Signs of a bubble emerging in ASX | The Business | ABC NEWS

The Australian share market has been repeatedly breaking record highs in recent weeks. It has seen the benchmark index push past 9,000 points for the first time, helped by lower interest rates and easing fears about Donald Trump’s trade war. At Jackson Hole in Wyoming, US Federal Reserve chair Jerome Powell signalled the central bank could cut interest rates in September, driving up stocks on Wall Street, which translated into a small gain on the S&P/ASX 200. Analysts say the market’s lofty heights mean it is vulnerable to significant falls, but it is impossible to predict when that might happen. Fund manager Roger Montgomery said enormous amounts of liquidity, or credit, continued to slosh through global markets — a legacy of the central bank cash splash during the global financial crisis and again during COVID — and it was all looking for a home. Traders say cash is already rotating out of Wall Street into the S&P/ASX 200. Veteran market analyst Marcus Padley says it’s going into “MSCI Asia indices, which includes Australia, and … our biggest stocks.” The share price of Australia’s biggest company, the Commonwealth Bank, is up more than 20 per cent in a year even though its latest profit result disappointed investors. Trader Danielle Ecuyer says it isn’t” so much about the bank’s fundamentals … It’s more to do with the fact that there’s been a weight of money coming into it, which has pushed the stock higher.” Stockbrokers also offer index funds that mirror the performance of the S&P/ASX 200, with the big banks – CBA, NAB, ANZ and Westpac – making up roughly a quarter of them.

Analysts reckon the market’s irrational behaviour can be best seen in share price plunge of biotech giant CSL. Its underwhelming financial results, decision to cut 3,000 jobs and spin-off its vaccine division into a separate company sent investors running for the exits.

The record run on the Australian stock market is perhaps best captured by the performance of superannuation — up as much as 12 per cent over the past 12 months. There are, of course, risks to the share market. They include trade-war-induced global inflation, a US recession, geopolitical risks, or some sort of black swan event. But most of the risks to financial markets, analysts say, are not locally based. Mr Padley said any big fall for the Australian share market would likely stem from a possible Wall Street crash. Fund manager Roger Montgomery thinks it is not a matter of if Wall Street will tumble, but when.
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