No Major Country Is More Exposed to Banks than Australia
There are six large (with a market cap of over AUD50 billion) listed companies in Australia. The biggest four are banks, the fifth is BHP, one of the world’s largest mining companies. The sixth is the world’s most over-priced Telco, Telstra. The table below puts these companies into international perspective. They are small on a world scale, but behemoths in their domestic market.
The financial sector amounts to 44% of Australian stock market capitalization. The vast majority of the sector is comprised of banks and “diversified” banks. The remainder is insurance and real estate.
Before going further we need to understand just how small Australia is. In terms of population, Australia is the same size as Shanghai and slightly larger than Beijing; about the same as NY State; and three times larger than London. In terms of GDP Australia comes in at number twelve (IMF 2013). Australia’s GDP was USD1.5T, compared with the US at 16.7T and China at 9.5T.
Moving on.
The dominance of the financial sector is astounding. I doubt it is replicated in any other developed economy. The Australian stock market is capitalized at around AUD1.5 trillion (about twice AAPL). Almost half is represented by the financial sector. Worse, within the financial sector, the big four banks represent around 30% of total stock market capitalization.
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