The ASX 200 added 0.31% to close at 8640.60, for its second consecutive session of gains, defying expectations that the Reserve Bank’s rate increase would dampen risk appetite across the market. For it’s part, the All Ords index added 0.32% on the day to close at 8,847.70, although underperforms the bluechip index YTD, with the All Ords down 2.09%, against the ASX 200’s decline of 1% on the period.
The ASX 200’s resilience today may surprise many, with the index adding 26.3 points despite the RBA having lifted the cash rate just one day earlier. Sector performance painted a picture of broad-based optimism: Information Technology added 1.59%, Energy rose 0.71%, Industrials gained 0.66%, and Materials added 0.47%. Even rate-sensitive Financials managed a modest 0.08% advance.
Leading the charge was Droneshield Ltd, which rocketed 10.45% to $4.44, extending its extraordinary run as defence spending concerns continue to drive institutional and retail interest. Sims Ltd followed with a 9.88% surge to $20.68, reflecting renewed confidence in the global metals recycling cycle. Coal producer New Hope Corporation climbed 5.85% to $5.25, while healthcare innovators Telix Pharmaceuticals and 4DMedical added 5.9% and 5.01% respectively, demonstrating that appetite for growth remains intact despite higher borrowing costs.
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The session’s strength came despite clear headwinds for rate-sensitive names. REA Group, heavily exposed to housing market transaction volumes, fell 2.26% to $162.34 as markets digested the implications of higher mortgage costs. Blue-chip defensive CSL Ltd dropped 2.23% to $138.00, while premium medical imaging software provider Pro Medicus declined 2.19% to $125.31, suggesting a rotation out of richly valued defensives into higher-beta opportunities.
Droneshield’s double-digit gain built on a remarkable growth trajectory that has seen the company transition from speculative defence play to genuine revenue generator, ably supported by a new partnership on the day.
Sims Ltd’s near-10% rally reflected improving sentiment around global scrap metal spreads and industrial activity, and a huge profit guidance raise.
Defence contractor Austal Ltd climbed 4.62% to $4.98, reinforcing the session’s defence-complex theme alongside Droneshield. The shipbuilder’s exposure to US Navy and Australian government contracts has positioned it as a more established play on structural defence spending increases, offering a less speculative alternative to emerging defence technology names.
The weakness in REA Group serves as a stark reminder that higher rates will continue to work through the domestic economy with a lag. Housing affordability pressures are only beginning to bite, and transaction volumes typically respond to rate changes with a three-to-six-month delay.
New Zealand-exposed names Mercury NZ and Summerset Group fell 3.21% and 2.52% respectively, pressured by yield-curve dynamics and positioning flows rather than Australian macro factors, though their weakness underscores the broader rotation away from yield-oriented defensive plays.
The technical picture for the ASX 200 remains constructive in the near term, with the index holding above 8600 despite the rate shock. However, the real test will come in the weeks ahead as economic data, particularly employment, retail sales, and housing indicators, reveal whether the RBA’s move was appropriate or risks tipping the economy into a sharper slowdown than markets currently anticipate.
