The ASX is lower today.
The S&P/ASX200 dropped 12.50 points or 0.17% to 7,139.30. Over the last five days, the index is virtually unchanged but is down 4.10% for the last year to date.
Bottom-performing stocks in this index are Nanosonic Ltd down 12.33 and Sayona Mining Ltd down 4.55%.
Of the sectors, Utilities up 1.82% and Industrials up 1.05% were the best performers with Materials down 1.54 and Information Technology down 1.53%, leading those in the red.
Information Technology has started this week better than it did last.
The best-performing sectors last week included Materials and Information Technology, followed by Consumer Staples. The worst-performing sectors were Communication Services, Utilities and Financials – all down over 1%.
Best performers in the S&P/ASX top 100 stocks were Fortescue Metals Group (ASX:FMG) up over 9%, followed by Illuka Resources Ltd up over 7% and the A2 Milk Company Ltd up over 5%. The worst-performing stocks were Allkem Ltd down over 10% followed by Pilbara Minerals down over 8% and Lynas Rare Earths down over 6%.
Buy now, pay later industry set for change
Financial Services Minister Stephen Jones plans to regulate the buy now, pay later (BNPL) industry, with reform that could include developing a mandatory industry-specific code without the need for an Australian Credit Licence, bringing the BNPL sector under the Credit Act with a more moderate set of responsible lending obligations and applying similar rules as those for credit cards and other loan products.
RateCity.com.au research director Sally Tindall has agreed that changes are required.
“This intervention might be long overdue but at least it’s finally moving in the right direction," Tindall said.
“Four years ago, ASIC released its first damning report into the havoc buy now, pay later services can inflict on people’s finances, yet to date, very little has been done to prevent this.
“It’s time to introduce strong regulation to help protect the millions of Australians regularly using buy now, pay later services, many of which are getting themselves into serious financial hot water."
According to RateCity research, 41% of buy now, pay later users had been in financial trouble using BNPL platforms.
“The new regulation must ensure all providers check a person’s ability to repay the maximum credit they are applying for, in addition to all other credit they have access to," she said.
“Currently, people can sign up to several buy now, pay later accounts, giving them access to credit totalling thousands of dollars, without anyone checking to see if they’re in a financial position to pay it all back."
Support has also come from ASX-listed BNPL lender Humm Group, which said it was in favour of industry-wide responsible lending checks, including customer identity and credit history checks.
Humm has struggled, abandoning its BNPL sale to Latitude Finance as well as UK expansion and instigating cost-cutting measures and is down around 38% this year.
However, it sees regulation as a step forward for the industry as long as it does not impede the basic function of the industry.
"We also believe it is important that the final legislation does not have the unintended consequence of denying consumers the significant benefit of Buy Now Pay Later finance as an interest-free alternative to more expensive forms of finance," Humm chief executive Rebecca James said.
"We are encouraged to see that reflected in the draft issues paper which demonstrates that the government is considering a proportional and balanced approach to regulation."
Consumer groups want to see large change.
“One of the insidious design aspects of buy now pay later is the use of direct debits which preferences repayments of credit over other essential expenses,” Consumer Action Law Centre CEO Gerard Brody said.
“The practice of providers denying service access to those that fall into arrears can also have perverse impacts, as people respond by prioritising repayments so they don’t get kicked off the app. What this means is that low default rates reported by some providers hide high levels of financial distress.
“Financial distress is just so clear in calls to financial counsellors at Consumer Action. Often we’re hearing from people with multiple accounts, with repayments coming out of their accounts at different times, meaning that they lose financial control. Buy-now-pay-later and wage advance services don’t help people budget, they make it harder.”
Choice CEO Alan Kirkland said, “Australia has safe lending laws for a reason. Buy now pay later and other fringe lenders shouldn’t be allowed to evade important consumer protections by exploiting a loophole in the law.
“As many people struggle to pay their household bills, more are using buy now pay later to pay for essentials. Strong government action is needed now more than ever.
“We’re not asking for anything special – just that buy now, pay later plays by the same rules as everybody else that lends money to consumers, including the obligation to lend safely.”
What's next for Australian stock market?
Wealth Within founder and chief analyst Dale Gillham says, “While at times the market has shown indecision, over the past six weeks the All Ordinaries Index has been bullish rising over 11%. More importantly, last week it rose above its last major high of 7,386 points from August 16.
“As the All Ordinaries Index traded higher last week than the previous week, it was considered an up week. I expect the short-term fall of at least one week I have been expecting is likely to occur this week.
“If the market does start to fall, it will only be short term and last for one or two weeks with support between 7,000 and 7,200 points likely to stop the fall. The sectors currently showing opportunities include Financials, Materials and Consumer Staples, which should all do well into 2023.”
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