I'm beyond convinced structural movements in the market have given CBA its current price, rather than it being a company worthy of trading 28 times earnings.
There is a big risk appetite in the USA, money pouring into the tech sector amid a believed AI boom. This has dragged the US index to record highs. Then what happens, is Australia will track the gains made in the USA, however because we don't have mega cap stocks with amazing earnings potential, there is no other place to put the inflow of money, other than the banks. Market doesn't trust the miners whose earnings are volatile against the backdrop of a maturing/slowing Chinese economy.
So what you have are money managers with no other choice other than to buy CBA and the other banks. The present returns are pitiful, and the correction risk is sky high, but majority of FM's earn their money through management fees rather than performance fees.
but what I find incredible is, why investors who are either passive or use an active FM, would want to invest in Australia. Your buying CBA at a more expensive multiple than Google. Nvidia has doubled its EPS in the past 4 years. CBA hasn't grown its EPS in the past 10 years. The Australian GDP is less than 1%, the USA is a healthy 3%.
No other developed economy prices its banks like we do. JP Morgan is 13.5 times earnings; HSBC is Britain's biggest bank and has a PE Ratio of 9. Royal Bank of Canda has an earnings multiple of 15. MUFG in Japan - 13 times earnings. But here in Australia, we live on the outlier where we have priced our banks going on 30 times earnings if the trend continues.
You ever seen a little kid try to replicate a backflip his big brother performed? usually, he ends up botching it and hurting himself. Well thats what Australia is doing, we are trying to match big brother America despite not having the flex or strength.
American inflows = Meta, Google, Nvidia, Apple, Microsoft
Straya inflows - CBA, Westpac, NAB, ANZ.
Were such a stupid country. Now wonder we are in e technical recession.
CBA Price at posting:
$158.21 Sentiment: Sell Disclosure: Not Held
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