What do CBA and CSL’s slides mean for the future of Australia’s biggest stocks?

Commonwealth Bank’s horror week has turned the ASX’s biggest bank from market darling into market warning sign, analysts say.

The stock ended Tuesday at $171.57. A day later, it had been smashed to $153.67, wiping 10.43 per cent from its value in what Morningstar described as the worst session in the bank’s listed history.

It has since recovered some ground, hovering near the $160 mark, but the sell-off has sparked dire remarks from analysts that place it squarely in bear territory.

The record sell-off was not triggered by a disastrous result. Morningstar market strategist Lochlan Halloway said CBA’s third-quarter update was “a marginal miss”.

“Perhaps it was the reaction to the Budget,” Mr Halloway said, noting changes to negative gearing and capital gains tax concessions should be a headwind for house prices, all else equal. But he warned housing forecasts had repeatedly been wrong.

Despite the conditions, CBA has regularly enjoyed beating the benchmark over the years.

Mr Halloway said CBA even rose when the US bombed Iran, then rose further when the US declared a ceasefire.

Regal Partners investment director Charlie Aitken noted this back in June last year: “This is a domestic, low-growth, highly regulated mortgage bank, not an AI stock. According to market price action, CBA is a winner under all circumstances.”

Back then, Mr Aitken described CBA as “the one blatant bubble” in Australian assets and said shareholders should consider using the bank as a funding source for other opportunities before its share price “deflates”.

“I want to put on the record that CBA is the biggest single-stock bubble I’ve seen in 30 years of being at the coalface of the Australian equity market,” he said.

That was a bruising call on a stock that made up about 12 per cent of the benchmark S&P-ASX200, a level Mr Aitken said few Australian companies have been able to sustain for long. Mr Aitken was right: CBA now makes up 10.8 per cent of the benchmark’s market value after this week.

Mr Halloway said the sell-off may simply reflect how high expectations had become.

Even after falling 10 per cent, CBA still trades on about 24 times forward earnings, with a dividend yield of around 3 per cent and a price-to-book ratio above three — all relatively rich valuations.

The CSL effect

Mr Aitken’s June note said CBA had the hallmarks of previous ASX bubbles, including News Corporation, Telstra, BHP during the mining boom and, more recently, biotech giant CSL.

CSL was once treated as the market’s untouchable compounder. Its forward price-to-earnings multiple peaked above 40 times before falling to about 24 times now. Its share price was $280 three years ago; now it’s just over $97.

CSL peaked at 7 per cent of the S&P-ASX200. When Mr Aitken made his note last year, it fell to 4.5 per cent. Today it is only 1.9 per cent.

“I realise nobody can see it right now, but this is peak CBA. It’s right now into the end of FY25, just like it was peak CSL three years ago,” Mr Aitken had said back in June last year.

Mr Aitken’s call may not have been vindicated until this week. CBA’s stock price has fallen 17 per cent since he penned the note.

Because CBA is the second-largest company on the ASX by market value, weakness in its share price is not just a problem for bank shareholders. It raises a broader question about how much stress the benchmark can absorb if its biggest names start to unwind.

Only a few years ago, CSL was among the five largest companies on the ASX. It now sits at 15th.

Macquarie analysts remain underweight on the banking sector, with Westpac, Australia’s fourth-largest company, rated underperform. Its shares have already fallen 7.9 per cent over the year to $35.86.

NAB and ANZ, the fifth and sixth-largest companies on the market, are rated neutral, having fallen 14.2 per cent and 3.4 per cent respectively in 2026.

The major miners may also be nearing the end of strong runs, with BHP, Australia’s largest listed company, up 32 per cent over the year, and Rio Tinto, the ninth-largest, up 26 per cent.

Morningstar has a bearish long-term view on BHP, which is trading at $60.71, about 28 per cent above its fair value estimate.

Morningstar equity analyst Jon Mills said copper prices remain near record highs on data centre, grid, renewable energy and EV demand, while iron ore is still holding around $US110 a tonne.

But he is more bearish long term, expecting copper to fall to about $US3.80 a pound and iron ore to $US75 a tonne from 2030, based on Morningstar’s estimate of long-run production costs.

It is even more cautious on Rio Tinto, which share price has been pushed higher due to record aluminium prices. Mr Mills estimates its no-moat fair value at 49 per cent below the current price of $187.60.

Morningstar said CBA has consistently increased shareholder wealth in favourable economic times. But Australia’s economic outlook remains uncertain for now.