CBA, Macquarie hit record highs as financial sector leads gains
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More news: Financial was the best performing sector on ASX by 12:50pm AEST, adding 1.15% compared to a wider market rise of 0.61%.
Each of the big four lenders Commonwealth Bank (1.4%), National Bank Australia (0.95%), Westpac (1.6%) and ANZ (0.7%) was trading higher, along with fellow banking major Macquarie Group (1.9%).
Both CBA and Macquarie hit fresh record highs of $145.01 and $228.5 respectively earlier in the session.
UBS recommends buying ASX bank stocks over miners
The news: Investors making a choice between the two biggest sectors on the ASX would be better served by picking Australian bank stocks over miners, according to UBS analysts.
The numbers: Banking stocks on the ASX are up 30% year-to-date, while miners are down around 20% over the same period, UBS analysts Richard Shellbach and Dericka Hong estimated.
Despite this stark divergence between the two sectors, bank share prices have still underperformed miners on a 10-year basis, they found.
The context: The analysts said the investment case for both sectors was tough because banks were trading at extremely high valuations, while miners were under pressure over China fears. However, the size of these two sectors means that being underweight both is not possible.
Factors going against miners include the impact of a continuing economic slowdown in China, which is also likely to weigh on commodities prices. On the other hand, while bank stocks are expensive, stretched valuations for the sector are being seen across the globe, they said.
What they said: “Investors have only recently neutralised their crowded long position in miners, but remain crowded short banks. A switch in these signals could drive further outperformance from banks over miners in coming months,” the analysts said in a note.
The source: UBS Research
