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2 reasons why Commonwealth Bank of Australia is the most traded stock on the ASX

It’s official: Commonwealth Bank of Australia (ASX: CBA) was the most traded stock on the ASX in 2016.

According to The Australian Financial Review, $67.55 billion worth of the bank’s shares changed hands during the year. Although that was slightly below the value of its shares traded in 2015, it was still larger than the $62.71 billion worth of BHP Billiton Limited’s (ASX: BHP) shares traded.

It was the second year running that Commonwealth Bank has pipped BHP Billiton as the most traded ASX share. That comes after BHP took out the title of most traded ASX stock by value between the years of 2010 and 2014.

Last year’s results might come as something of a surprise to some investors. After all, Commonwealth Bank of Australia shares recorded a 3.6% decline for the calendar year, compared to a gain of more than 40% for BHP’s share price.

In fact, BHP’s rally was even more impressive given that its shares had fallen 21.3% within three weeks of the year beginning. The BHP Billiton share price struck a low of just $14.06, then rallied 78% before 31 December, 2016.

So, why is it then that Commonwealth Bank’s shares were still the most traded?

Here are two likely reasons:

  1. BHP Billiton completed a demerger of South32 Ltd (ASX: S32) in June 2015. According to The Australian Financial Review, $13.3 billion of South32’s shares were traded in 2016: had the demerger never have occurred, that value could have been recognised under BHP’s own shares, potentially catapulting it into first place.
  2. BHP is dual-listed. It also has shares listed on the London Stock Exchange and are thus not registered as trades on the ASX.

Outside of Commonwealth Bank and BHP, Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB) rounded out the top 5 most traded shares for 2016.

As you’d expect, Telstra Corporation Ltd (ASX: TLS), Fortescue Metals Group Limited (ASX: FMG), Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW) were also popular trades for the year.

Should Commonwealth Bank of Australia be on your buy list in 2017?

Commonwealth Bank is Australia’s biggest company by market value, and also one of its most popular – particularly among self-managed super funds (SMSFs) and retirees. Although I wouldn’t be rushing out to sell it – it does offer stability, recognisability and a very generous, fully franked dividend yield – I wouldn’t necessarily be keen to buy it today either.

For one, its shares aren’t all that cheap while it is also vulnerable to a potential pullback in the Australian or world economies. Investors should at very least ensure they maintain a diversified portfolio so that if the bank’s shares are to fall, at least the investor’s risk is spread.

Rather than loading up on Commonwealth Bank shares, investors may instead want to take a look at another up-and-comer: a company that has a strong record for growing earnings and dividends.

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