In a market update, Pengana Capital said physical commodities and resources stocks have produced “strong gains” since the lows of end-2015.
According to Pengana, iron ore is up +54 per cent, oil has rallied +33 per cent and gold prices have risen +18 per cent.
In terms of specific equities, in the past six months Anglo American and Glencore are up +107 per cent and +71 per cent respectively. Fortescue is up +66 per cent and Newcrest is up +54 per cent.
Pengana said that for an asset class that seemingly has been forgotten, it has been “notching up” gains which can no longer be ignored.
The update noted that resources and commodities are likely to be supported by subsequent structural changes in the global economy.
China has reduced its reserve rate requirements for banks, injecting liquidity into the system. The likelihood and pace of US interest rate hikes is also questionable, with markets now poised for one rate hike in 2016 rather that four as initially expected.
“In a nutshell, structural shifts in the economy seem to be underway, which are likely to benefit the undervalued resources sector,” the update said.
“In addition, investors have under-estimated the ability of many resource companies to adapt to current market conditions.
“Strong productivity gains, aggressive cost cutting, reduction in dividends and profit margin enhancement through weaker producer currencies have also assisted greatly,” Pengana said.
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