Hedley Widdup

Mining stocks have put on poor (ahem, disastrous) absolute returns since 2011. In 2011 to 2014, these were against a strong broader market, but during 2015 miners have fallen alongside a weaker market. The chart shows the correlation between ASX200 Resources and ASX200 Industrials (ie rest of the ASX200), for trading each calendar year, for the last 15 and a bit years. The miners "fell out of bed", with very low (negative) correlations with the rest of the market in 2012, 13 and 14. A correlation in 2015 of 0.72 is highly significant. The importance is the wash out of investors leaving the mining investment space really seems to have ended. Whilst a far cry from heralding a recovery in mining equities, this is probably the last stage of the healing process. In fact, this last flush of mining equity falls (in parallel with the market) feels a lot like capitulation - the last stage of any bust. I am watching now for signals of a recovery in liquidity in the mining space, as the investors start creeping back.



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