15 October 2018
Where are we in the Cycle?
Global growth is decelerating as monetary policy settings become less
supportive in an already mature metal price cycle. Unusually prolonged
supply side constraints which have been offsetting the effect of weak demand
growth are losing their impact as newly initiated production starts to flow
in some metal categories. None of the five PortfolioDirect cyclical
guideposts are turned to ‘green’.
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Market Directions
Mining and oil and gas stocks, both at the top end and among explorers,
were caught up in the broader equity market decline in the past week. Gold
stocks benefitted from the search for a safe haven after gold prices rose
slightly. The direction of growth sensitive financial market indicators,
such as US government bonds, is at odds with the performance of metal prices
suggesting investor confusion and scope for readjustment.
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Portfolio Performance and Positioning
Price falls across all portfolio segments during the week were less
pronounced than the market benchmark, with Phase I stocks showing greater
resilience in part because they had participated least in the cyclical
improvement evident since the beginning of 2017. The Phase II companies,
typically at critical junctures in their development paths and most
sensitive to changes in current conditions, performed least well. The macro
portfolio remains tilted toward advanced exploration efforts. There were no
suggested portfolio adjustments.
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Stock Reviews and Rating Analysis
PortfolioDirect rating reports analyse the quality and risk
attributes of proposed mineral developments. Rating criteria apply to mining and oil and gas stocks at any stage of
development. PortfolioDirect uses a five point rating
scale to measure the risk adjusted quality of proposed mineral developments
or companies.
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The 'Steak or Sizzle' blog provides summary judgements on
the top performing ASX-listed resources stocks.
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