Dalian has flamed out this morning, losing it’s overnight gains and putting a lid on Big Iron, except for BHP which is up 2.8%, with RIO 2% and FMG 1.55%:
BHP’s result was clearly awful with the small sweetner of cost control overwhelmed by the fallout from bad investments, bad commodity prices and bad luck. The future also looked lousy with the outlooks for most products gloomy, the exception being oil in the longer run. I would not buy it with someone else’s money.
So, why do I say it’s on the verge of a positive re-rating? One reason is the chart which is threatening to break out of a bullish ascending triangle pattern:
The second reason is it’s exposure to coking coal and oil. The first of these is really on a tear and unlike iron ore looks like it has legs for another few quarters. I don’t rate the oil exposure but I’m more bearish than the market on black gold so that is also a positive for the instos.
The last reason is the most important. One must always recall that instos live and die on relative performance. By mandate they need to be deployed in equities and often their allocations are mandated by sector. If you are forced to buy miners at this juncture would you prefer BHP’s mix of iron ore, copper, oil and coking coal to the iron pure plays of RIO and FMG? Yes, you would. So, I expect we’ll see a raft of upgrades to the stock so that fundies can lose less than they would in other miners and take home their fat bonuses.
Stupid, yes, but there you have it.
Big Gas is also tearing along on HOPEC with WPL 1.3%, OSH 2.7%, ORG 1% and STO also verging on breakout at 1%:
STO has the same bullish pattern as BHP:
But, again, I wouldn’t touch it with a barge pole given my view of another sell down in oil and the ongoing contractpocalypse.
Gold is not traveling well today despite overnight gains with NCM -4.4%, RRL -3.3%, IGO 2.2%, SBM -3.6% and EVN -5.3%. I’m not sure what has triggered the angst given gold is mostly up:
Banks are mostly firm with CBA -2.9% (perhaps ex-div?), WBC 1%, NSB 0.9%, ANZ 0.4%:
Not going anywhere in a hurry.
