Australian banking stocks have ripped higher after the final Hayne report

After the Hayne commission’s final report from its inquiry into misconduct in financial services, look what’s happening to the ASX financial index today:


A short time ago the financials index was up almost 4%. The big story is in the shares of the major banks; at around 10.20am Westpac was up more than 5.5%, CBA and ANZ were both up around 4%, while NAB — which was singled out for criticism in the final report — was up 3%.

It’s a bit of a relief rally — before the release of the final report, investors sold down holdings in financial companies to reduce their exposure to any potential bombshells that could be ruinous for existing companies’ business models.

There was also short positioning by hedge funds and other professional investors betting that the share prices of some banks would tumble.

When prices rise and numerous investors are short, those traders need to buy back stock that they’ve sold into the market. This pushes up the demand for the stock even further, exacerbating the price gains.