Australia shares shaky, on track for worst week in three years

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SYDNEY/WELLINGTON, June 5 (Reuters) - Australian shares fell to their lowest in over four months on Friday as bank stocks pushed deeper into the red, setting the market on course for its worst weekly performance in three years.

The S&P/ASX 200 index slid as far as 5,479.2, reaching a low last seen in late January. It stood at 5,507.7 by 0155 GMT, flat on the day as some bargain hunters cautiously emerged after four straight sessions of declines.

Still, the index is down nearly 5.0 percent on the week - the biggest drop since mid-2012 - partly driven by renewed weakness in the banking sector.

Westpac Banking Corp fell as far as A$31.20 on Friday, reaching a low not seen since February 2014 - a vicious turnaround for a stock that was probing record highs above A$40.00 just two months ago.

"It just doesn't feel like the move lower in the banks is even mature," said Chris Weston, chief market strategist at IG (LSE: IGG.L - news) .

"Many investors would have bought throughout April and many would have faced margin calls this week, although I am only speculating here."

The tide for banks started to really turn in early May after several lenders disappointed investors with their earnings and forecast a more challenging outlook.

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New Zealand's benchmark NZX50 share index was marginally weaker but off its lows as well at 5,861.63 as modest support for selected top stocks offset weakness among medium and small-sized companies.

Top stock Fletcher Building (NZSE: FBU.NZ - news) was up 1 percent on bargain hunting after it touched a three-week low, with Auckland International Airport, Ryman Healthcare and telecommunications operator Spark also supporting.

However, smaller stocks offered the bigger price action.

Retailer Kirkcaldie and Stains was up a further 5.6 percent to a nine-month high on a modest volume after it said the previous day it planned to close and return cash to shareholders.

On the downside, biotechnology company Pacific Edge fell 3.1 percent after it said it planned to raise NZ$35.3 million ($25.16 million) through a share issue to fund expansion.

($1 = 1.4029 New Zealand dollars) (Editing by Eric Meijer)