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Top 100 mining stocks at best levels in eight months

The world's biggest 100 miners, by value, have gained USD 596bn in value, from trough levels seen late in 2008, and continue to lead global equity markets.

Author: Barry Sergeant
Posted: Tuesday , 05 May 2009

JOHANNESBURG -

The world's 100 biggest miners, by value, have gained USD 596bn in aggregate from trough levels seen late in 2008, during the immediate aftermath of the most pronounced panic produced by the so-called global markets crisis. Measured on a weighted average basis, these stocks have gained an average of 117% each, for an aggregate current total market value (capitalisation) of USD 1.1 trillion.

Indonesia's Bumi Resources (coal, gas, oil, and other energy), one of the world's most volatile stocks of any kind and any size, leads the pack, with a gain so far of 725% from the bottom, followed by Fresnillo (478%), the world's biggest primary silver producer, Teck (414%), the debt challenged diversified metals producer, Sichuan Hongda (328%), the Chinese miner of zinc, phosphates and lead, First Quantum (299%), the African copper-gold miner, Ivanhoe Mines (322%), the main showpiece of mining showman Robert Friedland, Iamgold (291%), ENRC (283%), the diversified miner (ferroalloys, iron ore, alumina and aluminium, and energy), Shanxi Lu'an (279%), a Chinese coal miner, and Eldorado Gold (262%).

The recovery varies widely; at the other end of the scale are found the likes of Arab Potash, a mere 32% above its recent lows, Anglo Platinum, Exxaro, CAP, ARM, Coal & Allied, Norsk Hydro, Kumba Iron Ore, Eramet, Qinghai, Shenhua, China's big coal miner, NMDC, and Anglo American.

While the average big mining stock has gained more than 100% in value since late in 2008, the MSCI Barra global dollar index for all equities has risen by a more modest 35%; the MSCI emerging markets USD index has, however, jumped by a more convincing 57%. The CSI 300, a broad measure of Chinese listed stocks, has gained just short of 70% and ranks as the world's best-recovered country equities index, after the Micex Russia, which was truly trashed amid some of the most shock-inspired selling seen in recent times.

Global oil stocks have gained an average of just over 50% from lows, while a selection of 80 banks listed across the world indicates an average gain of just above 51%. The KBW banks index, which measures the performance of two dozen banks across the US, has jumped by 108%.

The forward direction of stock prices remains, however, on a knife edge. While the drivers of recovery among various stock markets, and equity subsectors, varies it has become increasingly clear in recent weeks that the flow of global economic and earnings data continues to beat expectations. This, as the Bank Credit Analyst puts it, is "helping to gradually heal investor sentiment".

The BCA Research global leading economic indicator and boom/bust index have both ticked higher, albeit from historically depressed readings. Similarly, purchasing managers' surveys and business confidence measures appear to have bottomed across the developed world, after free-falling late last year.

But there may be a way to go. BCA Research states that the US economy "has merely shifted from falling off a cliff to sliding down a slope. The latter is certainly less terrifying and justifies the unwinding of Armageddon trades but is hardly bullish. Risk assets may continue to move higher from oversold levels over the next few weeks but sustained upside will require evidence that the spate of positive second derivative of growth indicators will turn into a meaningful recovery".

For BCA Research, the bottom line is that "policymakers will need to continue acting aggressively for the recovery in risk assets to persist. We are positioned modestly in favor of reflation but prefer taking bets in fixed income spread product rather than equities due to relative value and a better yield pickup in case a sustainable upleg takes time to develop".