Back on September 24 I
highlighted
that the market priced in the death of China (
FXI
,
quote
) and technical picture continues to improve since the last
post. Overnight the Shanghai composite was the only positive
index in the region as it test key resistance levels, supported by
resource stocks, which should be no surprise to Emerging Money
readers.
[caption id="attachment_71803" align="alignright" width="220"
caption="Chart Courtesy of Bloomberg"]
Despite heaviness of the overall Chinese market the resource
names are performing well coupled with the move in iron ore from
$85 to $114 in yesterday's session.
I still believe we can have great run into the November 8
th
transfer of power.
-
[/caption]
A Citi Research piece out today suggests iron ore should
continue to be bought to a point. Those players whose
positions can withstand lower prices and wait for the market to
rationalize should be fine.
Prices dropped when China began de-stocking and causing
large consumer to step away from the market was devastating to
marginal demand. Now that China stocking cycle is ending
players are seeing prices rebounding once again.
Price volatility in Brazil over the next one to two years
could provide ample opportunities to those that are
nibble. Citi suggests prices levels below $100 are buying
opportunities and price above $120 player should begin to
consider reducing positions and locking in gains in companies
positioned well in the space.
Citi's only buy recommendation in the space is currently is
Vale (
VALE
,
quote
) and suggest that Vale is the only investable iron ore miner
in Latina America. For additional buy/sell
recommendations from Citi Researchers and to read the full
research paper
click here
.
In the absence of iron ore ETF players can look to names
like iShares MSCI Global Select Metals and Mining Producers (
PICK
,
quote
) which invest in companies primarily involved in extraction
including some production of a diversified list of metals
including aluminum, steel, and precious metals and
minerals. Most notably the fund excludes gold and
silver. PICK's reach extends to both developed and
emerging markets. It's not a pure play for iron ore but
provides the investor access to names like Rio Tinto Ltd (
RIO
,
quote
) and Vale SA (
VALE
,
quote
) that have significant iron ore exposure.
