Newspaper article The Evening Standard (London, England)

Investors Warned off Miners as Commodity Prices Slump; MARKET ROUND-UP

Newspaper article The Evening Standard (London, England)

Investors Warned off Miners as Commodity Prices Slump; MARKET ROUND-UP

Article excerpt

Byline: Mickey Clark

IT'S official! The boom time for mining companies is over and share prices will continue to lose ground in line with falling commodity prices.

That is the conclusion of two major City players who have warned clients today that mining companies now face leaner times.

Investec Securities says: "After months of strong performance, commodities and mining equities are starting to show signs of being overbought."

It reckons exchange-traded commodity prices have further to fall in the short-term now that the Chinese have officially stopped stockpiling and are in fact looking to sell. It is concerned this will have a knock-on effect to the speculative buying that has been buoying share prices.

Citigroup has also repeated its forecast for a short-term "pull-back" as restocking in China comes to an end and imports slow.

Investec thinks the market may shift its focus from China to US and European demand. "But these economies remain weak, in our view, despite all the talk of green shoots," it warned.

Even so, Citigroup's preferred commodities are copper and coal. It rates Rio Tinto, up 24p at 1944p, as a buy now that the [pounds sterling]9.3 billion rights issue has been completed, and has raised its share-price target from 2810p to 2900p.

Investec favours Rio Tinto as well, and has raised its rating from hold to buy following a drop of 28% in the shares during the past month.

BHP Billiton, which failed with its bid for Rio last year, is also fancied. Its shares responded with a rise of 231/2p to 13231/2p. In addition, Citigroup has lifted Antofagasta, 5p better at 582p, and Vedanta Resources, down 6p at 1315p, from sell to hold, but has cut the target for Ferrexpo, 1/4p off at 1291/4p, from 165p to 140p with a hold rating, and Lonmin, 18p lower at 1051p, from 1385p to 1190p.

RBS has raised bid target Anglo American from sell to hold. Anglo, 51/2p off at 1622p, has rejected a bid approach from Anglo-Swiss miner Xstrata. Shares generally were a touch softer for choice despite selective gains among the miners. This followed selloffs overnight in New York and this morning in Asia. …

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