Lot of head scratching amid $25bn rout
Matthew Stevens | July 04, 2008
COME again?
We have oil prices running at $US145 a barrel, record iron ore prices built on the supposedly solid sands of overwhelming demand from China and India, copper prices skipping through the indicative $US4 a pound threshold after news of a strike in Peru, and the investors in Australian resources stocks do what?
Why, they march out of the sector, of course.
Yesterday's $25 billion rout has everyone in the minerals and energy game scratching their heads. But there has been an awful lot of talk about tipping points in various markets over the past 72 hours, so maybe it should not have been unexpected that a wave of bearish sentiment would infect the previously insulated resources sector. The week opened with the Bank for International Settlements considering the prospect of a tipping point in global financial markets....
...."It just defies logic," the befuddled chief executive of one leading mining house suggested yesterday. "It is like they looked at one European coal price settlement and said 'it is all over'.
(The price being referred to was coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year, which dropped $27.50, or 13 per cent, to $190 a tonne in London.)
"Well, it isn't over. The fundamentals haven't changed one bit. But these traders are like lemmings chasing each other over the edge.
"You look and there is a hell of a lot of money in some of these funds and their resources desks are being driven by a lot of young people who haven't seen a bear market before. This morning they got spooked by a coal settlement and ran for the exits. But they'll be back in a week or two when they realise the world hasn't ended."....
theaustralian.news.com.au |
