Market Analysis, Investments and Trades: For Rent

[TraderRich]

http://www.marketwatch.com/story/commodity-rally-spills-into-asian-resource-shares-2010-09-30?siteid=nbsh

Commodity rally spills into Asian resource shares

TOKYO (MarketWatch) — A rally in commodity prices has fueled gains in Asia’s resource stocks, but those stocks have yet to fully reflect investors’ craving to pile money into commodities.

Investor interest in the commodities market has helped lift gold prices to record levels, silver near a 30-year high, and oil to its strongest levels in weeks in New York. Copper and tin trade around two-year peaks in London. Read the latest Metals Stocks column.

“Investors are focused on the short term, and that is just the short-term hot money which is driving precious metals and base metals higher,” said Chintan Karnani, chief analyst at Insignia Consultants in New Delhi.

With commodity prices rising, some resource stocks saw impressive gains last month, but those gains pale in comparison to those seen in physical commodity prices.


Divided Koreas meet for talks
North and South Korea hold their first working-level military talks in two years to discuss a range of security issues. Video courtesy of Reuters.

“Retail investor participation in stock markets is not very high at the moment,” said Karnani. “Once retail investor participation in [the] stock market increases, commodity-related stocks will catch up with commodities.”

On Friday, commodity-related shares mostly higher in late morning trading. Shares Inpex Corp. (JP:1605 393,000, -15,000, -3.68%) (IPXHF 0.00, 0.00, 0.00%) climbed 1.5% in Tokyo, as the Nikkei Stock Average (JP:NI225 9,453, +83.79, +0.89%) added 0.9%. Sumitomo Metal Mining Co. (JP:5713 1,275, -28.00, -2.15%) (STMNF 15.30, +0.30, +2.00%) fell 0.2%, but for the month of September, its shares rose nearly 19%, while Inpex has climbed over 3%.

In Sydney, Newcrest Mining Ltd. (AU:NCM 39.99, +0.32, +0.81%) (NCMGF 37.85, -0.75, -1.94%) rose 0.9%, and BHP Billiton Ltd. (AU:BHP 39.43, +0.52, +1.34%) (BHP 76.41, +0.09, +0.12%) was 1.4% higher, with the S&P/ASX 200 (AU:XAT 4,588, +3.42, +0.08%) up 0.2%. For September, Newcrest gained over 6%, while BHP rose 5%.

Trading was closed for holidays in Shanghai and Hong Kong, but for the month of September, Aluminum Corp. of China Ltd. (HK:2600 7.32, -0.32, -4.19%) (ACH 23.53, -0.28, -1.16%) , also known as Chalco, added 18% and Cnooc Ltd. (HK:883 15.04, -0.04, -0.27%) (CEO 194.28, -0.02, -0.01%) was up 12%.

In wider Asian trading, Seoul’s Kopsi (XX:KS11 1,873, +6.36, +0.34%) rose 0.4%, and Taiwan’s Taiex was nearly flat.

Retail interest in the stock market will “climb once the third quarter growth numbers are out and they show that growth will continue in [the] fourth quarter also,” said Karnani.

Pure plays

The real gains so far in commodity-related shares have been seen in “pure plays,” which are more sensitive to risk that has been abundant in the market, said Chris Weston, an institutional dealer at IG Markets in Melbourne.

Among those are Sundance Resources Ltd. (AU:SDL 0.25, -0.01, -2.00%) (SUDCF 0.21, +0.08, +61.54%) , which was up over 70% for the month of September, Lynas Corp. (AU:LYC 1.36, -0.01, -0.37%) (LYSCF 1.33, +0.01, +0.76%) , Oz Minerals Ltd. [s: (AU:OZL 1.48, +0.03, +1.72%) (OZMLF 1.35, -0.04, -2.88%) and Murchison Metals (AU:MMX 1.69, +0.03, +1.51%) (MUMTF 1.55, -0.15, -8.82%) .

Some of the pure plays have had “sizeable outperformance versus underlying commodit[ies] and there is a lot of speculation about future earnings being priced into these names,” said Weston.

‘Resource stocks are still a good place to invest.’

Chris Weston, IG Markets
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