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.


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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?