Aussie bank shares “too expensive to own”??
After the market closed on 13 March, major broker Macquarie released a research report titled "Australian Banks: This time it's different.” In the report, they reiterated their view that ASX bank stocks were priced for perfection as they were “trading at peak multiples without a clear fundamental reason.”
Geez, tell us what you really think Macquarie!
They went on to retain an UNDERWEIGHT rating on the entire Aussie banking sector, and then downgraded their ratings on three of the Big 4:
- $ANZ Group Holdings Ltd(ANZ.AU$ downgraded to UNDERPERFORM from neutral
- $Westpac Banking Corp(WBC.AU$ downgraded to UNDERPERFORM from outperform
- $CommBank(CBA.AU$ downgraded to UNDERPERFORM from neutral
Geez, tell us what you really think Macquarie!
They went on to retain an UNDERWEIGHT rating on the entire Aussie banking sector, and then downgraded their ratings on three of the Big 4:
- $ANZ Group Holdings Ltd(ANZ.AU$ downgraded to UNDERPERFORM from neutral
- $Westpac Banking Corp(WBC.AU$ downgraded to UNDERPERFORM from outperform
- $CommBank(CBA.AU$ downgraded to UNDERPERFORM from neutral
As for the rest, Macquarie already had Commonwealth Bank of Australia , $Bendigo and Adelaide Bank Ltd(BEN.AU$ , $Bank of Queensland Ltd(BOQ.AU$ and $Judo Capital Holdings Ltd(JDO.AU$ rates as UNDERPERFORM.
The response in the market to Macquarie’s unanimous sector bearish research report was swift. On March 14, the banking sector was down an average of 2.5%, but ANZ (-3.76%), WBC (-3.75%), and $National Australia Bank Ltd(NAB.AU$ (-2.76%) each suffered more severe declines.
As you can see from the above chart, the fall ended what was a spectacular run of performance in ANZ’s chart. CBA, NAB, and WBC each experienced a similar run in their share prices since November, and none have recouped those 14 March losses yet.
As you can see from the above chart, the fall ended what was a spectacular run of performance in ANZ’s chart. CBA, NAB, and WBC each experienced a similar run in their share prices since November, and none have recouped those 14 March losses yet.
- Institutions have been buying
- Mum and dad investors are taking profits
Whilst individually your typical retail investor is a mere drop in the ocean of the market, when it comes to Australian banks, they punch well above their weight. Macquarie suggests retail investors represent around 40-50% of banks’ share registries. This means a trend of selling among retail investors can have an outsized impact.
Macquarie cites activity at retail stockbrokers over the period and confirms Retail investors were indeed net sellers of Aussie banking stocks. This is “consistent with previous bank share-price rallies”, notes Macquarie. The selling from retail investors was most pronounced in WBC, followed by ANZ, and then NAB.
-See ya later, shorts!
The other key finding of Macquarie’s research was the activity among short sellers. Short sellers usually get a bad rap among Aussie investors who believe the shorts are responsible for pushing down the prices of investors’ favourite stocks. The flip side of this equation is usually understated or forgotten – when the shorts have to get out, they can become major buyers of stocks.
And buy Aussie banks the shorts did. For the same reasons many institutional investors were underweight the bank sector, many hedge funds were short.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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