have been demolished today, but for me personally, there are too many unknowns to justify a buy in the current climate. It feels too much like a roll of the dice – and that is not something I come to the share market to do!
