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Basic Instinct
Marketing feedback
Event
Investors continue to be very cautious as to the market outlook in both
Asia and the Rest of the World. Interest levels in the Commodities space
are very low and while people are happy to talk on the subject, engagement
on buy ideas is very low.
The market has now shifted its focus to demand side analysis. With
production rates strong during 1H11, the focus was very much on the supply
side of things. Now that demand appears to be showing signs of weakness,
investors are focused again on steel production, cement production and the
impact this will have on commodities demand and prices.
Investing in the Commodities sector at the moment remains challenging.
Valuations are starting to look appealing across most sectors but there are
still concerns that global economies and China might slow further and this will
put downward pressure on earnings and valuations. We continue to like
Thermal Coal as a key defensive play and we also think that Iron ore looks
reasonable at current levels despite some potential downside to prices.
Key defensive picks: Shenhua, China Coal, Straits Asia Resources,
Fortescue, Atlas Iron, Mitsubishi and Mitsui.
Impact
When demand is booming, the supply of certain commodities really
forces prices and returns up. When demand starts to be an issue, the
market increasingly focuses on the potential downside to commodity prices
and it also starts to increase its focus on the demand forecasting of analysts.
Over the past few weeks, the demand environment has started to show signs
of weakness and while China is holding in there relatively well, a number of
cracks have started to appear. The Global economic situation has not helped
the situation and while China is the driver of demand, weakness in Europe
and the US is not helpful for commodity prices.
We remain positive on Thermal Coal, Coking Coal and Iron ore – all the
bulks. China is still the key driver of bulk commodity demand. Steel
production and Cement production remain strong and while there are some
signs of weakness emerging, we are still running at record levels. Prices in
these commodities appear to have good support into 4Q so company
earnings will also be well supported.
Outlook
The outlook into FY12 is still very unclear at this stage. Global Markets
remain very uncertain and there are now signs emerging that China may see
some demand weakness. Commodity prices have been very resilient but in
an environment where demand could come under further pressure, the
requirement for buyers to step into the market is reducing. We think Thermal
Coal prices look very well supported at these levels but we do see some
potential downside risk to Iron ore and Coking coal prices and we also think
that Copper has some short-term downside.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Basic Instinct
Marketing feedback
Event
Investors continue to be very cautious as to the market outlook in both
Asia and the Rest of the World. Interest levels in the Commodities space
are very low and while people are happy to talk on the subject, engagement
on buy ideas is very low.
The market has now shifted its focus to demand side analysis. With
production rates strong during 1H11, the focus was very much on the supply
side of things. Now that demand appears to be showing signs of weakness,
investors are focused again on steel production, cement production and the
impact this will have on commodities demand and prices.
Investing in the Commodities sector at the moment remains challenging.
Valuations are starting to look appealing across most sectors but there are
still concerns that global economies and China might slow further and this will
put downward pressure on earnings and valuations. We continue to like
Thermal Coal as a key defensive play and we also think that Iron ore looks
reasonable at current levels despite some potential downside to prices.
Key defensive picks: Shenhua, China Coal, Straits Asia Resources,
Fortescue, Atlas Iron, Mitsubishi and Mitsui.
Impact
When demand is booming, the supply of certain commodities really
forces prices and returns up. When demand starts to be an issue, the
market increasingly focuses on the potential downside to commodity prices
and it also starts to increase its focus on the demand forecasting of analysts.
Over the past few weeks, the demand environment has started to show signs
of weakness and while China is holding in there relatively well, a number of
cracks have started to appear. The Global economic situation has not helped
the situation and while China is the driver of demand, weakness in Europe
and the US is not helpful for commodity prices.
We remain positive on Thermal Coal, Coking Coal and Iron ore – all the
bulks. China is still the key driver of bulk commodity demand. Steel
production and Cement production remain strong and while there are some
signs of weakness emerging, we are still running at record levels. Prices in
these commodities appear to have good support into 4Q so company
earnings will also be well supported.
Outlook
The outlook into FY12 is still very unclear at this stage. Global Markets
remain very uncertain and there are now signs emerging that China may see
some demand weakness. Commodity prices have been very resilient but in
an environment where demand could come under further pressure, the
requirement for buyers to step into the market is reducing. We think Thermal
Coal prices look very well supported at these levels but we do see some
potential downside risk to Iron ore and Coking coal prices and we also think
that Copper has some short-term downside.
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