Bank stocks looking strong in Election aftermath
The banks came out of last week’s post-election share market rise very strongly, with Westpac alone up 13 per cent from the week before on Friday, and data from FE Analytics reveals which funds were best positioned to take full advantage of this jump.
Wealth Within’s chief analyst, Dale Gillham, said that the surprise election result saw a scramble by short-sellers to cover positions, labelling the banks “some of the big winners” of these movements.
Five funds, mostly exchange-traded funds (ETFs), in the Australian Equities sector held over 10 per cent of their funds under management (FUM) in the biggest winner, Westpac, and the chart below shows how this holding translated into strong returns. The spike in the last fortnight brings the performance of all the funds either close to or above their highest returns for the last year.
Of these funds, the VanEck Australian Banks ETF held the most FUM in Westpac, with 20.44 per cent of its total holdings, followed by the State Street Global Advisors SPDR S&P ASX 200 Financials ex AREIT ETF (17.54 per cent), Perpetual’s Wholesale Geared Australian offering (14.75 per cent, BetaShares’ Australian Dividend Harvester ETF (11.3 per cent), and ETF Securities’ S&P ASX 300 High Yield Plus ETF (10.38 per cent).
Year-to-date performance of funds with >10 per cent exposure to Westpac
Funds with over 10 per cent of FUM invested in the other Big Four banks also did well following the Election, unsurprisingly considering Financials were up over 6.5 per cent for the week and ANZ and NAB were up more than eight per cent. For context however, Gillham pointed out that these two banks were recovering from poor performances last week after going ex-dividend.
The table below again illustrates the contribution the post-Election spike could have made; the returns of the last month are greater than most individual months in the year to day, while the three-month returns are generally well over half of the total year-to-date performance of each offering, which were damaged by share price falls during the Banking Royal Commission.
Performance of funds with >10 per cent exposure to a Big Four bank
Other sectors to perform strongly in last week’s slight share market jump were Consumer Discretionary, up 2.9 per cent by last Friday, and Communications, up 1.3 per cent. The Information Technology sector suffered more, down 3.3 per cent, with Energy and Utilities also experiencing slight declines of 1.25 and 1.15 per cent respectively.
Gillham recommended that investors “just enjoy the ride” offered by these positive share market movements, predicting that the rise would continue for a few more weeks before turning in July.
“Right now, the sun is shining on the Australian stock market and I expect the all-time high will be challenged and possibly broken very soon,” he said. “That said, I do expect the market to move into another low sometime early to mid-July.”
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