Richard Coppleson explains why a short-term bounce in Australian banking stocks 'looks possible'

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  • The ASX 200 Banks Index has tumbled 9.3% since mid-August.
  • After such a sharp fall, Richard Coppleson, director of institutional sales and trading at Bell Potter securities, says a short-term bounce in the banks looks possible.
  • October is traditionally a good month for Australian banking stocks, lifting in each of the past seven years for an average gains of 5.05%.

Australian banking stocks have been hammered since mid-August with the ASX 200 Banks Index tumbling 9.3%, largely reflecting renewed concern about the potential fallout from Australia’s Banking Royal Commission.

Investing.comASX 200 Banks Index

Richard Coppleson, director of institutional sales and trading at Bell Potter securities and author of “The Coppo Report,” thinks a bounce in the banks is coming, suggesting that with much of the bad news already priced, there’s grounds for a short-term rally.

“The Banks have been smashed after the Royal Commission, but on a short-term basis, most seems to be factored in and a short-sharp three week bounce looks possible,” he says.

Particularly given October is traditionally a good month for banking stocks, as he explains.

“Since 2000 the Bank Index, on average, has been up 14 out of the last 18 years [in October], or up a huge 77% of the time. Since 2011 it has been up seven years straight by an average of +5.05%.”

Coppleson says there’s a good reason why banks tend to perform well in October: the prospect of juicy dividend yields, particularly during a period when there’s few other sectors offering them.

“With the September reporting season over and all stocks from then having already gone ex-dividend, most are in the process right now of paying dividends into investor accounts,” he says.

“Many investors, in their desperate hunt for income, look to where they can next harvest income from. So what we see is a rotation out of the stocks that have already paid dividends into the next ones that do.”

And that list includes ANZ, NAB and Westpac who, based on prior years, will likely go ex-dividend from early-to-mid November.

Something for investors to mull over if you’re in the market for a short-term trade.

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