Hedge funds across the country no doubt cheered on Monday when Westpac earnings triggered a sector-wide sell-off after the big four lender reported a slump in mortgage applications since Labor’s sweeping tax reforms.
Short-sellers and long-only fund managers have been burnt by the years-long rally in bank stocks despite the sluggish economy and lacklustre earnings growth. A less obvious victim of the wave of money flooding into blue chips has been smaller companies, a corner of the sharemarket that has largely been neglected.
Small-cap investors got their first taste of life without soaring bank valuations after the big four lenders wiped 62 points off the S&P/ASX 200 Index on Monday following Westpac’s bearish numbers on mortgages as the government tax changes announced in May slowed property turnover.
The bank sector dragged the bourse to a 0.3 per cent loss, while the S&P/ASX Small Ordinaries Index – fresh off its best week in six years – gained 0.6 per cent.
The Small Ords rallied a further 0.6 per cent on Tuesday after the Reserve Bank of Australia left the cash rate at 4.35 per cent, with the decision was unanimous by all nine members.
Source: https://www.afr.com/markets/equity-markets/westpac-turbocharges-small-caps-as-investors-finally-sour-on-banks-20260811-p60n62