August is shaping as a negative month for superannuation returns, with downbeat sentiment pushing the Australian stockmarket to its worst daily fall in three years.

Nervous investors wiped 2.4 per cent from the value of ASX-listed stocks on Friday, bringing total losses for the week to 4 per cent.

The benchmark S&P/ASX 200 slumped 135 points to close the week at 5,478.8 points.

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The main driver of the sharp falls across the market is the disappointing profit reporting season, which has revealed many blue-chip companies falling short of earnings targets.

Regulatory pressure on Australia’s big four banks is also weighing on the confidence of investors.

The banks are scrambling to comply with new capital rules announced recently by the Australian Prudential Regulation Authority.

They each have to raise several billion dollars to support their lending activities.

ANZ shares were down 7.5 per cent. Photo: AAP

ANZ was the first bank to issue new shares to meet the regulatory changes, a move that has diluted the investments of existing shareholders.

ANZ raised a whopping $2.5 billion through its new equity issue and the share price plummeted by $2.44 or 7.5 per cent on Friday.

The other major banks are almost certain to follow with similar programs and were all sold off by investors.

“All ASX sectors remained moored in the red, with financials registering no improvement from the significant losses posted in early trade,” said ComSec analyst Tom Piotrowski.

“The market conversation focussed on which lender will be next to follow in ANZ’s footsteps.”

Commonwealth Bank fell 3.8 per cent to $81.30 and Westpac closed down 3.2 per cent to $32.35.

Impact on super returns

The falls posted by the ASX since the beginning of July are likely to be felt by most superannuation members who have invested their retirement savings in balanced options offered by super funds.

A large portion the funds held in balanced options are invested in Australian-listed shares.

International share markets have also experienced a negative start to the new financial year, so investors in balanced funds will be relying defensive assets such as cash and bonds to ease the damage.

Super members who have all of their super cash tied up in equities-based options such as “Australian shares” or “International shares” are likely to underperform other investment options if current trading patterns persist for some time.

This weeks declines were not unexpected.

Several leading investment managers including Morgan Stanley recently lowered their short-term growth targets for the S&P/ASX 200 Index.

The disappointing earnings season is fuelling concerns that average dividends paid by blue chip companies are now under pressure.

Losses across the market

While the banking sector posted the biggest losses on the ASX, mining stocks were not far behind.

The latest sell-off of resources stocks was triggered by Rio Tinto, which posted a 43 per cent dive in first half profit following the recent collapse in iron ore prices.

Rio’s share price closed at $53.27 and is now trading more than 20 per cent lower than at the same time last year.

Whilst most other big miners have also lost ground this month, mining services companies such as Orica and Incitec Pivot are taking even bigger hits.

Friday’s dive capped off a tough week.

Orica slumped $3.19 or 17 per cent to $15.64 after the company announced $1.65 billion writedown of its global mining explosives businesses. The Melbourne-based manufacturer also warned that its full year net profit could fall up to 15 per cent short of market expectations.

Shares in Incitec Pivot slumped 23 cents or 6.4 per cent to $3.36.

Other blue chips posting big losses on Friday were Ramsay Healthcare (down 4.7 per cent) and Origin Energy (down 3 per cent) after Moody’s warned earlier in the week that the company’s credit ratings could be downgraded.

Origin’s share price has fallen almost 40 per cent in the last 12 months.