29 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 have been caught up in a broader equity
market decline although the sector has been more resilient than might have
been expected against a backdrop of investor worries about the momentum of
global economic growth. Gold stocks have benefitted from the search for a
safe haven which has pushed gold prices slightly higher with the Australian
gold sector receiving an added benefit from a weaker Australian dollar.
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Portfolio Performance and Positioning
The fall in Phase I stocks accelerated although losses were evident
across all development categories. The macro model performed better than
the benchmark due to the relatively large weighting in Phase I companies
which have generally displayed less downside risk due to having been omitted
from the earlier cyclical rally. The Phase II companies, typically at
critical junctures in their development paths and most sensitive to changes
in current conditions, have tended to perform least well.
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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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