27 August 2018
Where are we in the Cycle?
Weak productivity outcomes among advanced economies and structural
impediments among a large number of developing economies are evident
headwinds to the advancement of an already mature metal price cycle, with a
rising probability that peak metal prices were recorded in February 2018.
Evident global metal demand weakness has been offset by unusually prolonged
supply side constraints.
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Market Directions
The downward trajectory of precious and industrial metal prices remains
intact despite a limited respite from a rise in the US dollar at the end of
the week. US trade policies have been blamed for weaker market conditions
although signs of momentum loss in industrial metal prices have been evident
since the first weeks of 2018. Metal related equity prices have been dragged
lower although the extent of the leverage to changed conditions still
reflects some investor scepticism that cyclical conditions have actually
worsened.
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Portfolio Performance and Positioning
Majorities of Phase I, Phase II and Phase III stocks produced losses in
the past week with the largest subtraction from performance coming from
Phase I companies. The macro portfolio remains tilted toward the smaller end
of the market and advanced exploration efforts where there is less
correlation with broader equity market conditions but where leverage to more
subdued cyclical conditions is also more marked. No portfolio adjustments
were made.
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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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