Aus macro/housing finance

Australian housing finance data is out. Recovering from its nadir, would be the comments on first glance.

To the degree the job ads are rolling over, it is hard to see this recovery being sustained. But never doubt the underlying demand for housing, it is only ever but seconds away/inches-beneath-the-surface.

We are underweight the banks, but still have about 15% absolute weight (through ANZ and WBC, which we simply regard as CBA and NAB like, only cheaper) for exactly this reason.

The yields are high, the underlying demand for finance is nigh on unkillable, and only climbing unemployment can damage it.

We’ve held the banks because we thought they provided some exposure to higher rates in the portfolio, with the basic idea being that bank profitability usually increases in a rising rate environment. That didn’t hold true, indeed the sector has competed away most of its return over the past 2 years or so, but today’s data would make you more inclined to keep them anyway, as a growing top line (at least superficially) provides an offset to pressures on the NIM from increased competition.

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