Far East Capital Newsletter
Iron ore producers lead the market higher BHP, Fortescue and RIO
23 Feb 2019

In This Issue

Iron ore producers lead the market higher BHP, Fortescue and RIO

In the weeks since our last chart update the All Ords, the Metals and Mining and the Energy Indices have all powered ahead with strength that would have been considered impossible only a month earlier. What should we read in this? Is the economic outlook any better? No, there continue to be clouds on the horizon all around the the world.

There has been a rise of 13.9% in the All Ords since the Christmas Eve low of 5,478. The rise has been so strong that you would have to say that it can’t continue like this. The Energy index has risen by 25.2% over the same period, from its low of 9,183, resuming a broad long term uptrend. The Metals and Mining Index has been even more dramatic, peaking 27.9% higher from its low of 3,365 on 28 November, but it is now pushing against long term resistance.

The importance of BHP to the Indices needs to be acknowledged in any analysis of the market performance. Another tailings dam collapse in Brazil and the subsequent reduction in iron ore supplies from Vale has underpinned a strong rise in the iron ore price, and therefore the share price of BHP. Vale’s pain is BHP’s gain. Speculators have led the charge, so you need to be ready for when they take profits, but earnings will be much stronger in the immediate future. 

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