Australian Resource Sector Outlook March 2010

The Australian resources sector is in a bull market uptrend with some very positive developments over the last couple of months.

Weve seen quite a strong A$, the copper price looks very robust and the gold price looks as if its finally starting to move up. Weve seen iron ore prices and coal prices being renegotiated upwards - and when we say upwards, were talking about 100% higher than prices 12 months ago.

At the same time weve also got the long awaited weakness in the American Treasury bond market which is going to be the key to everything. That weakness is accelerating and I think that over the next three months well see sharply higher yields on long term bonds and funds flying out of that bond market into equities, particularly resource sector equities.

This is a major long term bull market in resources which weve been talking about for some time.

One thing that we can really notice is the number of resource sector stocks that are in the major indices, for example the ASX 300 and the ASX 200. Its interesting that in 2004 the ASX 200 had 20% of resource stocks, but this has now increased to 30%. When we consider the ASX 300, it included 57 resource sector stocks at the end of 2004 and five years later that number is 109. Its clear that the resource sector is playing a bigger and bigger part of the Australian economy. The institutional fund managers who have any index weighting in their portfolios really have to move to a lot of these stocks. A lot of those 109 stocks are totally unknown to the major institutional investors, so theres a real catch up to come through.

We talked about our wave structure weve had ten years of wave one which was disbelief, weve had a big sell off in 2008, to produce those extraordinary lows , that was our pessimism wave, and now were in the optimism up-leg. Weve had the first leg up, weve had now four months of correction, I think that has now changed and is turning, were seeing lots of stocks starting to perform, sure its patchy we still note that there is a lack of liquidity in the market generally, in the smaller sectors, but BHP is doing very well and leading the market up.

The oil price is up, the oil stocks are starting to move, but generally an improvement on market breadth and its looking very, very, positive for the next year.

We think that the next six months is going to be outstandingly strong. Do watch the gold price and keep in touch with us, as weve got a lot of exciting things happening.

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News & Politics

Tags:

• Gold price
• Oil price
• Copper price
• Commodities
• ASX
• Stock Market
• Resource Sector
• Investment
• Australia