ASX rally: Market jumps, big banks surge on Coalition victory in federal election

More than $27 billion has been added to the value of the nation’s big four banks in a stunning stockmarket rally following Prime Minister Scott Morrison’s unexpected election victory.

MORE than $27 billion has been added to the value of the nation’s big four banks in a stunning stockmarket rally following Prime Minister Scott Morrison’s unexpected election victory.

Shares in the Commonwealth Bank, Westpac, National Australia Bank and ANZ all notched up their biggest one-day gains in at least a decade yesterday as possible changes to franking credits and negative gearing were consigned to the scrap heap.

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Health insurers also surged as the benchmark ASX 200 index gained 1.7 per cent in a post-election rally.

The rally took the index, which broadly tracks the nation’s 200 biggest listed companies, to a fresh 11-year high and through the 6400-point mark for the first time since 2007.

Shares in the big banks have surged.

The Coalition’s unexpected win has implications for a broad range of companies — from property and energy to childcare — given the Opposition had a broad range of policies that had spooked investors.

Labor had promised to scale back franking credits, negative gearing and capital gains tax discounts, take more ambitious action on climate change and increase pay rates in some industries.

Shares in the Commonwealth Bank gained 6.3 per cent yesterday to $77.40 in a rally that added $8.1 billion to its market value.

It was the biggest one-day gain since March 2009.

Westpac skyrocketed 9.2 per cent to $27.75 — its biggest one-day rally in at least 20 years — adding $8.1 billion to its market value.

National Australia Bank climbed 7.9 per cent to $25.81 while ANZ put on 7.8 per cent to $27.86.

The rises added $5.4 billion and $5.7 billion to their respective market values and were the biggest one-day gains since September 2008 and February 2009.

Across the big four banks, the rally added a whopping $27.3 billion to their market value.

Health insurer NIB was the best-performing stock in the benchmark index as its share price surged 15.8 per cent to $6.82. Medibank Private was second best, up 11.5 per cent to $3.21.

The share market is a sea of green today.

Morgan Stanley equity strategist Chris Nicol said money would flow back into blue-chip stocks that paid generous fully-franked dividends — such as the big four banks — and health insurers.

“A Coalition win can be deemed a surprise for investors and the upshot is that many tail risks that were potential consequences from what was a significant and wide-reaching tax and policy reform agenda from the ALP are now removed,” Mr Nicol said in a research report.

“We would expect a meaningful rotation back towards blue chip yield given imputation refund ability is no longer at risk.

“For banks, some of the risks that may have arisen from negative-gearing changes are diminished.

“Domestic healthcare, insurance and consumer stocks should all see a sentiment boost to outlook.”

RBC Capital Markets Australian fixed income strategy head Su-Lin Ong said the return of a Coalition government injected greater certainty into the outlook for investors.

“We would expect some bounce in business confidence,” Ms Ong said.

UBS economist George Tharenou said the election result “materially reduces” the downside risk to the housing market.

Business Council of Australia chief Jennifer Westacott said it was critical that confidence was returned to business so the sector could deliver investment, jobs and wage growth.

“Now is the time to end the anti-business rhetoric and do all we can to ensure that all Australians, particularly those in the regions, have the opportunity to get ahead,” Ms Westacott said.

“Australians want sensible solutions to increase wages, drive down energy prices, deal with climate change, and give them the skills they need.”