In 2008, the global mining index fell 76% from its May 2008 highs, this time around, the index is down 23%.
The last time it was widely reported that equities had dragged commodities down, but a Citi report thinks it may not be the same this time around.
Right now companies have better balance sheets than they did in 2008, valuations aren’t stretched, and China which had slowed down its commodity demand then has the capacity to re-accelerate now.
For now analysts think mining shares are factoring in base commodity prices, spot or current prices, long-term price assumptions and worst case scenarios. Based on these factors, analysts expect:
- On a spot basis i.e. current price at which commodity can be traded, gold equities have the most chance of seeing returns that exceed expectations, followed by iron ore.
- A worst case and in a long-term scenario copper equities are most likely to have returns that fall short of expectations.
- In terms of regions, Asia and Australia are expected to be the best on risk-reward basis.