Westpac (ASX: WBC), along with the other banks and defensive stocks such as Telstra (ASX: TLS), have opened at an increased value for the third consecutive day, following signs that China’s central bank is working to halt the country’s liquidity crunch that has, in part, depressed our market over recent weeks.
On Tuesday, China’s share market plunged as much as 5.8% before recovering strongly after the People’s Bank of China announced that it had injected funds into some of China’s financial institutions in a bid to boost their liquidity, and stated that similar moves were possible in the future. Other markets also showed signs of relief, with the Dow Jones up 1% overnight as well.
After six consecutive days of trading in the red, Westpac has gained almost 4% since Monday, supported by domestic fund buying before the end of financial year. In early morning trading, NAB (ASX: NAB) has gained 1.5%, whilst Commonwealth Bank (ASX: CBA) and ANZ (ASX: ANZ) have gained 1.2% and 1.7%, respectively. But these short-term movements may represent just a brief reprieve for shareholders.
Although the banks and other defensive stocks have seen gains over the last two days, the volatility in the market will likely remain high for quite some time yet. Furthermore, despite recent setbacks in the banks’ values, they still present as very expensive investment options, inflated by investors’ search for high yields over the last 12 months. It’s not exactly a recipe for market-beating returns, going forward.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.
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