“With the Labor government no longer being a possibility, it’s back to normal,” Mr Le Mesurier said.
White Funds Management managing director Angus Gluskie said that although the banks still faced challenges, the election result “removes one of the growing areas of risk”.
“People’s concerns about the further weakness in the housing market were exacerbated by the removal of negative gearing,” he said.
Mr Gluskie said the sharp rise in bank shares on Monday was an illustration of a view among some in financial markets that Labor’s proposed policies on tax were “economically and financially damaging”.
David Walker, portfolio manager at Clime Asset Management, said the surge in bank shares also reflected a view in markets that the property market could reach its bottom sooner as a result of Saturday’s election result. He said with markets expecting a Labor win before the weekend, a slower recovery in the property market had previously been “priced in.”
“If you take that policy change away, it’s a boost to sentiment in the housing market and therefore to bank stocks, because housing prices and markets are crucial to bank stocks,” Mr Walker said.
In a powerful rally, Westpac shares surged 9.2 per cent to $27.75, Commonwealth Bank shares rose 6.3 per cent to $77.40, National Australia Bank shares jumped 7.9 per cent to $25.81, and ANZ Bank shares increased 7.8 per cent to $27.86.
Bank shares have been held back by low credit growth in recent months, which experts have blamed on tighter lending standards and softer demand for loans from investors, some of whom may have anticipated a Labor win.
UBS economist George Tharenou, who predicted the trend towards tighter credit, on Monday said the Coalition’s win “materially reduces downside risk” for the investment bank’s views on the housing market.
In a note to clients, he said the fact that Labor’s plans were not proceeding could “stabilise sentiment” towards the housing market, though it would have little impact for the credit tightening taking place in banking.
Head of banking research at Morningstar, David Ellis, predicted investor sentiment in the housing market may improve based on Saturday’s result.
“The rate of decline in house prices has been slowing, and this might just slow that down even further, where it might stabilise for a while,” he said.