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Harvey Norman hit hard as ASX edges lower

The S&P/ASX200 Index remains unable to maintain gains above the 5800 level, with broad-based losses across most sectors erasing last week's positive moment.

The benchmark index shed 0.4 per cent to 5778.9, while the broader All Ordinaries index was 0.4 per cent lower to 5820.5.

"Turnover is very light – down by around 40 to 50 per cent," noted Arnhem Investment Management partner Simon Twiss. "There's a public holiday in Japan, which for whatever reason, makes our markets go very quiet. And we had a meager lead from US markets."

Wall Street closed down just 0.1 per cent on Friday, giving relatively little momentum to local markets. 

"Outside of that, it's single stocks that are having the most movement," said Mr Twiss.

The biggest drag on the benchmark index came from telco giant Telstra, which slid 2.1 per cent despite Goldman Sachs analysts saying they saw value in the shares following their recent underperformance.


"Following a 9 per cent fall since its interim result, Telstra now trades on a fully franked yield of 6.6 per cent — amongst the highest in the market," the analysts said.

Harvey Norman shares were clobbered, down 8.2 per cent to $4.36, its largest slide in more than five years, after a director sold down shares in the company. It and fellow retailers were identified as those most likely to be affected by Amazon's entry into Australia.

Myer, identified as having the most to lose should it be forced to directly compete with the online retailer, fell 3.1 per cent. JB Hi-Fi fell 2.8 per cent, Super Retail Group shed 3.4 per cent while Premier Investments, which owns a series of youth-focussed brands like Just Jeans and Jay Jays, was the least affected, ending the day flat.

Fletcher Building was the day's biggest loser in the ASX200, down 10.0 per cent after the New Zealand building giant cut its earnings forecast. 

The financials sector, down 0.3 per cent as a whole, was responsible for around a third of the day's losses. NAB was one of the day's few gainers, up 0.1 per cent, while the other three major banks all traded in the red, down between 0.3 and 0.5 per cent.

Meanwhile, materials more modestly shed 0.2 per cent. Big miner Rio Tinto fell 0.9 per cent, while BHP bucked the trend by adding 0.2 per cent. Fortescue Metals closed flat. 

The one bright light was Australia's medical stocks, with the index adding 0.8 per cent off strong performances in Japara Healthcare, up 3.9 per cent, Primary Health Care, up 3.7 per cent and Virtus Health, up 2.5 per cent. Cochlear fell 0.9 per cent. 

Stock watch: Harvey Norman

Shares in Harvey Norman were heavily sold down on Monday, falling 8.2 per cent to $4.36 after executive director David Ackery sold $1.5 million shares only a day after managing director Katie Page sold $1.06 million. Short-selling interest in the retailer has risen, with 4 per cent of the company's shares being shorted, despite it having posted its "best ever trading results" in the February earnings season. On Monday, a Credit Suisse analysis estimated the company could lose between 3 to 9 per cent or EBIT upon Amazon's entry into Australia. While Harvey Norman was the least affected of the stocks assessed by Credit Suisse, Gerry Harvey has been particularly vocal about the threat caused by the online retailer. 

Market movers

High quality ore

China's industrial sector reforms will support demand for higher-quality raw materials and thus Australia's iron ore export market, according to Rio Tinto. "There is a clear push in order to reduce pollution, to restructure the steel business, but that is not bad thing for us," chief executive Jean-Sebastien Jacques said in an interview. "In order to produce the same output, then you are going to need better-quality iron ore - absolutely music to my ears." The spot price for iron ore continues to defy analyst predictions, last week ending at $US92.34 a tonne.

Lending crackdown

Treasurer Scott Morrison signalled that a renewed surge in investor property buying - particularly with interest-only loans - is likely to trigger a fresh regulatory crackdown on banks as part of the government's efforts to boost affordability for actual home buyers. With the May budget due to unveil a series of measures that would "reduce the burden" on those looking to buy or rent a house, Morrison indicated that so-called macroprudential restraints on lenders introduced in 2015 were no longer working as effectively as they were in 2016.

Oil glut

Oil prices remain under pressure as rising US drilling activity and steady supplies from OPEC countries - despite touted production cuts - hit already-bloated markets. Brent crude, the international benchmark for oil, is down 0.7 per cent at $US51.41 a barrel, while WTI crude has dropped 1 per cent to $US48.30 a barrel. "Crude oil has attempted to break out of the trading range that formed last year ... However, this uptrend has stalled," futures brokerage CMC Markets said in a note. "Now there is good, strong momentum to the downside."

Flight Centre

Flight Centre shares fell 0.8 per cent after a Macquarie analysis said the company would need to close 135 stores to regain the same level of boom time growth it had in 2012. Flight Centre has a major retail presence in Australia with 678 physical locations, but that level of presence is being questioned by Macquarie. "Flight Centre Total Transaction Volume per store has not grown since 2012, and therefore according to our transport analysts, additional store openings have been dilutive to sales productivity," the analysts said in a report to clients