What: The recovery of Commonwealth Bank of Australia (ASX: CBA) was short-lived with the bank's shares once again trading in the red today and acting as a drag on the overall S&P/ASX 200 (INDEXASX: XJO). The stock is down 51 cents or 0.7% at $75.69 after sinking as low as $75.50 earlier in the session.
So What: The bank's shares rallied 2.4% over the last two days as foreign investors took advantage of the mass sell-off which saw the stock drop more than 11% since late July. This was reflected by the Australian dollar's surge past the US87 cent mark.
However, it appears that the relief may have only been temporary with the market down 0.8% today. Many experts are suggesting the AUD is still significantly overvalued, forecasting it to fall to as low as US75 cents in the near future. That would indicate a further 14% downside from today's level, and even more pain for the shares of the big four banks.
Now What: Despite its recent plunge, Commonwealth Bank shares are still overvalued and investors who buy today could be committing themselves to years of underperformance. The same could be said for its peers, namely National Australia Bank Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC).
