Why is the ASX 200 falling today? Thank CBA shares

What’s behind the ASX 200’s massive fall today? Investors can look to CBA shares for an answer

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The big news on the S&P/ASX 200 Index (ASX: XJO) today is… the ASX 200 itself. At the time of writing, the flagship index is down a substantial 1.62% to 7,249.8 points. That’s a pretty big readjustment, considering the ASX 200 was pretty much at a new record high last week – over 7,400 points. We haven’t seen a fall of this magnitude for a while now. So understandably, some investors might be a little nervous today. Especially considering the rampaging run ASX shares have been on over the past month or two.

So what’s going on?

Well, it’s first worth noting that ASX 200 blue-chip shares are falling across the board. The big miners like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) are all down between 1-3% today. Telstra Corporation Ltd (ASX: TLS) has fallen 0.98%. Woolworths Group Ltd (ASX: WOW) has lost 0.14%.

But the biggest sector adding to the AX 200’s woes today is undoubtedly the ASX banks. The big four major banks make up 4 of the 6 largest ASX 200 shares by market capitalisation. This means they have a massive influence on what the ASX 200 does at any point in time. And the banks are being sold off heavily today.

Westpac Banking Corp (ASX: WBC) shares are currently down 2.63% to $26.17. Australia and New Zealand Banking GrpLtd (ASX: ANZ) shares are faring even worse, down a nasty 2.76% to $28.18. National Australia Bank Ltd. (ASX: NAB) shares are doing a little better, but still down a substantial 2.38% to $26.20 today. But it’s the Commonwealth Bank of Australia (ASX: CBA) that’s really dragging on the ASX 200 today.

CBA ruins the ASX 200 party?

The CBA share price has been walloped today. Commonwealth Bank is currently down a hefty 4.34% today to $99.19 a share, back under the $100 a share threshold it broke for the very first time only a few weeks ago. After reaching a new all-time high of $106.57 just last week, CBA is now around 7% off of that new high watermark.

CommBank is the ASX 200’s largest share, with a market capitalisation of $176.62 billion on current pricing. This means that CBA is also the ASX share with the most weighting in the ASX 200 index. According to iShares, CBA shares currently have a weighting of 9.1% in the ASX 200. In turn, this means that CBA has the distinction of being the share that has the single largest impact on the index itself.  As such, the hefty fall of ASX’s biggest bank today would be proving a major drag on the entire share market.

So what happened with CBA today? Well, as my Fool colleague Marc Sidarous covered earlier, the market seems to be reacting rather unenthusiastically to an announcement CBA made this morning. The bank will be selling off its general insurance division (CommInsure General Insurance) to Hollard Group for a yet-undisclosed amount. The bank did state that it would be paid $625 million in upfront considerations. But it only stated that the rest (undisclosed) will be received “upon achieving certain business milestones”.

Evidently, investors have not been impressed with at least some aspects of this deal. And we can largely thank this apathy for the dismal performance of the entire ASX 200 today.

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Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited and Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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