Australian Share Market Report “The ‘Big Four’ Banks”

Australian Share Market Report

The release of a preliminary report this week into Australia’s financial system, following an investigation chaired by ex-Commonwealth Bank chief executive David Murray, finds that competition in our banking sector is acceptable. However, can we really be sure that this assessment of the key issues was balanced when members of the committee charged with the task of conducting the investigation appear to overwhelmingly represent the corporate sector?

Our financial system is a very diverse industry and therefore any changes to policy settings that impact the sector can effect such a broad group of participants, from retail clients up to the big four financial institutions. Given this, does it make sense that the investigating committee didn’t include adequate representation from the different interest groups?

The Customer Owned Banking Association COBA, representing credit unions, mutual banks and friendly societies, have been lobbying the government for some time about the lack of fairness in the financial system. COBA believe that the big four banks continue to hold a significant competitive advantage over the smaller financial institutions and claim that the big banks are still benefiting from government backing, which gives them access to funding at lower rates.

In response, the big end of town have indicated that profits being made by the big four based around this funding are at historic lows, however, that doesn’t mean they don’t have an advantage. Also, smaller financial institutions are even further behind the eight ball as they are required to hold greater levels of funding than the major banks, which only increases costs. Who is right?

So what do we expect in the Australian share market?

This week there is cause for some excitement about the Australian share market as finally we have seen it push higher, above the highest point traded in six years, and towards our target zone. You may recall how following the high of 5453 points in October 2013 that the Australian market has largely traded sideways, only ever managing to break beyond this level during April this year when it achieved a high of 5533 points.

At this time of year the institutions are shuffling the decks, reweighting their portfolios to particular sectors, often to those previously out of favour, and in this case we are currently seeing interest in the Energy, Industrials and Materials sectors. This is also the time for US companies to report their financial performance and for Australian companies to indicate of how they are tracking. All of these things are having a positive impact on our market.

image of all ordinaries index from 18-07-14

To your profitable trading,

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma of Share Trading and Investment.