Monday, 20 January 2014

Rio Tinto: Mining for value

Over at least the past decade, UK-listed mining stocks such as Rio Tinto (RIO) have been tightly correlated with two key financial asset classes:

Industrial commodities (industrial metals such as copper, nickel and aluminium and coal for making steel) and Emerging markets such as the Brazilian, Russian, Indian and Chinese (BRIC) stock markets, as well as the Australian stock market (which is itself heavily-weighted towards mining stocks).

The reason for this is clear: the main sources of growth in demand both for these industrial metals and for coal have been China and India, as they have expanded their heavy manufacturing bases to become the world’s centres for all types of manufactured goods, from white goods to toys.

Nothing new or particularly interesting to note so far. Recall that the worst-performing major regional stock markets over 2013 were indeed Emerging Markets; and that one of the worst-performing industrial sectors in the UK stock market last year was the Mining sector, both driven by concerns over slowing growth in the major BRIC economies.

But Rio Tinto is Now Diverging from Emerging Markets

However, now for a more interesting and perhaps less obvious fact: Since the middle of last year, the major UK-listed diversified mining company Rio Tinto has managed to de-correlate from the poor trend in emerging market stocks.

To read the rest of this article and see the associated graphs, please click on the link below to my "Expert Opinion" page on the MindfulMoney website:

Happy digging, 

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