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Why are ASX 200 bank shares being trashed on Tuesday?

Has the market rotation started again in September?

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The ASX 200 bank stocks fell sharply on Tuesday, with a clear rotation out of overvalued bank stocks and into falling mining stocks.

The move follows news that China, the world’s largest metals importer, will implement a “more proactive” fiscal policy and a “moderately loose” monetary policy next year to support its weakening economy.

China made an announcement about new stimulus measures at yesterday’s monthly Politburo meeting.

Any economic stimulus in China tends to mean increased demand for resources such as iron ore and coal.

That’s 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 performed the worst, falling 1.83% and 4.40% respectively.

The Australian Financial Review (AFR) said financial stocks appeared to fall due to profit-taking, while technology stocks fell on news that China was investigating chipmaker Nvidia (NASDAQ: NVDA).

Meanwhile, the benchmark S&P/ASX 200 index (ASX: XJO) fell 0.59%.

ASX 200 bank shares vs miners on Tuesday

Here’s where the ASX 200 bank stocks are at the time of writing:

  • Westpac Banking Corp. (ASX: WBC) share price fell 2.07%
  • National Australia Bank Ltd (ASX: NAB) share price fell 2.56%
  • Commonwealth Bank of Australia (ASX: CBA) share price fell 1.47%
  • Australia and New Zealand Banking Group Holdings Ltd (ASX: ANZ) share price fell 1.47%
  • Macquarie Group Ltd (ASX: MQG) share price fell 1.81%
  • Bendigo and Adelaide Bank Ltd (ASX: BEN) share price fell 1.19%
  • Bank of Queensland Limited (ASX: BOQ) share price fell 2.18%

Meanwhile, ASX mining stocks have been doing the exact opposite of the banking stocks:

  • BHP Group Ltd (ASX: BHP) share price rose 2.93%
  • Fortescue Ltd (ASX: FMG) share price up 5.06%
  • Rio Tinto Limited (ASX: RIO) share price rose 4.06%
  • Mineral Resources Ltd (ASX: MIN) share price up 7.72%
  • Pilbara Minerals Ltd (ASX: PLS) share price rose 5.53%
  • IGO Ltd (ASX: IGO) share price rose 2.52%
  • Vulcan Energy Resources Ltd (ASX: VUL) share price up 7.97%
  • South32 Ltd (ASX: S32) share price up 1.81%

Why are investors selling bank stocks and buying miners?

ASX 200 bank stocks have had an incredible run since the end of 2023, with many analysts believing current share prices are overvalued.

Meanwhile, ASX 200 iron ore stocks have struggled this year amid low or falling commodity prices.

Reduced demand from China, the world’s largest metals consumer, due to its recession is a major reason why commodity values ​​are struggling.

Taking iron ore as an example, the RMB price fell by 15.83% in 2024. This has caused BHP Billiton’s share price to fall by about 17% so far this year, Fortescue’s share price to fall by 30%, and Rio Tinto’s share price to fall by 9.

Today’s trading suggests investors see good earnings potential in ASX 200 bank stocks, while mining stocks also offer good value.

We also saw a similar flow from banks to mining stocks in September when China announced its first round of new stimulus measures.

China’s economic stimulus measures typically boost its demand for metals and minerals, which directly affects commodity values ​​and therefore the earnings of ASX 200 mining stocks.

Goldman Sachs analyst Hui Shan described the Chinese stimulus news as “an unexpected surprise”.

The market is currently awaiting more details from China’s Central Economic Work Conference on Wednesday.

Policymakers will set new priorities and announce economic growth targets for 2025 at the meeting.

In overnight trading, the price of iron ore in RMB rose 2.15% to $111.35 a tonne. The price of 62% iron ore fell 2.05% to $104.11 a tonne.

Motley Fool contributor Bronwyn Allen owns shares of BHP Group, Macquarie Group, and South32. Motley Fool Australia’s parent company, Motley Fool Holdings Inc., owns shares of Goldman Sachs Group, Macquarie Group, and Nvidia and recommends them. Motley Fool Australia owns shares of Bendigo and Adelaide Bank and Macquarie Group and recommends them. Motley Fool Australia recommends Nvidia. Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorized by Scott Phillips.

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