Bank plunge could spell end of an era for ASX investors
The dominance of listed bank shares could be coming to an end and investors should look elsewhere for better returns following a collapse in the value of Australia’s largest institution, a global asset manager has warned.
The economic conditions that made big banks the default trade for a generation of investors—lowering inflation, falling interest rates, uninterrupted mortgage loan growth, and no-loss provisioning—have reversed, according to VanEck.
Inflation is here to stay, interest rates are rising and banks are having to set aside more capital for loan provisions in case their loans go bad, the executive told his annual meeting. Australian Stock Outlook It was published this week.
There are also concerns that the changes outlined in the 2026/27 federal budget could deter real estate investment.
On Wednesday, Commonwealth Bank of Australia shares suffered their biggest single-day loss ever.
The stock fell 10.4 percent to $153.67 after CBA missed third-quarter earnings estimates because it had to set aside another $300 million for loan provisions.
CBA shares rebounded somewhat on Thursday and Friday, but still finished down 9.4 percent for the week and slightly in the red for the year to date, at just $159.40.
“If you look at the way Australian banks have been priced, their valuations have certainly not been in line with their international peers over a long period of time,” Russel Chesler, VanEck’s chief investment officer, told AAP.
“Banks are excellently priced. The market expects them to continue to deliver really strong results.”
“Any disappointment will place a heavy burden on the banks, and we’ve seen that now.”
Some of the reasons behind the fall in CBA’s share prices may also be due to the 2026/27 budget handed out by Chancellor of the Exchequer Jim Chalmers on Tuesday.
“I think the market expects to see fewer investors coming into the (real estate) market with the changes in negative gearing and less debt going into real estate from an investment perspective,” Mr. Chesler said.
That could hurt the banking industry’s mortgage business, but negative gearing could still be allowed for new construction, Mr. Chesler said.
Regardless, VanEck believes there are more opportunities in mid-market companies that are in the Australian Securities Exchange’s ASX100 (or top 100) but not in the ASX50.
Mid-caps stand out this earnings season and offer the strongest surprises, according to VanEck’s outlook report.
They were also trading at a lower valuation, Mr. Chesler said.
“So from our perspective, we think they have some value,” he said.
VanEck is also a fan of what traders call HALO companies, “heavy assets, low obsolescence,” businesses that have real-world demand-driven cash flow and are backed by long-lived infrastructure.
Mr Chesler pointed to Queensland rail transport operator Aurizon, tollway owner Transurban and Telstra as companies whose pricing power and asset quality would likely enable them to perform well in an environment where interest rates remain higher for longer.
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