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Nab shares are at a three year high, so how have nabtraders responded?

Gemma Dale
12 November 2021

The ASX200 closed at 7381 points on Thursday, down over half a per cent but rising off its midday lows. It is down 0.62% over the last five days, where the headlines have been dominated by rising – and not very transitory – inflation in the US, which has led to fears that central banks will need to reduce their accommodative monetary policy and start raising rates earlier than expected.

Rising interest rates make many popular trades, such as high growth, loss-making technology stocks, unprofitable, while inflation pressures can result in a flight to core assets.

The big news for the week was nab’s (NAB) results on Tuesday. The big four banks all remain top 10 holdings for nabtrade investors, and were all among the top 10 most bought stocks during the Covid rout in the first half of 2020.

Westpac’s (WBC) results the previous week were met with condemnation by the market, with the share price down over 10% since reporting. Nabtrade investors, typically contrarian, have been enthusiastic buyers, with WBC shares topping the volumes last week with more than 90% buys.

The reaction to nab’s performance has been dramatically different – results were largely in line or ahead of expectations, earnings growth has been pleasing, and the share price has held up strongly, touching $30 for the first time since early 2018. Nabtrade investors have taken profits; at an average price of $29.93, the bank was an incredible 92% sell on Wednesday. It dipped 1.6% on Thursday and was a buy. Trading in ANZ and Commonwealth Bank (CBA) have been mixed on lower volumes.

The divergence in performance of the big four banks may come as a surprise to many holders, as banks are typically pro-cyclical (a significant positive as the economy returns to growth and interest rates ultimately rise). Investors have become broadly used to outperformance by CBA, and convergence between the others. Higher value stock pickers have been rotating into Westpac and out of CBA and nab, hoping for a return to the mean.

The other major driver for many investors, the iron ore price, has continued its downward trend, falling below $US90 on Wednesday night. Despite this, BHP (BHP) shares rallied 2.5% and Rio Tinto (RIO) was up 1.8%.

Even more astounding was Fortescue Metals Group (FMG), rising as high as 11% on Thursday, before closing up 8% at $15.45. Nabtrade investors have traded FMG in huge volumes throughout 2021, and this level of price action brought out the enthusiasts, with FMG topping the trade numbers after a week of banks; it was nearly double the next most traded stock. There are several hypotheses for the rally, including a rebound in stocks in the Chinese residential property development sector (assuming a relaxation of lending restrictions by Chinese authorities), and enthusiasm for Andrew ‘Twiggy’ Forrest’s green hydrogen ambitions.

By way of context, the XFJ ASX200 Financials Index is up over 30% year on year, in a broadly straight line, while the materials sector is up just 7%, but well off its highs and down 16% over three months.

Former market darling Xero (XRO) fell 6% on Thursday after a half year report which flagged higher investment costs and lower than expected revenue. Nabtrade investors, unsurprisingly, were buyers, although in relatively modest volumes.

Battery technology hopeful Novonix (NVX) has been a huge winner on the ASX in 2021, up over 600% over twelve months, but fell heavily on Wednesday, down over 14%; it was a strong buy. It rallied over 10% on Thursday and was promptly trimmed.

On international markets, Tesla (TSLA) continues to dominate headlines and trading volumes. Human headline Elon Musk tweeted a survey to his 63 million (yes, 63 million) followers, asking if he should sell 10% of his Tesla stock to meet capital gains obligations. The survey response was 58% for, and Musk sold (as would have been submitted to regulators in advance), leading to a 13% fall in the share price. Nabtrade investors were largely enthusiastic, with a 72% buy on the dip. Luxury electric vehicle hopeful Lucid Group (LCID) was mixed, in much smaller volumes.

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