Proactive Investors - Run By Investors For Investors

Societe Generale cuts ratings for BHP and Rio Tinto as it moves to a more cautious stance on Metals & Mining stocks

SocGen’s analysts said: “While sentiment towards the sector remains positive, it is uncertain how long this will last given mixed macroeconomic data and relatively subdued commodity price momentum”
Mining truck
Glencore remains SocGen's only ‘buy’ among the diversified miners, with its target price unchanged at 350p

Societe Generale has cut its ratings for BHP PLC (LON:BHP) and Rio Tinto PLC (LON:RIO) as the French bank moves to a more cautious stance on most of the Metals & Mining stocks it covers after gains posted across the sector in the year-to-date.

In a note to clients, SocGen’s analysts said: “While sentiment towards the sector remains positive, it is uncertain how long this will last given mixed macroeconomic data and relatively subdued commodity price momentum.”

READ: UBS scraps ‘buy’ recommendation for Rio Tinto, expects iron ore prices to slide in 2019

The analysts said they have adjusted sector valuations to reflect the optimism in the markets leading them to downgrade BHP’s rating to ‘hold’ from ‘buy’ with a reduced target price of 1,680p, down from 1,780p, and cut Rio Tinto to ‘sell’ from ‘hold’, albeit with an increased target price of 3,880p up from 3,830p.

They pointed out that Glencore PLC (LON:GLEN) remains their only ‘buy’ among the diversified miners, with its target price unchanged at 350p.

The analysts pointed out that the Metals & Mining sector got off to a strong start this year, with the Stoxx 600 Basic Resources rising 16.5% year-to-date in US dollar terms after a correction in the second half of 2018.

They said: “As of now, the index has recouped about half of the ground lost since the 2018 peak, leaving room for another leg up if macro conditions stay supportive.

“On the other hand, equities have outperformed base metals, which is a cautionary sign judging by historical precedents, just as bulk commodities seem to be peaking again.”

The analysts added; “The current positive sentiment towards the sector is mainly supported by hopes for the nearing resolution of the US-China trade spat and evidence of renewed easing measures implemented by the Chinese authorities.

“However, neither is guaranteed to translate into stronger growth in the world’s second largest economy, and there are signs of economic momentum sputtering elsewhere.”

Rio Tinto was the biggest FTSE 100 faller on Thursday, albeit with its shares trading ex-dividend, down 7.4% at 4,146p, while BHP shed 2.8% at 1,728.60p.

View full RIO profile View Profile

Rio Tinto Timeline

Related Articles

South America's prospective lithium triangle extends upwards from Argentina, across Chile and to Bolivia
January 31 2019
Galan is named for the Cerro Galán volcano system near its Argentinian ground.
1554206107_Jupiter-Mines---Tshipi-ore.jpg
April 02 2019
The Tshipi manganese has a 100-year mine life, and a track record of delivering cash flow and profits
Piedmont's Carolina location map, showing nearby mines and lithium processing facilities
April 22 2019
Piedmont Lithium is a large landholder in North Carolina pursuing regulatory approvals for its Piedmont US-lithium project.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use