It is still too early to ‘buy the dip’ in the mining sector, according to heavyweight broker JP Morgan Cazenove, though its stance on the sector is softening.
After turning negative last December, 15-20% has been wiped off the value of companies amid worries the coronavirus will stall economic progress in 2020.
This still hasn’t been enough to prompt JPMC to go full-blown positive of the extractive industries given headwinds such as a predicted 10% fall in iron ore prices if industry leader Vale ships at the predicted rate; add to this record Chinese steel inventories and a slowdown in property investment there too and you can understand the reticence.
However, the broker did weigh in with what can best be described as a lukewarm upgrade – to BHP Billiton (LON:BHP), going to ‘neutral’ from ‘underweight’ on stock in the Anglo-Aussie giant.
In the same note to clients, it reinstated its coverage of Anglo American with an ‘overweight’ recommendation. JPMC remained ‘underweight’ on Glencore (LON:GLEN).
“We think it premature to aggressively ‘buy the dip’ due to the fluid and high-risk impact of COVID-19, but valuation support is now visible across the sector and decisive central bank policy easing lays positive foundations for commodities in the second half,” the broker concluded.