Mining Stocks Up on Better Chinese Economic Growth


Mining Stocks Up on Better Chinese Economic Growth
  1. Mining Stocks Up on Better Chinese Economic Growth
    morningstar.co.uk
    UK mining stocks rose today after better than expected Chinese economic data and record steel…
    Markets

Shares in UK mining stocks were up on Monday, boosted by positive economic data from China.

China’s economy expanded 6.9% in the second quarter of the year compared to the same three months in 2016. This was the same growth rate as the first quarter, running January to March end, the National Bureau of Statistics of China said today. This was higher than analysts’ expectations of 6.8% GDP growth. Industrial output rose 7.6% in June compared to 2016, higher than the estimated 6.5% increase. 

The Chinese government has set an economic growth target of 6.5% "or higher if possible," for 2017, the lowest economic growth target in 25 years.

“The better than consensus print for Chinese GDP suggests that the economy is maintaining momentum with both industrial output and fixed asset investment somewhat stronger than estimates. Despite concerns over China’s so-called shadow banking system, the global economic recovery seems to have supported the Chinese economic growth,” said Shilen Shah, bond strategist at Investec Wealth & Investment.

Separate data from the National Bureau of Statistics of China on Monday showed that China’s steel output hit a record level in June. China is the world’s largest copper and coal consumer. Other commodities also rely on Chinese. Anglo American's platinum business benefit from China’s rising household income that bolster Chinese demand for automobiles and jewellery, categories that collectively account for roughly 80% to 90% of platinum and palladium use.

Mining Stocks Up on Positive Chinese Data

As China is a keydriver of global commodities demand, the positive economic news boosted a number of UK mining stock prices today. Antofagasta (ANTO) gained 1.6% while Anglo American (AAL) was up 2.3% at the end of the trading day on Monday. Shares of other miners Glencore (GLEN) and BHP Billiton (BLT) also gained 2% and 1% respectively, while Rio Tinto (RIO) were slightly up 1%.

The above mining stocks, except BHP Billiton, were rated as overvalued stocks, meaning analysts believe these stocks are trading at their fair value estimate. Glencore and Anglo American were rated as one-star stock, which is trading at a higher fair value estimate than two-star rated Rio Tinto and Antofagasta.

BHP Billiton is rated a three-star stock, meaning analysts believe the stock is trading at its fair value estimate.

Antofagasta a Pure Copper Miner

Antofagasta is a "pure-play" Chilean copper miner, said Seth Goldstein, equity analyst with Morningstar. This set the scene that why share prices of Antofagasta went up the most when the data showed record steel outputs from China.

“We expect Chinese copper demand to dip during the next several years as real estate activity fades to a level more commensurate with underlying urbanization trends and power spending shifts away from copper-heavy distribution to copper-light transmission. On the supply side, mine production growth, cost deflation, and rising scrap availability all threaten prices. Our analysis points to long-term $2 copper in real…

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