Already a subscriber?A wave of cash into Australian equities from China has fuelled a dazzling rally in bank stocks at the expense of mining companies, but investors are now questioning whether it has also pushed valuations to unsustainable levels.
, others are pointing to increased demand from Asian investors that are fleeing China’s battered markets and seeking shelter in Australia’s lenders. But if foreign investors wanted exposure to the region that excludes China, the allocation to Australia would jump to nearly 23 per cent, triggering flows into the ASX’s largest companies, like BHP, Commonwealth Bank and CSL.
“If you’d taken a position of banks over resources then you have to be confident about your view on China, and confident about the alternatives to China,” said Barrenjoey’s chief macro strategist, Damien Boey. That was followed up by UBS which cautioned that “very optimistic assumptions are required” to justify the rally. The broker, which is also underweight banks, said its range of recommendations for the sector reflected a “cautious bias”.