Sad news for mining knockers: Yep, Mining Stocks have fallen - but in parallel with the rest of the market

Hedley Widdup

Lion Selection Group

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.


Hedley Widdup
Analyst
Lion Selection Group

Geologist, mining investor, watchful commentator, bicycle collector and father of three.

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