The prospect of a stock market crash is likely creeping into the minds of investors this week as China’s second-biggest property developer Evergrande spooks the global financial markets.

Evergrande has around US$300 billion of liabilities to banks and bondholders. Last month, it warned that it may fail to pay its creditors.

Fitch Ratings downgraded Evergrande’s credit rating to ‘CC’ in early September, suggesting “a default of some kind appears probable”.

The real estate conglomerate has a looming US$83.5 million bond interest payment due on Thursday, a major test as to whether or not it has conjured up enough cash to pay bondholders.

Could this cause a stock market crash?

Evergrande’s liabilities are far-reaching and involve more than 128 banks and 121 non-banking institutions, including household names such as BlackRock and Allianz.

Fitch Ratings reported that Evergrande’s credit risk could have broader implications, affecting home builders through to the banking sector.

Fitch said:

In the unlikely event that a default unsettles the broader property market, significantly disrupting sales and investment, this could have farther-reaching macroeconomic effects. We estimate the sector accounts for approximately 14% of GDP.

Risks to our growth outlook on China are mitigated by the government’s capacity to intervene with policies to shore up the housing market, but we believe the threshold for such support will be high — as it might set back other priorities such as reducing real-estate lending concentration and tackling the high cost of housing.

Wall Street cratered overnight, with major indices the Dow Jones Industrial Average, S&P 500 and Nasdaq sliding 1.78%, 1.70% and 2.19% respectively.

Encouragingly, Markets Insider reported that many market experts believe Evergrande is “too big to fail and is likely to be rescued by the Chinese government, limiting the economic impact on China and the world”.

What does this mean for the ASX?

The S&P/ASX 200 Index (ASX: XJO) couldn’t escape the gloom and doom on Tuesday, down 1.3% to a 4-month low of 7,118.

While it might feel like the beginning of a stock market crash, the ASX 200 is still up a comfortable 9% year-to-date.

Investors might want to keep an eye out for the resources sector, given the fact the Chinese real estate and building sector are the main drivers of steel and copper usage, according to Mining.com.

ASX 200 mining heavyweights BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Ltd (ASX: FMG) have cratered under the recent slump in iron ore prices, down 12%, 17% and 40% respectively year-to-date.

The post Worried about a stock market crash? Here’s what you should know appeared first on The Motley Fool Australia.

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• Leading brokers name 3 ASX shares to buy today
• Here are 3 of the most popular ASX 200 shares by volume today
• Rio Tinto (ASX:RIO) share price craters as iron ore hits US$100 a tonne
• Why Fortescue, Karoon Energy, Nickel Mines, & Orocobre shares are sinking

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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While Australia slept last night, the US stock market faced a tough selloff for a variety of potential reasons.

Some media outlets have blamed the US stock market’s awful day’s trade on worries surrounding the Chinese property market. Others are pointing to uncertainty regarding an upcoming US Federal Reserve meeting or proposed tax increases and policy changes as the reason for the drop.

Whatever the reason, the Dow Jones Industrial Average (INDEXDJX: .DJI) fell 1.8%, or 614 points, overnight.

The S&P 500 (INDEXSP: .INX) also dropped 1.7%, or 75 points.

Additionally, the Nasdaq Composite Index CAD (INDEXNASDAQ: COMPCAD) plunged 2.2%, that’s 14,714 points.

So, what caused the US stock market’s suffering, and what does it mean for the ASX? Let’s take a look.

What sent the US stock market tumbling overnight?

The US stock market has taken a beating overnight with some pointing to a Chinese property giant as the major catalyst.

According to reporting by The Wall Street Journal (WSJ), the Hong Kong-listed China Evergrande Group might be to blame for the US stock market’s struggles.

The Evergrande share price plunged 10.2% overnight.

The outlet states the company, which has more debt than any other listed real estate development or management company, noted it was struggling last week.

The WSJ claims there’s a risk China’s government will let the company fail. Additionally, it stated Evergrande’s challenges may negatively affect the Chinese economy, thereby damaging other global economies in its wake.

However, as the Australian Financial Review (AFR) reports, some experts believe the US stock market is being hit by an overdue correction.

Other experts told the AFR the dip was exacerbated by deadlocks in US Congress and proposed tax increases. Additionally, some pointed to the US Federal Reserve’s upcoming November meeting as the cause of the selloff.

Either way, the ASX might be in for a day of carnage.

What does this mean for ASX shares?

As The Motley Fool Australia has previously reported, the ASX largely follows the US stock market’s activities.

There are ample reasons as to why this is the case. Here are 3 of big ones:

The New York Stock Exchange is the largest in the world, with the US’s NASDAQ exchange coming in second. Due to the amount of money that passes through these 2 exchanges, they have a huge global influence.

Further, plenty of investment and cultural sentiment overlaps between Australia and the US and it’s no different on our stock market.

Finally, 23.3% of all foreign investment into Australia in 2020 came from the US, according to the Department of Foreign Affairs and Trade. This likely solidifies the link between our economies and, as a result, our stock markets.

The post The US stock market plunged overnight. What could this mean for ASX shares? appeared first on The Motley Fool Australia.

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• Why this top broker thinks the Appen (ASX:APX) share price can double
• 2 exciting ASX tech shares that could be buys

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The S&P/ASX 200 Index (ASX: XJO) was the talk of the town on Monday after a 2.1% slump to start the week and kickstarted fears of a stock market correction. Shares in Commonwealth Bank of Australia (ASX: CBA) fell 2.0% lower while Westpac Banking Corp (ASX: WBC) finished the day down 2.2%.

Markets wobbled on Monday as news of Chinese property developer Evergrande‘s struggles emerged. That has put pressure on the Aussie market as some investors get skittish about the potential knock on effects.

While there’s no signs that a stock market correction is on the way just yet, let’s take a look at how ASX 200 bank shares have performed under similar circumstances.

How could a stock market correction impact ASX 200 bank shares?

Rewinding the clock back to March 2020, the ASX 200 was in a bear market. Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) shares slumped 41.2% and 42.9%, respectively, in the space of a month.

That was fuelled by the emerging COVID-19 pandemic and unprecedented restrictions on global movements. Investors feared an economic collapse and severe damage to the global and Aussie economies.

However, that stock market correction was shortlived. In fact, ANZ and NAB shares have rocketed 69.4% and 74.6%, respectively, since March 20 2020.

Before COVID, there was the 2015 crash in ASX 200 bank shares. The CBA share price lost 25% between March and September 2015 amid fears of slowing economic growth in China. Similarly, Westpac shares also shed more than 25% as investors sold down once again with expectations of an economic flow on effect for Australia.

Who can forget the 2007/2008 Global Financial Crisis (GFC). The GFC represented one of the largest stock market corrections of all time. ANZ shares slumped 60.9% between October 2007 and February 2009 as ASX 200 bank shares were hit hard.

However, despite bottoming out at around $12 per share, the ANZ share price has recovered to its current $27 per share mark.

Foolish takeaway

Stock market corrections are part of the investing life cycle. Investors may be jittery at the moment as the world waits to see what happens with Evergrande.

However, ASX 200 bank shares have crashed before, and recovered. No one knows when the next stock market correction will occur, and whether this will be just a blip on the 10-year share price performance chart or the start of something bigger.

Experienced investors know to keep their eyes on the prize and align with their investing strategy to drown out the noise and make informed decisions.

The post How could a stock market correction impact ASX 200 bank shares? appeared first on The Motley Fool Australia.

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• The ANZ (ASX:ANZ) share price is down 8% in 5 weeks. What’s happening?
• Climbing mortgage stress: Are the CBA, ANZ, NAB and Westpac share prices in danger?
• 5 things to watch on the ASX 200 on Tuesday
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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ASX uranium shares have taken the spotlight after uranium prices skyrocketed more than 60% in the past month to over US$50/lb.

Uranium shares were quick to rerate, many of which have doubled in the past month.

The largest ASX-listed uranium player Paladin Energy Ltd (ASX: PDN) is up 95% in the past month, even after sliding 16% on Monday.

Prospective explorers have also boomed, with names such as Boss Energy Ltd (ASX: BOE), Deep Yellow Limited (ASX: DYL) and Peninsula Energy Ltd (ASX: PEN) up between 70% and 115% since mid-August.

As both ASX uranium shares and the underlying commodity surge in such a short span of time, experts are questioning whether or not this new price rally is sustainable.

Uranium boom “hard to maintain” says Morgan Stanley

Uranium prices are running hot largely thanks to Sprott’s Physical Uranium Trust.

The fund has been aggressively buying physical uranium off the spot market, sparking a renewed interest in the energy metal and tightening the market.

ASX uranium shares are looking to capitalise on the recent jump in prices, with Paladin Energy eyeing a restart of its “globally significant” Langer Heinrich project and Boss Energy looking to fast track its Honeywell project.

Last Friday, Sprott’s Twitter said that it added more than 10 million pounds of physical uranium since 17 August. Now amassing more than 28 million pounds.

Unfortunately, Morgan Stanley questions whether or not Sprott’s uranium shopping spree can continue into 2022.

According to Business Insider, the broker said:

It needs to be seen how long the current rate of investment demand can be maintained, but some bulls argue that we won’t see the price dipping if fund buying slows, as improved market liquidity has aided price discovery and revealed the ‘true’ spot price.

Morgan Stanley flags that commodities such as coal and natural gas prices have rallied due to “actual market tightness” whereas uranium’s underlying “supply-demand fundamentals haven’t meaningfully changed over the last few months to warrant this price surge.”

“Only when these utility inventories are worked off materially, the real need for a higher price to incentivise the return of idled supply will become more pressing, we think” Morgan Stanley added.

What does this mean for ASX uranium shares?

The current run-up in uranium prices doesn’t necessarily spell big profits for ASX uranium shares.

In the case of Paladin Energy, the company requires US$81 million of pre-production capital expenditure to restart its uranium operations.

Once things get going, life of mine production cash costs come in at US$27/lb in addition to freight and logistics of US$0.95/lb and sustaining capex of US$2.90/lb.

Business Insider said that commodity strategists remain bullish on uranium in the medium-to-long term with a price forecast of US$49/lb by 2024.

If true, this means that the current uranium bull market might need to take a small breather.

The post Are ASX uranium shares fully valued? appeared first on The Motley Fool Australia.

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• Why ASX uranium shares are diving double-digits on Monday
• Why the Paladin Energy (ASX:PDN) share price is down 15% on Monday

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Monday was a day to forget for the Polynovo Ltd (ASX: PNV) share price. Shares in the Aussie biotech company finished 4.3% in the red at a new 52-week low of $1.91 per share.

Unfortunately for shareholders, 2021 has been a year of consistent declines for Polynovo’s valuation. So, what’s driving the recent share price moves, and what is on the horizon for the company?

What’s up with the Polynovo share price?

There were no new announcements from Polynovo but that didn’t stop the losses on Monday. That’s largely because the broader market was smashed as investors feared the knock-on effects of Chinese property giant Evergrande‘s current struggles.

The S&P/ASX 200 Index (ASX: XJO) slumped 2.1% lower on Monday and the Polynovo share price was far from immune. Troubles in China are clearly not good news for the broader global economy nor those companies that have a lot of future growth already priced in.

However, leaving Evergrande aside, the Polynovo share price has been sliding lower throughout the year. In fact, shares in the Aussie biotech are down 51.4% since the start of the year to $1.91 per share.

That’s despite what appeared to be a strong financial result for the year ended 30 June 2021 (FY21). Polynovo reported a 32% jump in revenue to $29.3 million with strong growth in the United States and Europe.

Polynovo’s net loss after tax of $4.6 million including non-cash items and the result as a whole fell short of market expectations and couldn’t spark the Polynovo share price higher.

The company also announced the departure of chief operating officer Dr Anthony Kaye, on September 10. Dr Kaye has taken up a more senior role with fellow Aussie biotech, CSL Limited (ASX: CSL).

Foolish takeaway

All in all, 2021 has not been a good year for the Polynovo share price. However, shares in the company had been surging higher in recent years before the 2021 pullback.

Investors will be hoping strong research and development results and continued product development can turn around the company’s valuation in the near term.

The post Why the Polynovo (ASX:PNV) share price is sitting at a 52-week low appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. and POLYNOVO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Appen Ltd (ASX: APX) share price was out of form again on Monday.

At one stage, the artificial intelligence (AI) data services company’s shares were down almost 4% to a multi-year low of $9.28.

When the Appen share price reached this level, it meant it had fallen a disappointing 64% since the start of the year.

Is the weakness in the Appen share price a buying opportunity?

While the decline in the Appen share price is bitterly disappointing for shareholders, it could be a buying opportunity for non-shareholders.

That’s the view of the team at Citi, which remain very positive on the company despite its recent struggles.

According to a recent note, the broker has a buy rating and $18.80 price target on the company’s shares.

Based on the latest Appen share price, this implies potential upside of greater than 100% over the next 12 months.

What did the broker say?

Citi remains upbeat on Appen’s outlook and has recently highlighted an acceleration in advertising revenue from Facebook and Google as a reason to be positive.

The broker believes this could support increased investment in AI and machine learning activities in the near future, which could lead to increased demand for Appen’s services.

After all, it was the lack of investment in these activities from big tech companies that weighed on Appen’s performance over the last 12 months. So, any increased investment could only be good news for Appen.

And while the broker acknowledges that there are concerns that Appen is facing structural issues, it doesn’t believe this is the case and sees positive tailwinds supporting its growth over the medium term.

All in all, it feels this could make the Appen share price a value play at the current level.

The post Why this top broker thinks the Appen (ASX:APX) share price can double appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Appen Ltd. The Motley Fool Australia owns shares of and has recommended Appen Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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ASX tech shares could be the place to find exciting long-term opportunities.

Technology is often the sector that is able to generate good profit growth because of the low cost of the underlying product. Tech businesses are often able to grow quickly because of how they can provide services digitally for customers or clients.

These two tech stocks could be ones to consider:

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is a key enabler of US churches to receive electronic donations. It is actually responsible of processing billions of dollars. In FY21 it processed US$6.9 billion of donations, which was an increase of 39% on FY20.

The company says that it adopted best-in-class software tools and scalable processes early in its development. Combined with “strong financial discipline”, these investments will allow significant operating leverage to be achieved as revenue grows.

Despite the high level of investment for growth, Pushpay continues to experience increasing levels of operating leverage.

FY21 saw earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) increase by 133% to US$58.9 million, whilst operating cashflow soared 145% to US$57.6 million.

The ASX tech share is looking to expand in the Catholic segment of the faith sector, which is its first initiative to grow its customer base outside of its existing core base. It has set a goal of reaching market share of more than 25% of the Catholic church management system and donor management system market over the next five years.

The Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions. It also continues to look for acquisitions opportunities. It recently acquired video streaming business Resi Media.

At the current Pushpay share price, it is valued at 30x FY23’s estimated earnings.

Kogan.com Ltd (ASX: KGN)

Kogan is a fast-growing e-commerce retailer. It offers a number of different products and services for customers.

The Kogan.com website offers an Amazon-like selection of different categories and items like computers, phones, TVs, clothes, footwear, vacuum cleaners, appliances, furniture and so on. It also has additional services such as a membership program, insurance, credit cards, energy and telecommunications.

FY21 was a year of two halves. The first half showed strong growth, rising profit margins and an expanding customer base. However, the second half showed a growth slowdown and inventory issues.

After working through the inventory difficulties, Kogan’s management is still excited about the future. Over the next 12 months, it’s going to roll out new projects to support its members with membership rewards, new and improved delivery solutions and it will further enhance the online shopping experience.

The ASX tech share will also look to grow its Mighty Ape business in New Zealand, which is growing in size and profitability. Kogan acquired Mighty Ape in December 2020, meaning its contribution for FY21 was seven months to 30 June 2021 where it generated $6.9 million of adjusted EBITDA and $3.7 million of adjusted net profit. For the seven months to 30 June 2021, Mighty Ape contributed around 10% to overall gross profit.

Management say the synergies and integration is progressing well with Mighty Ape. The New Zealand business has grown its active customers by 10% since acquisition to 764,000.

According to Commsec, the Kogan share price is valued at 22x FY23’s estimated earnings. That’s after falling 28% over the last month.

The post 2 exciting ASX tech shares that could be buys appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has struggled in the past few weeks.

The pain for investors continued yesterday, with shares in the banking giant closing 2% lower for the day.

Let’s take a look at why the ANZ share price has been struggling.  

Why is the ANZ share price under pressure?

Despite a disappointing past few weeks, ANZ has not released any price-sensitive news.

As a result, there are many undercurrents that could be putting pressure on the ANZ share price.

Firstly, general weakness in the broader market domestically and abroad could explain why shares in the banking giant have struggled.

During the same period, the broader  All Ordinaries Index (ASX: XAO) has plummeted 4.5%.

A recent broker note could also explain the bearish sentiment on ANZ’s share price.

Leading broker Citi recently released a note that had a sell rating on the bank with a $28 share price target.

According to analysts, recent APRA data indicates a sharp contraction in ANZ’s mortgage book.

In addition, some experts have also flagged a more bearish outlook for the ANZ share price.

According to the commentary, moderation in volume and housing growth could slow near-term growth prospects for the big banks.

Outlook for ANZ

Contrary to the bearish sentiment, some analysts are more optimistic about the outlook for the ANZ share price.

A recent note from Bell Potter had a buy rating on the bank’s shares with a $31 price target.

Analysts cited ANZ’s recent Environmental, Social, and Governance (ESG) update as a positive for the banking giant.

In addition, the broker highlighted ANZ’s focus on retail, business, and the private banking space.

Snapshot of the share price

Although shares in ANZ have struggled in the past few weeks, they remain more than 18.5% higher for the year. 

By comparison, the broader S&P/ASX200 Index (ASX: XJO) has only managed to claw around 8% higher for 2021.

In its recent business update for the third quarter, the banking giant noted that its CET1 ratio came in at 12.2%, a slight reduction from the 12.4% recorded in the previous period. 

With its strong capital position and cost reductions, ANZ announced its intention to buy back up to $1.5 billion of shares on market as part of its capital management plan.

The ANZ share price closed yesterday’s trading session at $27.14.

The post The ANZ (ASX:ANZ) share price is down 8% in 5 weeks. What’s happening? appeared first on The Motley Fool Australia.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The South32 Ltd (ASX: S32) share price recently hit a 52-week high of $3.52.

And while the mining giant’s shares have pulled back a touch since then due to the market volatility, they remain 33% higher year to date.

Is the South32 share price a buy for dividends?

Despite the South32 share price trading close to a 52-week high, the company could still be a great option for income investors.

That’s the view of the team at Goldman Sachs, which have a conviction buy rating and $3.80 price target on its shares.

Goldman Sachs likes the company for three reasons. The first is the South32 share price valuation, which it notes is trading below its net asset value.

The second reason is the company’s strong free cash flow generation thanks to favourable commodity prices. This is particularly the case for aluminium, which Goldman believes is in the early stages of a multi-year bull market.

The third reason is the broker’s belief that South32’s shares will yield fully franked, double-digit dividend yields in the near term.

Goldman recently pencilled in dividends per share of 29 US cents in FY 2022 and 31.9 US cents in FY 2023. Based on current exchange rates, this will mean 40 cents and 44 cents in Australian currency.

So, with the South32 share price fetching $3.32, this equates to fully franked yields of 12% and 13.2%, respectively, over the next 24 months. This is significantly better than the market average and anything you’ll find with term deposits or savings accounts.

What did the broker say?

Goldman explained why it is bullish on the South32 share price.

It commented: “We retain our Buy rating (and keep S32.AX on the ANZ Conviction List) on: (1) Valuation: The stock is trading at 0.92x NAV (A$3.75/sh). (2) Strong FCF outlook: We forecast a FCF yield of c. 15-18% in FY22 & FY23 (over 20% at spot), driven mostly by higher base metal prices (combined c. 70% of FY22 EBITDA). Spot EBITDA is over US$3.8bn vs. our base case c. US$3.0bn estimate. (3) Increased capital returns: We assume the buyback continues to be extended (at US$250mn p.a) and S32 continues to pay out 70% of earnings (40% ordinary, 30% special dividend component). On our estimates, S32 is on a dividend yield of c. 12-13% in FY22 & FY23.”

The post Is the South32 (ASX:S32) share price a buy for dividends? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The share prices of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) could be put under the spotlight by rising mortgage stress.

According to reporting by The Sydney Morning Herald, research by the University of NSW has revealed that the percentage of households in mortgage stress has risen to 42%.

This mortgage stress evaluation is based on how much money households have after their normal expenditure (including housing) compared to their income. Households with less than 5% left are deemed to be “stressed”. Ones with a deficit of more than 5% are “severely stressed”.

The research is based on 52,000 households that are either paying a mortgage or paying rent. It shows that just under 33% were in stress in February 2020, it has now risen to 41.7%. Sydney and Melbourne are the places where stress is particularly popping up. Investors are also reportedly facing increased stress with their loans. This could apply to plenty of the borrowers at CBA, Westpac, ANZ and NAB considering their overall market share of the mortgage market.

What does the RBA think is the problem?

Low interest rates are widely acknowledged to be a factor for increasing asset values, not just housing.

However, the RBA also pointed to how property investment is encouraged by the tax system and it also leads to people not moving and selling. Examples included the capitals gains tax concession and how the principal place of residence is excluded from the age pension means test.

The SMH referred to the RBA’s submission to a parliamentary inquiry into housing affordability, which mentioned negative gearing:

However…the RBA believes that there is a case for considering the tax system in a holistic way, taking into account the interaction of negative gearing with other aspects of the tax system.

The housing market is a big deal for the big four ASX banks

CBA, Westpac, ANZ and NAB all earn a large amount of their profit from loans to households and property investors.

This report of increasing household stress may not be a good look when it comes recently after UBS’ survey showed that a record number of loan applicants were not being truthful on their applications relating to the income, expenses or financial liabilities.

The big four ASX banks aren’t the only ones that need to keep an eye on mortgage stress. There are other ASX shares involved in mortgages including Bank of Queensland Limited (ASX: BOQ), Suncorp Group Ltd (ASX: SUN), Bendigo and Adelaide Bank Ltd (ASX: BEN) and MyState Limited (ASX: MYS).

It will be interesting to see if anything comes of this mortgage stress. Some banks like ANZ have been launching share buy-backs and releasing credit from their provisions for potential bad debts. Mortgage stress may not necessarily lead to bad debts for the banks considering the high level of house price growth over the last 12 months.

The nationwide COVID-19 vaccination effort may also open up numerous economic sectors so they can get back to earning again.

The post Climbing mortgage stress: Are the CBA, ANZ, NAB and Westpac share prices in danger? appeared first on The Motley Fool Australia.

More reading

• Top broker tips ANZ (ASX:ANZ) share price to rise 14%
• Why is the Bendigo Bank (ASX:BEN) share price suffering more than its peers today?
• Why is the Bank of Queensland (ASX:BOQ) share price underperforming its sector today?
• Why is the CBA (ASX:CBA) share price outperforming its big four peers today?
• The NAB (ASX:NAB) share price has just had a lousy week, what’s next?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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