Global Natural Resources: turning bullish on mining

01/08/2016

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By nature, natural resource equities and commodity prices are cyclical and as history suggests, resource equity turning points are often sudden and explosive events.

Analysis by the Global Natural Resources Team suggests that not only have we seen signs over the last six months that point to the beginning of a strong turnaround in the mining sector, but we have also had the largest six-month positive change since the inception of the Euromoney Global Mining Index in 1988.

The chart below plots the Euromoney Global Mining Index (grey) and the rolling six-month rate of change in the index (red) over the last 15 years. The sharp uptick in the red curve demonstrates the rapid change underway, while the Euromoney Global Mining Index suggests the turnaround is the beginning of a longer-term recovery in the mining sector.
 
Mining sector: long-term recovery ahead?

Euromoney Global Mining Index (in AUD) vs Rolling six monthly rate of change in Euromoney Global Mining Index (in AUD) (%)
Source: Euromoney, Bloomberg. Data at 29 July 2016. 
 
In my 30 years of working in the natural resources sector and having experienced at least five major cycles, the six-month bounce from its recent lows is likely to be one of the strongest since the start of my career. As a result, we have increased our exposure to the mining sector to more than 40%, the highest level since the inception of the Global Natural Resources Strategy. 
 
 

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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