Traders are scrambling after China’s latest effort to boost its economy prompted investors to rapidly pull money from the big four banks and pile into the mining sector.
Already a subscriber?China’s biggest stimulus package since the start of the pandemic may have ended the blistering rally in Australia’s biggest banks, as a rebound in metal prices prompted investors to pile into heavily shorted mining stocks.committed to helping banks boost lending to consumers and lowered mortgage rates on Tuesday, hedge funds were scrambling to cover their aggressive short positions by buying up mining stocks.
China’s central bank followed up on Wednesday by lowering the interest rate charged on its one-year policy loans by the most on record, which sent iron ore futures surging another 2.1 per cent to $US96.70 a tonne. The top 30 most shorted stocks on the S&P/ASX 200, around half of which are mining companies, climbed by an average of 6.1 per cent on Tuesday, smashing the benchmark’s 0.1 per cent loss on the day.The S&P/ASX 200 Banks index fell 2.7 per cent on Tuesday, while the resources index jumped 2.5 per cent. That continued on Wednesday, with the bank index down a further 1.8 per cent, and resources up 2.7 per cent.
The broker was one of the first to “overweight” the ASX’s diversified miners, gold and energy stocks.UBS reiterated its preference of Rio Tinto over BHP, but said it remained cautious on Mineral Resources and Fortescue. Just two weeks ago,China’s stimulus package, which also included a measure to allow funds and brokers to tap the central bank’s funding to buy equities, flowed through to the country’s sharemarket.
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