Coalition ‘Miracle Win’: Bank Shares Drove ASX Higher

Coalition ‘Miracle Win’: Bank Shares Drove ASX Higher

In a miracle win, the Coalition is set to be re-elected in Australia’s federal election. The Labor Party lost seats in Tasmania, Queensland and New South Wales and failed to make more than minimal gains nationally. This came as a piece of unexpected news and resulted in substantial share market gains when the ASX opened today.

The stocks of the banks and private health insurers surged on the Australian Securities Exchange (ASX) on the back of the Coalition win. The financial stocks drove the Australian share market to a near 12-year high and powered the ASX200 to a 1.7 per cent gain closing at 6476.1 points today.

The below table features the closing price (as on 20th May 2019) and the respective percentage gain (relative to the last close) in the stock price of the leading banks of Australia on the ASX:

Banks Closing Price (As on 20th May 2019) Percentage Gain
Commonwealth Bank Of Australia (CBA) AUD 77.40 6.27%
Australia And New Zealand Banking Group Limited (ANZ) AUD 27.86 7.77%
National Australia Bank Limited (NAB) AUD 25.81 7.90%
Westpac Banking Corporation (WBC) AUD 27.75 9.20%

As shown in the above table, there was a significant improvement in the stock price of leading banks with the Coalition win. The financial sector witnessed a gain on the ASX with the S&P/ASX 200 Financials surging up by 5.53 per cent. NAB and WBC were among the top five gainers on the ASX today.

The banks gained as market perceived some of proposed Labor’s policies as detrimental. This includes changes in franking credit policy, reducing the capital gains tax discount, limiting negative gearing, the possibility of higher bank levies and tougher restrictions on mortgage brokers than proposed by the Coalition.

The Labor’s policy of ending cash refunds for franking credits was one of the major possible reasons for the loss of the party. The party faced an internal revolt to dump its signature 14 billion dollars franking credit policy. Any chance of franking credits changing has gone in the wake of Labor Party’s stunning election loss to the Coalition. The franking credit policy would have stripped tax refunds from retired investors who had not paid tax.

Investors have been considering the banks as a staple investment and hope for reliable dividends with decent dividend yield from them. But the changes to the franking credit policy would have hampered the banks’ reputation as a reliable investment. The royal commission enquiry had already put the banks’ status at risk due to which banks moved towards the dividend cut. The change in the franking credit policy would have reduced the return of some investors through taxation, which would have encouraged them to pay less for the banks.

Mortgage brokers celebrate, as the Coalition will not adopt the banking royal commission’s recommendation to end trailing commissions and limit other commission payments. With the Coalition’s surprise election win, the investors are heaping again into the highly franked dividends that the banks offer.

The market analysts highlight the following Labor policies that would have worked against investors:

  • Asset and sectoral re-allocations (franking credits)
  • Margin compression (higher wages)
  • Pressure on house prices (negative gearing and capital gains discount changes)
  • Further pressures on the banks (increased levy, royal commission recommendations)

The unexpected victory of the ruling Coalition government melted the wall of worry facing Australian investors. The market analysts view the result as a net positive for economic growth that will add another 15 basis points to GDP.


Disclaimer

This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.

Checkout our Free Dividend Stocks Report

Specially made for income-hungry investors, Invest in growing Franked Dividends an opportunity that should not be missed.


6 Cannabis Stocks under Investor’s Limelight…

Cannabis companies that sell both medicinal weed and recreational pot. Marijuana stocks to look at. Marijuana mergers and acquisitions. Dispensary data analytics. Upcoming marijuana IPO’s Those phrases have become increasingly common as marijuana legalization spreads.

Global spending on legal cannabis is expected to grow 230% to $32 billion in 2020 as compared to $9.5 in 2017, according to Arcview Market Research and BDS Analytics. As of June 29, 2018 the United States Marijuana Index, despite a lot of uncertainty around regulations, has over the past 1 year gained 71.49%, as compared to about 12% gain seen by the S&P 500.

Click here for your FREE Report