Blue chip mining stocks seeing more bearishness ahead

Blue chip miners stock has moved from black to red as ongoing volatility rocks the market.

Anglo American, BHP, and Glencore have all recorded at least a fifth of their value destroyed, while  Rio Tinto has also been hit, as all suffer under poor economic conditions and declining commodity demand, according to Bloomberg.

Anglo American has fared worse out of the majors, as it undergoes rapid surges in share prices which are quickly wiped out the following day.

On Thursday the miner experienced a 14 per cent uplift, the majority of which was lost the following trading day.

Glencore is again experiencing rapid climbs and declines, recording weekly movements exceeding 10 per cent.

BHP is seeing the sharpest movements since the sharemarket slaughter of the Global Financial Crisis.

The resources giant also recorded an enormous impairment, further harming its standing.

It announced a pre-tax impairment of US$7.2 billion ($10.3 billion) on its US onshore oil and gas assets, following a review into the company’s assets.

This was another blow for the resources giant, which has shed more than 35 per cent of its value since November, with its shares last week closing below $15 at $14.77 – the first time it breached this watermark since May 2005.

On the back of this, a measure of BHP’s 100 day volatility hit 50.6, the highest in approximately six year, according to Bloomberg data.

Glencore has also seen increasing volatility, however nothing yet as unpredictable as what it experienced late last year, when its shares fell nearly 30 per cent over a week, at one point slipping 16 per cent overnight and wiping US$13 billion off its value, only to see a 72 per cent skyrocketing in value in Hong Kong markets the following week.

Rio Tinto today has actively spruiked its “solid fourth quarter results”, in a bid to reassure shareholders after the doom and gloom announcement of a company-wide pay freeze last week.

Rio chief executive Sam Walsh focused on cost cutting and financial discipline in his message to the market.

“It beggars belief,” Des Kilalea, an analyst at RBC Capital Markets in London, told Bloomberg.

“There aren’t many natural buyers of the stocks. It’s been left to people with a more trading bent.”

This ongoing uncertainty is compounded by  what has been touted at the worst start for commodities  in years.

The Bloomberg Commodity Index has recorded its worst start to a year since data began collection in 1992.

The coverage of returns for 22 materials fell four per cent, according to Bloomberg.

This precipitated the massive impact on mining and commodity prices, which rely heavily on ongoing Chinese demand, and are being negatively affected by continuing uncertainty in the country.

Glencore and Anglo have taken drastic action to right their value, scrapping dividends and putting underperforming assets on the market, although Rio and BHP are yet to take similar measures.

“There isn’t a sector of the mining industry that isn’t struggling,” Kilalea said.

“There are just so many things weighing on the industry.”

Some pundits are expecting the market to only head further south.

Market analysts have compounded their bearish views across 18 raw commodities, doubling their negative best in the last fortnight.

“There’s fear in the marketplace,” said Lara Magnusen, a La Jolla, California-based portfolio manager at Altegris Investments, which oversees $2.5 billion, told Bloomberg.

The market is “very concerned about slower economic growth and what’s going on with China and the contagion effect,” she said.

An economic report slated for today is expected to only bring more negative news, with forecasts likely to show China’s economy slowing to its weakest pace since 1990.

“The fact is there’s no major fiscal stimulus to ignite global growth,” US Global Investors CEO Frank Holmes said.

“Everyone is extremely bearish.”

This bearishness is the new normal for the mining industry. 

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