Email of the day
Comment of the Day

June 19 2012

Commentary by David Fuller

Email of the day

On the big-cap miners:
"Dear David, do you have a view about miners such as BHP, or FCX or VALE? Do you think they could be a good play for a potential recovery of the China stocks, if any? Thank you for your thoughts. Best wishes for you and the team in London. Hoping to have someday TCS in Buenos Aires or some place nearby."

David Fuller's view I imagine TCS will visit South America at some stage. and thank you for your interest in our two-day workshop on Behavioural Technical Analysis.

The miners have had a decidedly cyclical performance during the global economic slowdown, as one might expect. They would certainly benefit from a China-led economic recovery and hopefully we will see some evidence of this during 2H 2012. Meanwhile, they are arguably cheap and offer some decent yields.

Looking at 5-year charts in local currencies, (AUD, USD and BRL for BHP, FCX and VALE), respectively, you will also find graphs for them in other currency listings in the Library. BHP Billiton (yield 4.53%) took another downward step last month. The share looks oversold and has steadied recently but the minimum required to improve this pattern beyond a temporary rally is a move back above A$35 and the declining 200-day MA. Freeport-McMoran Copper (3.63) also looks oversold and has steadied recently above the 2010 and 2011 lows. It could use another upward dynamic such as we saw on those earlier occasions to signal renewed buying interest. Companhia Vale do Rio Doce (0.98%) broke downwards last month but has not maintained the move beneath BRL40 which is also the upper region of the 2008-2009 base. While encouraging, it will need to eventually break the progression of lower rally highs to signal a return to demand dominance beyond the short term.

In conclusion, these shares have underperformed over the last two years but have returned to levels that are likely to attract value investors. An improvement in base metal prices will be required to entice broader interest among investors and copper may provide that eventual lead, as it often has on previous occasions. Meanwhile, investors in BHP and FCX are at least partially compensated for their patience by attractive yields.

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