Strengthening emerging market equity prices may be needed to help precipitate a turn in resources sector stock prices. The chart at (VIEW LINK) shows a clear break in relative performance dating from January 2012 between the share prices of Australia's smaller resources companies and emerging market equity prices. The break occurred after many years during which the two were closely correlated. The loss of momentum in emerging market equities has translated into large losses of absolute performance for the bulk of the listed resources companies. The resources sector has turned from being highly correlated with emerging markets into a highly leveraged proxy for developing economies and emerging markets.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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Interesting blog piece from BlackRock: Emerging market stocks have started to outperform developed market equities. We believe that investors should maintain a long-term overweight in EM stocks, but need to be prepared for significant volatility and focus on being selective in their country and company selection. http://www.blackrockblog.com/2013/11/27/emerging-markets-reemerging/?utm_medium=spredfast&utm_content=Blog&utm_source=BLK_Twitter&sf19984404=1
John, another interesting chart here. I have been watching the small resources sector for the last few years and wondering what it is going to take to bring money back into the sector. Sustained recovery in commodity prices is clearly the answer in my view as evidenced by iron ore stocks. Is a recovery from developed nations such as the US + Europe more important to commodity prices or are emerging markets a more powerful influence?