CBA is often touted as the biggest holding in widely held ASX 200 ETFs like VAS, IOZ, A200 and STW, which has led some market commentators to link the bank’s price surge to ETF-buying activity. Yet, research from ETF Shares shows these ETFs collectively own approximately 1.34 per cent of CBA’s total shares on issue – around 22.4 million shares out of 1.7 billion.
“Since 1 January, these ETFs have bought about 1.8 million CBA shares over the 125 trading days this year. Assuming smooth flows, that works out to buying 15,000 shares a day. Now, CBA trades on average around 2.1 million shares a day. Meaning these ETFs are responsible for less than 1 per cent of CBA’s average daily trading volume. That’s not enough to move the market on a company this large,” David Tuckwell wrote on LinkedIn.
He also pointed out a critical nuance often missed – much of the money flowing into ASX 200 ETFs is recycled from active funds or direct shareholdings already exposed to CBA.
“What we’ve often seen in ASX 200 ETF flows is money shifting sideways. It does not logically follow from the fact that ASX 200 ETFs experience inflows that aggregate demand for CBA’s shares is therefore increasing,” Tuckwell said.
If ETFs were truly behind the surge, he argued, similar effects would be evident in other large-cap stocks. Yet, BHP – the second largest ASX stock with an 8 per cent index weight – is down 9 per cent year-to-date.
Tuckwell also argued against conflating ETF inflows with index inclusion effects, arguing the two operate under different market dynamics.
“Index inclusion is well-known for sparking rallies. Arena REIT jumped 5–7 per cent on joining the ASX 200 in 2022. Boss Energy soared 20 per cent in December 2023 on the same news. Tesla’s 70 per cent rally ahead of its S&P 500 inclusion in 2020 is perhaps the most dramatic recent example,” he said.
“But index inclusion and subsequent rallies predate ETFs, and they’re not driven by passive vehicles alone. Active managers pile in too.”
While ETFs could theoretically wield more influence as their market share grows, Tuckwell suggested current evidence shows they are a convenient scapegoat for CBA’s rally.
“Could ETFs one day become so large that they do set CBA’s price? Theoretically, yes. But we’re nowhere near there yet,” he said.
“For now, ETF flows look more like a scapegoat. The search continues for the real driver of what’s fast becoming the most hated rally on the ASX.”
In recent months, superannuation funds, too, have come under scrutiny for allegedly distorting equity markets and inflating Commonwealth Bank’s share price through their size and benchmark-driven investment strategies.
“The big issue in Australia is the concentration of industry funds. Whenever you get concentration of power, you get trouble,” PM Capital’s Paul Moore recently said. “The problem is, the industry super funds in Australia have supercharged the passive impact.”
Betashares executive director Cameron Gleeson also acknowledged the outsized influence of large super funds in equity markets but pushed back on the idea that passive investing itself is responsible for the rally.
“It isn’t passive itself that has driven what has happened with the banks,” he said in May.
“Absolutely right, big super is the gorilla in the room. Your Future, Your Super has changed the way these fundamentally active managers have had to manager their portfolios.”
Gleeson pointed instead to reports of increased buying activity in the banking sector last year as funds sought to reduce underweights in key financial stocks – a dynamic that, he suggested, played a more material role in pushing up prices.
“There’s been comments around big super being at limits in terms of Australian equities, and they’ve reduced buying within Australian banks this year,” he said.
“If you want to break it down, it’s certainly big super that owns a quarter to a third of the Australian equities market, rather than straight index or straight ETF.”
