Booming Material And Mining Sector Space

  • Dec 10, 2018 AEDT
  • Team Kalkine
Booming Material And Mining Sector Space

With major banks and technology sector stocks lately seen trading on volatile bands given the softness at global and domestic front, one sector that has gained traction is the ‘materials sector’ that includes space across metal and mining, chemical products etc.

The S&P/ASX 200 Materials Index (i.e., XMJ) represents YTD performance of -7.51% and -1.4% under one-year return. The material sector benchmark closed at $ 10713.8, down by 0.58% as on 10th December 2018. It reflects member companies of GICS materials sector and sub-industries such as manufacturing chemicals, forest products, paper, construction materials, packaging products, and metals, minerals and mining companies etc.  

The struggle of material sector is attributable to global growth concerns coupled with trade and sea war between two major global superpowers- US and China and reduced China commodity demand.

However, if we compare recent sector wise index performances, XMJ has been performing better than S&P/ASX 200 Information Technology Index (XIJ) and S&P/ASX 200 Financial Index (XFJ). At the close of trading hours today, the material sector was down by meagre 0.58%. On the other hand, the financial sector dropped by 3.22% and IT sector by 3.99%.

Also, specific stocks belonging to the material sector are performing exceedingly well. Let’s take an example of BHP Billiton Limited (ASX: BHP), world-leading minerals & metals mining and exploration company. The stock has reported a YTD of 5.05% and shown a growth of 14.89% since a year, closing at $31.290 as on 10th December 2018. With a market capitalization of $100.14 billion, its annual dividend rate stands at 5.1%. The company reported a surge of 32% in copper production, coal production rose by 7% and 3% increase in iron ore production for the fiscal year 2018, despite the global economic slowdown and shrinking China’s commodity demand.

Iron Ore giant, Fortescue Metals Group Limited (ASX: FMG) has also recorded a growth in share price by around 9% over the period of 3 months.

Upside rally has also been observed for gold stocks. Saracen Mineral Holdings Limited (ASX: SAR) has reflected impressive gains since the beginning of 2018 with a massive YTD return of around 50% and 3 months gain of 45%.

Over the past one year, gold stock - Evolution Mining Ltd (ASX: EVN) has witnessed a strong performance growth of 33.61% with YTD rise of 21.51%. It ranked among top 5 index performers for today, closing at $3.30, representing a surge of around 3%.

Not just blue chips, but even junior players such as Ramelius Resources Limited (ASX:RMS) performed exceeding well, closing at $0.450, demonstrating an impressive growth of 12.50% as on 10th December 2018. The group’s latest exploration update has been liked by the investors despite other shortcomings seen in the stock lately.

In light of recent surprising robust performance by the material sector even in global uncertain economic and political climate, the gold and iron stocks are worth keeping a close eye. Prudent selection of stocks at the right time will prove fruitful to investors.

Even though commodity markets for gold (down by 0.03%), silver (down by 0.46%), copper (down by 0.63%), nickel (down by 0.90%) have closed at lower levels, however, stocks of various Australian companies have portrayed massive performance. This somehow or the other depicts the resilient nature of the stocks in said space while commodity prices also tend to drive the movement to a certain extent.


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