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India Equity Research Reports, IPO and Stock News
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Basic Material Ideas
Commodities vs Equities
Event
�� Commodity prices have been relatively stable or strong in some cases.
Despite this, the related equities that we cover have been underperforming.
We believe that commodity prices are correctly reflecting demand in the
market place and as such there is an opportunity to buy into some of the
higher quality equity names.
�� The two sectors that look most attractive on this analysis are Iron Ore and the
Steel sector. Equities have underperformed the underlying commodities
significantly. Despite this, the sectors we aggressively push at this stage
based on fundamental analysis include – copper, iron ore and coking coal.
�� Key stocks - Copper: Jiangxi Copper (also a MarQuee Buy idea), Minmetals,
Oz Minerals. Iron ore: Atlas Iron, Fortescue, Rio Tinto, Mitsui.
Impact
�� The strength in commodity prices better reflects the underlying demand
in the market place. Chinese steel and cement production has been running
at record levels, fuelled by strong construction demand across all segments of
the market. We expect to see some seasonal weakness in demand in 3Q11
and while infrastructure is showing some signs of slowdown, the nonresidential
and housing segment of the market remains strong.
�� Equities markets have been dominated by negative sentiment and global
concerns. Domestic investors have been cautious but holding things up.
Offshore investors have been very negative and dominated by growth and
debt issues in the US and default issues in Europe. As these unwind, we
expect fresh buying interest into the sectors.
Key stocks to focus on around the region
�� As a general comment the market has been neutral to overweight
commodities. That might seem strange given performance but when you
look at the sectors we believe it makes sense. In Asia, the two largest sectors
for investors are coal and cement. In both cases, investors have been
overweight and continue to be. It is the smaller sectors like the base metals
and the steel sector where they are significantly underweight. We remain
positive on both coal and cement but we think higher beta exposure can be
found in some of the base metals and the iron ore names.
�� Copper key picks – Jiangxi Copper, Minmetals (zinc and copper) and Oz
Minerals.
�� Iron ore key picks – Atlas Iron, Fortescue Metals, Rio Tinto and in the
Japanese trading house segment of the market, Mitsui.
�� Coal key picks – In the thermal segment of the market, Straits and Shenhua.
In the coking segment of the market Gujarat NRE and Fushan.
�� Cement key picks – Anhui Conch, CNBM, Taiwan Cement and James
Hardie.
�� Steel key picks – Dongkuk, JSW and Hyundai.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Basic Material Ideas
Commodities vs Equities
Event
�� Commodity prices have been relatively stable or strong in some cases.
Despite this, the related equities that we cover have been underperforming.
We believe that commodity prices are correctly reflecting demand in the
market place and as such there is an opportunity to buy into some of the
higher quality equity names.
�� The two sectors that look most attractive on this analysis are Iron Ore and the
Steel sector. Equities have underperformed the underlying commodities
significantly. Despite this, the sectors we aggressively push at this stage
based on fundamental analysis include – copper, iron ore and coking coal.
�� Key stocks - Copper: Jiangxi Copper (also a MarQuee Buy idea), Minmetals,
Oz Minerals. Iron ore: Atlas Iron, Fortescue, Rio Tinto, Mitsui.
Impact
�� The strength in commodity prices better reflects the underlying demand
in the market place. Chinese steel and cement production has been running
at record levels, fuelled by strong construction demand across all segments of
the market. We expect to see some seasonal weakness in demand in 3Q11
and while infrastructure is showing some signs of slowdown, the nonresidential
and housing segment of the market remains strong.
�� Equities markets have been dominated by negative sentiment and global
concerns. Domestic investors have been cautious but holding things up.
Offshore investors have been very negative and dominated by growth and
debt issues in the US and default issues in Europe. As these unwind, we
expect fresh buying interest into the sectors.
Key stocks to focus on around the region
�� As a general comment the market has been neutral to overweight
commodities. That might seem strange given performance but when you
look at the sectors we believe it makes sense. In Asia, the two largest sectors
for investors are coal and cement. In both cases, investors have been
overweight and continue to be. It is the smaller sectors like the base metals
and the steel sector where they are significantly underweight. We remain
positive on both coal and cement but we think higher beta exposure can be
found in some of the base metals and the iron ore names.
�� Copper key picks – Jiangxi Copper, Minmetals (zinc and copper) and Oz
Minerals.
�� Iron ore key picks – Atlas Iron, Fortescue Metals, Rio Tinto and in the
Japanese trading house segment of the market, Mitsui.
�� Coal key picks – In the thermal segment of the market, Straits and Shenhua.
In the coking segment of the market Gujarat NRE and Fushan.
�� Cement key picks – Anhui Conch, CNBM, Taiwan Cement and James
Hardie.
�� Steel key picks – Dongkuk, JSW and Hyundai.
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