Binary options traders might find the signals coming from the Australian banking sector contradictory and struggle to make up their mind about whether to buy put or call options. AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ANZ) is one of the largest banks in the country and to some extent the most vulnerable one, which is not necessarily a bad thing for those who deal with binary options. Unlike buying and holding on stock, these short-term investments can be profitable regardless of the direction in which the price goes as long as it is correctly predicted.
The Impact of the Mining Sector Slowdown
In the recent years, the Australian economy grew mostly due to the increasing exports of resources that are plentiful on the continent. Now that the mining sector is slowing down as a result of lower demand for raw materials such as iron, it is only natural to expect some shockwaves to hit the banking sector as well. India and China are no longer purchasing high quantities of iron and Australian officials proclaimed that the mining boom is now over. Some of the most prominent banks on the continent such as ANZ have a relatively low loan book exposure on the mining sector but their profits are adversely affected.
Australia and New Zealand banking group has a stock price revolving around the value of $25 with the most optimistic investors expecting it to grow to $26 and beyond. A bearish binary options trader has much more liberty to acting in the opposite direction and values below $23 are not overly pessimistic. The bank's profits could easily contract to more than 9% and even double-digit values are not to be dismissed as excessive. Their stock has over performed in the last years and appreciated by 25%, which means that a severe correction could saw it losing all that it gained.
Still a Better Choice than American Banks
While there are serious reasons to expect that ANZ shares will take a dive in a not so distant future, those who are investing mostly in banks are facing a predicament. Compared to their American counterparts, the Australian banks are still a better choice and the only downside is that some of their stock are slightly overvalued. ANZ bank cut its dividend sharply in 2008 and 2009, but it now pays $0.83 per share which means that the value is actually 40% higher than what they did before the financial crisis.
Few American banks can brag about such performance and in terms of yields the Australian banks also hold the upper hand. The Australian economy is under less pressure and the unemployment is 5.6%, two percent less than the American, which implicate higher consumer confidence. Last but not least ANZ bank is well supported by its earnings and if China returns to strong economic growth, Australia and its banks will once again be its biggest trading partners.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.