Troubles for BHP open way for Commonwealth Bank to regain its place at the top of the ASX

Battered BHP’s valuation is sinking as Commonwealth Bank surges to become the biggest stock on the Australian sharemarket.

CBA’s market capitalisation has now pipped BHP twice in a week and the return of the bank as the nation’s biggest stock on an ongoing basis looks increasingly inevitable. Picture: Hollie Adams

Commonwealth Bank is set to overtake BHP and become the biggest stock on the Australian sharemarket.

In a change of the guard that captures a wider story across the ASX, the diversified mining giant BHP has declined sharply in value by 13 per cent year to date while CBA has surged ahead by 16 per cent.

The price acceleration in CBA means the nation’s biggest bank has increased price at three times the pace of the overall market. It is now valued at $220.3bn against BHP’s reduced valuation of $220.1bn.

“Put simply, the switch at the top would reflect a better outlook for the banks than the miners,” says Alan Kwan, senior portfolio manager at Australian Eagle Asset Management.

Bank stocks – led by CBA – have already regained their grip on the top 10.

Commonwealth Bank CEO Matt Comyn.

At the same time slumping iron ore prices have pulled back the valuations of big miners such as BHP and Rio, which is down 16 per cent for the year to date.

Mining stocks have also been dragged lower by diminishing expectations in the so-called “future facing metals” where nickel and lithium markets have been significantly weaker.

In contrast, the bank majors have not seen any dramatic changes to the business cycle – rather the stability of Australian bank stocks have clearly become more attractive to overseas institutional investors.

CBA’s market capitalisation has now pipped BHP twice in a week and the return of the bank as the nation’s biggest stock on an ongoing basis looks increasingly inevitable as the ASX 200 market rally has now cleared the 8000 mark.

The nation’s biggest bank last overtook BHP back in November 2021.

“CBA held the top spot for more than a year back then, and the attraction this time around is the security of its dividend payments,” says Kwan.

In fact the dividend yield of BHP at 5.4 per cent tops the yield of CBA at 3.5 per cent – and they are both fully franked.

After BHP and CBA, the number three stock in Australia is biotech CSL.

BHP CEO Mike Henry. Picture: Thomas Graham

Meanwhile, NAB is in fourth place, Westpac is in fifth and the investment bank Macquarie also appears inside the top 10 stocks by size at number nine.

The only miner in the top 10 with a lift in price is Newmont (the acquirer of Newcrest) where a 15 per cent lift over the year to date reflects a better outlook for gold – which moves in a different direction to other commodities.

The new regime at the upper levels of the ASX clearly signals the local market is now about to be driven substantially by financials – though CBA will remain pivotal since its market capitalisation is now almost double its nearest bank rival NAB.

The key test for CBA’s revived status among share market investors will be its annual results which are due on August 14.

Outside of the banks, the tech boom has made its presence felt by lifting the premium on any stock directly associated with artificial intelligence.

Among the leaders here are the property trust Goodman Group which has attracted a premium from investors after first leading the sector in online retailing logistics and more recently shifting into the red-hot data centre sector.

Goodman now ranks as the 11th largest stock in Australia and the largest A-REIT by a distance – the next ranked A-REIT is Unibail-Rodamco Westfield with a market cap of $17bn.