Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

Equity Bottom-Up

INVESTMENT VIEW:  We believe <a href="https://www.smartkarma.com/entities/13" target="_blank" data-smartkarma-citation="entities:13:1">Rio Tinto Ltd (RIO AU)</a> shares are oversold versus <a href="https://www.smartkarma.com/entities/147" target="_blank" data-smartkarma-citation="entities:147:1">Bhp Billiton (BHP AU)</a> and recommend a pair trade: long Rio; short BHP.  Our analysis of each company’s earnings sensitivities to recent commodity price changes reveals much less contention to their earnings outlook than their share price changes since mid-June implies.  We look for Rio’s shares to regain 16% on a relative basis versus BHP into the next earning cycle.

INVESTMENT VIEW:   We believe Rio Tinto Ltd (RIO AU) shares are oversold versus Bhp Billiton (BHP AU) and recommend a pair trade: long Rio; short BHP.  Our analysis of each company’s earnings sensitivities to recent commodity price changes reveals much less contention to their earnings outlook than their share price changes since mid-June implies.  We look for Rio’s shares to regain 16% on a relative basis versus BHP into the next earning cycle. 

US$20bn in Lost Market Cap Looks Hard to Justify: Recommend Long Rio; Short BHP

Commodities

INVESTMENT VIEW:  We believe further easing measures may be required if the Chinese authorities wish to re-stimulate the economy. <a href="https://www.smartkarma.com/entities/22872" target="_blank" data-smartkarma-citation="entities:22872:1">Copper (COPPER COMDTY)</a> prices have rallied just 2% off their 19th July lows, which is a much more muted response than we have seen from previous China easing cycles.  This is because this year’s measures look much more modest in comparison.  
DR COPPER’S PROGNOSIS:  ‘The patient requires more aggressive treatment’, is what we believe Dr Copper is saying right now…

INVESTMENT VIEW:  We believe further easing measures may be required if the Chinese authorities wish to re-stimulate the economy. Copper (COPPER COMDTY) prices have rallied just 2% off their 19th July lows, which is a much more muted response than we have seen from previous China easing cycles.  This is because this year’s measures look much more modest in comparison.  
DR COPPER’S PROGNOSIS:  ‘The patient requires more aggressive treatment’, is what we believe Dr Copper is saying right now…

Dr Copper’s Prognosis of China’s Policy Easing So Far…Stronger Treatment Required

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

Copper has formed a macro dual top at the 3.30 zone but the stage is set for a reaction trade higher from price support at the 2.72 level and a key risk pivot point to work with. A bounce would also be in sympathy with the China bounce that is unfolding and will produce a trade in copper and metal linked stocks in HK and the likes of RIO and COPX. A bounce in copper also aligns with a pending top for the USD in parts of Asia, given the USD rally is in the final innings.The break of 2.95 support…

Copper has formed a macro dual top at the 3.30 zone but the stage is set for a reaction trade higher from price support at the 2.72 level and a key risk pivot point to work with. A bounce would also be in sympathy with the China bounce that is unfolding and will produce a trade in copper and metal linked stocks in HK and the likes of RIO and COPX. A bounce in copper also aligns with a pending top for the USD in parts of Asia, given the USD rally is in the final innings.The break of 2.95 support…

Amareos

Federico Bagiotti, CFA

BHP - Constructive Neutrality BHP’s motto is “Think Big”. Pertinent given it is the world’s largest mining company. However, in seeming contradiction to its corporate tag line, the recent focus of the company has been towards streamlining its businesses and selling underperforming assets.This corporate diet, so to speak, has had considerable benefits, especially the improvement in profitability, which are widely recognized and BHP’s stock price has been on a solid upward trend since the early…

BHP - Constructive Neutrality BHP’s motto is “Think Big”. Pertinent given it is the world’s largest mining company. However, in seeming contradiction to its corporate tag line, the recent focus of the company has been towards streamlining its businesses and selling underperforming assets.This corporate diet, so to speak, has had considerable benefits, especially the improvement in profitability, which are widely recognized and BHP’s stock price has been on a solid upward trend since the early…

Thematic (Sector/Industry)

Our Recommendation – Narrow Focus to Select Commodities: Commodity pricing, which had been in a bullish trend since 1Q16, is being challenged by escalating trade concerns and weakening PMI reports. For example, the price of US soybeans and corn have dropped by ~4% this morning on the State Council's announcement that it would impose additional tariffs of 25 percent on US products including soybeans, cars, and chemicals, on a date to be decided after the US imposed its own tariffs on Chinese…

Our Recommendation – Narrow Focus to Select Commodities: Commodity pricing, which had been in a bullish trend since 1Q16, is being challenged by escalating trade concerns and weakening PMI reports. For example, the price of US soybeans and corn have dropped by ~4% this morning on the State Council's announcement that it would impose additional tariffs of 25 percent on US products including soybeans, cars, and chemicals, on a date to be decided after the US imposed its own tariffs on Chinese…

Commodity Prices Mixed in March on Escalating Trade Concerns; Recommend a Narrower Focus

United States

Copper is a chemical element with symbol Cu (from Latin: cuprum) and atomic number 29. It is a soft, malleable and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a reddish-orange color. It is used as a conductor of heat and electricity, as a building material and as a constituent of various metal alloys, such as Sterling silver used in jewelry, cupronickel used to make marine hardware and coins and constantan used in strain gauges and thermocouples for temperature measurement.

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Copper (COPPER COMDTY)

Dr Copper’s Prognosis of China’s Policy Easing So Far…Stronger Treatment Required

INVESTMENT VIEW: We believe further easing measures may be required if the Chinese authorities wish to re-stimulate the economy. Copper (COPPER...

Charles Spencer

Copper Play off of Solid Support

Copper has formed a macro dual top at the 3.30 zone but the stage is set for a reaction trade higher from price support at the 2.72 level and a key...

Thomas Schroeder

BHP - Constructive Neutrality

BHP - Constructive Neutrality BHP’s motto is “Think Big”. Pertinent given it is the world’s largest mining company. However, in seeming...

Amareos

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

US$20bn in Lost Market Cap Looks Hard to Justify: Recommend Long Rio; Short BHP

INVESTMENT VIEW: We believe Rio Tinto Ltd (RIO AU) shares are oversold versus Bhp Billiton (BHP AU) and recommend a pair trade: long Rio; short...

Charles Spencer

Dr Copper’s Prognosis of China’s Policy Easing So Far…Stronger Treatment Required

INVESTMENT VIEW: We believe further easing measures may be required if the Chinese authorities wish to re-stimulate the economy. Copper (COPPER...

Charles Spencer

Copper Play off of Solid Support

Copper has formed a macro dual top at the 3.30 zone but the stage is set for a reaction trade higher from price support at the 2.72 level and a key...

Thomas Schroeder

BHP - Constructive Neutrality

BHP - Constructive Neutrality BHP’s motto is “Think Big”. Pertinent given it is the world’s largest mining company. However, in seeming...

Amareos

Commodity Prices Mixed in March on Escalating Trade Concerns; Recommend a Narrower Focus

Our Recommendation – Narrow Focus to Select Commodities: Commodity pricing, which had been in a bullish trend since 1Q16, is being challenged by...

Charles Spencer