Mining Stocks Facing "Significant Risks", say Analysts

Despite upgrades to commodity price forecasts, Morningstar equity analysts still believe mining stocks are expensive

Mathew Hodge 11 October, 2018 | 2:37PM

Oil rig commodities natural resources energy brent crude WTI oil price

Morningstar analysts still see significant risks for the miners and think the stocks overall are overvalued. Buoyant commodity and share prices do not reflect the inevitable shift in China’s economic growth towards less commodity consuming activities, and the market has taken too much comfort from the stimulus-fuelled recovery.

The underlying sources of instability – poor quality lending in China and growing leverage are yet to be addressed. We see the greatest overvaluation among the bulk miners – those exposed to iron ore, coking coal, and thermal coal. Prices for those commodities remain elevated.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Fortescue Metals Group Ltd16.39 AUD0.99
New Hope Corp Ltd1.22 AUD2.95
Rio Tinto PLC5,007.00 GBX0.34

About Author

Mathew Hodge  is an equity analyst for Morningstar

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