ASX 200 bank shares are significantly lower on Tuesday in an apparent recommencement of the rotation out of overvalued bank stocks to fallen mining stocks.
This follows news that the world's biggest metals importer, China, will implement "more proactive" fiscal policy and "moderately loose" monetary policy next year to prop up its faltering economy.
China made statements regarding new stimulus measures at its monthly Politburo meeting yesterday.
Any economic stimulus in China tends to mean a raised demand for resources like iron ore and coal.
This is why the S&P/ASX 200 Materials Index (ASX: XMJ) is the leading sector today, up 2.52% at the time of writing.
Meanwhile, financials and information technology are the worst performers, down 1.83% and 4.40%, respectively.
Financials appear to be down due to profit-taking and technology is lower on news that China is launching a probe into chip maker Nvidia Corporation (NASDAQ: NVDA), according to the Australian Financial Review (AFR).
Meanwhile, the benchmark S&P/ASX 200 Index (ASX: XJO) is down 0.59%.
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ASX 200 bank shares vs. miners on Tuesday
Here is what's happening with ASX 200 bank shares at the time of writing:
- Westpac Banking Corp (ASX: WBC) shares are down 2.07%
- National Australia Bank Ltd (ASX: NAB) shares are down 2.56%
- Commonwealth Bank of Australia (ASX: CBA) shares are down 1.47%
- ANZ Group Holdings Ltd (ASX: ANZ) shares are down 1.47%
- Macquarie Group Ltd (ASX: MQG) shares are down 1.81%
- Bendigo and Adelaide Bank Ltd (ASX: BEN) shares are down 1.19%
- Bank of Queensland Ltd (ASX: BOQ) shares are down 2.18%
Meantime, ASX mining shares are doing the exact opposite of bank shares:
- BHP Group Ltd (ASX: BHP) shares are up 2.93%
- Fortescue Ltd (ASX: FMG) shares are up 5.06%
- Rio Tinto Ltd (ASX: RIO) shares are up 4.06%
- Mineral Resources Ltd (ASX: MIN) shares are up 7.72%
- Pilbara Minerals Ltd (ASX: PLS) shares are up 5.53%
- IGO Ltd (ASX: IGO) shares are up 2.52%
- Vulcan Energy Resources Ltd (ASX: VUL) shares are up 7.97%
- South32 Ltd (ASX: S32) shares are up 1.81%
Why are investors selling bank stocks and buying miners?
ASX 200 bank shares have had a phenomenal run since late 2023 and many analysts consider them too expensive today.
Meantime, ASX 200 iron ore shares have struggled this year due to sluggish or falling commodity prices.
A reduction in demand from China, the world's top metals consumer, as its economy falters is a key reason commodity values have struggled.
The CNY iron ore price, for example, has fallen by 15.83% in 2024. This has contributed to an approximate year-to-date decline of 17% for BHP shares, 30% for Fortescue shares, and 9% for Rio Tinto shares.
Today's trading indicates investors see good profits to be realised among the ASX 200 bank shares, as well as good value buying among the mining stocks.
We saw a similar rotation out of bank stocks and into mining stocks in September when China announced the first round of fresh stimulus.
Economic stimulus in China typically boosts its demand for metals and minerals, which has a direct impact on commodity values and, thus, the earnings of ASX 200 mining shares.
Goldman Sachs analyst Hui Shan described China's stimulus news as "an upside surprise".
The market now awaits further details at the Central Economic Work Conference in China on Wednesday.
Policymakers will set new priorities and announce the economic growth target for 2025 at the conference.
In overnight trading, there was a 2.15% lift in the CNY iron ore price to US$111.35 per tonne. The 62% iron ore price fell 2.05% to US$104.11 per tonne.
