Australian shares fell for a fourth straight session on Wednesday after Commonwealth Bank suffered its biggest drop on record following a disappointing trading update and concerns that budget measures will hurt investor demand weighed on sentiment.

The S&P/ASX 200 Index lost 40.30 points, or 0.5 per cent, to 8630.4 as heavy selling in the banks offset gains across the other 10 sectors on the benchmark as market watchers viewed an overhaul of negative gearing and capital gains tax rules as a positive for equities, especially dividend stocks.

Wednesday’s fall is the 16th time in the past 20 sessions that the benchmark has closed lower.

Investors wiped about $25 billion from CBA’s market value after shares plunged 10.4 per cent to $153.67 – surpassing a 10 per cent drop in March 2020 as its biggest fall on record. It was driven by a $2.7 billion cash profit for the March quarter that missed expectations and concern that budget measures to address housing affordability would hurt demand for investor loans – a segment where CBA dominates.

Financials dropped about 4 per cent as National Australia Bank fell 1.5 per cent to $36.86, ANZ 1.6 per cent to $34.57 and Westpac 2.8 per cent to $35.57 as UBS said it and CBA were the most exposed to the negative gearing crackdown.

That also weighed on other property exposed stock with Pexa down 4 per cent to $11.90 and REA Group 1 per cent to $171.

“CBA stood out at more risk because of its large investor lending book, and today’s move is really the market realising that exposure in light of the budget changes,” UBS Global Markets executive director Rob Taubman said.

Investors are now questioning what the level of credit growth will be after a particularly strong past six months, so there is a fear that it could step back from that.”

Taubman said that the changes to the housing market along with capital gains taxes makes equities more attractive, especially investing within superannuation and franked income.

Materials were the strongest sector for a second day running as copper rallied above $US14,000 to an all-time high on a rebound in Chinese demand. BHP jumped 2.9 per cent to a record close of $61.52, as it also appointed former BlueScope Steel boss Mark Vassella to its board, effective from June 1.

Elsewhere, Rio Tinto added 1.9 per cent to a record close of $189 and South32 3.2 per cent to $4.49.

Discretionary stocks also rallied after Aristocrat jumped 13.3 per cent to $51.94 to end market leader following a 9.1 per cent rise in first-half profit and a $1 billion expansion to its share buyback program. Light & Wonder added 4.9 per cent to $115.73.

Stocks in focus

In company news, Temple & Webster dived 6.4 per cent to $4.98 after its FY26 guidance for earnings before interest, taxes, depreciation and amortisation of between $20 million and $22 million was 30 per cent below consensus.

Zip Co lost 0.8 per cent to $2.44 after the High Court ordered it to stop using the “Zip” trademark in Australia following a ruling in proceedings brought by Australian non-bank lender Firstmac over alleged trademark infringement.

Perenti soared 8.4 per cent to $2.22 after Bellevue Gold awarded an underground mining contract worth $850 million to its subsidiary Barminco at the Bellevue gold mine in Western Australia.

Webjet added 1 per cent to 52¢ after chairman Don Clarke retired from the board with Gary Weiss named interim chairman. Weiss and BGH Capital had previously launched a takeover bid of the company.