* Australian govt poised to lose one-seat majority in parliament
* Opposition party's policies weigh on sentiment
* High-yielding bank stocks down
By Nikhil Nainan
Oct 22 (Reuters) - Australian shares fell on Monday as political uncertainty rattled investor sentiment with the governing coalition poised to lose its one-seat majority in parliament after a large swing against it in a weekend by-election.
The S&P/ASX 200 index .AXJO fell 0.7 percent, or 41.6 points, to 5,897.9 by 0043 GMT. The benchmark had closed marginally lower on Friday, but was up 0.7 percent for the week.
The country's Prime Minister, Scott Morrison, who ascended to the role after ousting Malcolm Turnbull in August, will meet independent lawmakers in a bid to shore up support for his government. the prime minister fails to secure support from independent lawmakers to continue to govern, it potentially sets the stage for early elections, which were otherwise not due until May 2019.
James McGlew, an executive director of corporate stockbroking at Argonaut, said the opposition Labor party's policies on "franking credits" were one issue of concern for market participants.
"Stocks in particular that will be affected by that (franking credits) are the high yielding bank stocks where their yields become relatively less attractive when you strip out the franking credits that are normally passed through," he said.
Franking credits give Australian shareholders tax rebates for dividends paid out from after-tax corporate profits. Labor's proposed tax reforms would keep the franking credit system but reduce some its concessions.
The financial sector .AXFJ dropped 0.6 percent, with Commonwealth Bank of Australia CBA.AX , a high-yielding stock, down about 1 percent.
The country's three other major banks were all trading in negative territory, with Westpac Banking Corp WBC.AX down 0.4 percent.
On Friday, concerns that trade frictions could dent global growth increased as China, Australia's largest trading partner and the world's second largest economy, posted its weakest economic growth since the global financial crisis, as it begins to feel the pinch of the U.S-led trade war. stocks .AXMM lost 0.8 percent, with global miners BHP BHP.AX and Rio Tinto (LON:RIO) RIO.AX down between 0.9 percent and 0.7 percent.
Elsewhere, WorleyParsons WOR.AX said it will buy Jacobs Engineering Group Inc (NYSE:JEC) JEC.N energy, chemicals and resources business for $3.3 billion. of WorleyParsons were on a trading halt pending the acquisition announcement.
Markets in New Zealand were closed for a public holiday.
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