Hong Kong - Glencore rallied for a fourth day in Hong Kong to lead mining stocks higher on rising confidence that the commodity giant can handle its debt burden even as raw materials languish and investors foresee US interest rates staying lower for longer.
The stock rose as much as 13 percent in Hong Kong following a 45 percent three-day surge through Monday after the company assured investors that its balance sheet remained robust. In Australia, BHP Billiton advanced as much as 3.3 percent and copper miner Oz Minerals climbed to the highest level since July.
Glencore’s collapse to a record and recovery last week centred on its battle to convince investors over its ability to pay back debt amid the plunge in commodities and slowing growth in China. A decision by the Federal Reserve to refrain from raising rates spurred a drop in bets for a rise in borrowing costs this year, bolstering the outlook for raw materials. The conclusion of a trans-Pacific trade deal was also benefiting the sector, according to Andrew Driscoll, Perth-based head of resources research at CLSA.
‘Turning point’
After the slump in share prices, there’s “a bit of a turning point in sentiment,” Driscoll said on Tuesday. “With Glencore’s commentary that it has adequate liquidity and that its operations are generating good cash flow, that’s certainly quelled some fears around default risk.”
Glencore traded 2.9 percent higher at HK$12.96 at 11:59 a.m. in Hong Kong. On Monday, the company’s Hong Kong shares gained 18 percent to their highest close since September 24, and surged a record 21 percent in London after analysts from Sanford C. Bernstein & Co said Glencore’s debt didn’t present an existential crisis for the firm.
Glencore CEO Ivan Glasenberg avoided the topic of the company’s stock performance at a conference in London on Monday, focusing instead on the prospects for copper, which provides nearly a third of the company’s earnings. The market will tighten and prices will go up as loss-making supply is shut down, he said.
Fed outlook
Goldman Sachs Group said there’s a chance the Fed will delay its planned interest-rate increase well into 2016, or even later. While a December liftoff is still the company’s central forecast, a slowdown in output and employment may justify policy makers keeping the near zero rate policy for “much longer, well into 2016 or potentially even beyond,” Jan Hatzius, New York-based chief economist, wrote in a note.
Agreement on the Trans-Pacific Partnership was sealed Monday in Atlanta after more than five years of negotiations between nations including the US, Canada, Japan and Australia. The deal, which must still be ratified by lawmakers, is the biggest trade agreement in history.
BLOOMBERG