CBA disappointed investors last week after it reported contracting net interest margins for the quarter, a death nail for banks which has led to Australia’s largest listed company rapidly correcting over 13%, making fresh 6-month lows in the process. A number of analysts are now flagging that CBA will lose its premium to its peers but I’m not convinced that one average report will undo 20-years of outperformance especially as the issues facing CBA will largely be a sector wide problem.
We reduced our exposure to CBA around 10% higher with the plan to potentially tweak holdings higher after a pullback, as we’ve just witnessed but we are also cognisant that the “easy money” from the sector feels behind us and a more market weight, to slightly bullish, stance feels appropriate with the 2 questions being what’s the optimum portfolio mix after the recent sector volatility and should we tweak back up the risk curve with regard to banking exposure.
Another factor for us is seasonality which is very supportive of the Banking Sector and hence the ASX as we move towards Christmas, over the last 10-years the banks have rallied an average of 6% from their November low, with a 100% success rate!
MM likes CBA around $95
Add To Hit List
