Markets are navigating heavy tax-related selling that is driving a string of fallen angels to fresh lows and throwing up some potentially attractive buying opportunities.
But market watchers say the phenomenon is starting earlier each year and has been an influence in local market activity since April. Matthew Kidman from Centennial Asset Management says the up and down performance of the ASX small cap index in the 2022 financial year is likely to be accentuating tax-loss selling.
Ben Rundle, co-founder of Hayborough Investment Partners, says the broad selloff of small cap industrials over the past six months is likely to be accentuating tax-loss selling as the end of the financial year approaches.He says tax-loss selling can sometimes be best spotted in companies that have raised capital from new investors earlier in the year. If the share price tanks as the end of the financial year approaches, those new investors are prime candidates to consider tax-related selling.
More generally, however, Rundle believes investors typically like to wait until companies issue earnings updates in July and August before coming off the sidelines.