Investors rush into Australian miners on China stimulus boost
Investors piled their money into beaten-down mining stocks after China unveiled a bumper stimulus
THE Australian resources sector surged more than 3 per cent on Wednesday (Sep 25) as investors piled their money into beaten-down mining stocks after China unveiled a bumper stimulus to pull the world’s second-biggest economy out of a deflationary slump.
The mining sub-index has rallied 6 per cent over the past two sessions, jumping more than 3 per cent on Wednesday to end at its highest level since mid-July.
Global mining giants BHP Group and Rio Tinto advanced 3.8 per cent each, while Fortescue soared over 4.7 per cent to an eight-week high.
Fifteen out of the top 20 performers in the ASX 200 benchmark index were miners on Wednesday.
That rally has come relative to the banking index which has lost 4 per cent this week. It ended 1.7 per cent lower on Wednesday at its lowest level since late August.
Analysts at Morgan Stanley last week wrote improvement in commodity signals and firmer signs of soft landing globally could be the potential triggers for rotation out of banks.
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“News of China stimulus saw significant rotation out of banks and into resources,” they wrote in a client note on Wednesday.
“Commodity signal and ultimate execution of (China’s) policy agenda will be key to durability of any further repositioning away from (Australian) banks in our view.”
To be sure, the banking sector is still the best performer in Australia this year with more than 22 per cent growth, including the day’s moves, underpinned by strong flows from pension funds although valuations remain stretched.
The mining index, on the other hand, has declined more than 13 per cent this year, making it the worst performing sector in Australia, as commodity prices remained under pressure owing to sluggish demand from a struggling Chinese economy. REUTERS
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