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Highlights:
- Disappointing China Stimulus: Chinese government’s latest debt relief measures fail to boost market sentiment, impacting major London-listed mining stocks.
- Major Miners Decline: Antofagasta, Rio Tinto, Anglo American, and Glencore shares slide as commodity markets react negatively.
- Concerns Over Impact: Analysts warn that China’s debt swap measures might not translate into increased consumption or investment growth.
London-listed mining companies faced a significant setback on Friday as the Chinese government’s latest economic support measures left markets unimpressed. Despite hopes for a stronger response, China’s unveiled debt relief package failed to provide the expected boost, sending shares of major mining firms into decline.
Copper producer Antofagasta PLC (LSE:ANTO) saw its shares drop 4.9% in morning trading, while industry giants Rio Tinto PLC, Anglo American PLC (LSE:ALL), and Glencore PLC (LSE:GLEN) also found themselves among the top losers on the FTSE 100 index.
China’s Minister of Finance, Lan Fo’an, announced a 10 trillion yuan refinancing plan aimed at addressing local government debt issues. The scheme includes raising local government debt ceilings by six trillion yuan and issuing four trillion yuan in special bonds. The objective is to reduce hidden debt levels from 14.3 trillion yuan to 2.3 trillion yuan by 2028.
However, the market’s reaction to the announcement was lukewarm. AJ Bell analyst Russ Mould pointed out that the measures arrived at a challenging time for mining firms, following a turbulent week in commodities markets influenced by Donald Trump’s US election victory. Mould suggested that investor concerns about potential risks from a second Trump presidency are currently overshadowing any positive effects from China’s efforts to stimulate its economy.
“The question on investors’ minds now is whether Beijing will be compelled to introduce a more aggressive package of measures to stimulate growth,” Mould remarked.
XTB analyst Kathleen Brooks expressed skepticism over the effectiveness of the latest debt relief initiative, warning that it may not translate into economic stimulus as initially anticipated. Brooks described the move as a "debt swap" rather than a genuine stimulus package, arguing that the focus appears to be on stabilizing local government finances rather than directly boosting consumer spending.
“The problem with China’s latest measures is that they don’t provide immediate economic stimulus,” Brooks said. “These actions are aimed more at preventing a financial crisis within China rather than driving new growth or consumption.”
While the debt swap plan is projected to save 600 billion yuan annually, which could theoretically be allocated to investment, Brooks noted that it remains “unclear” how these savings will materialize given the ongoing issues with China’s property market.
With Chinese policymakers facing mounting pressure to revitalize the economy, analysts and investors alike are left questioning whether a bolder stimulus approach might be required to counteract the impact of global economic uncertainties and domestic financial challenges. For now, London’s mining sector is left grappling with the market’s disappointment, as hopes for a stronger rebound in demand from China appear to have been dashed.
