We cannot look at China without considering the Resources Sector which exports huge amounts of its products into the worlds 2nd largest economy especially as the stocks are now enjoying the tailwind from renewed stimulus by China as it looks to kick start its economy after painful Covid. However, this has become a sector that is most definitely not moving as one e.g. year to-date BHP is +14.2% whereas RIO has fallen -3.1%. MM remains net bullish the sector but we are picking our targets carefully.
NB Other companies we could have considered with a large portion of their revenue from China sales are Iluka (ILU) ~34% or of course Fortescue (FMG) ~90% with the former being the latest addition to the MM Flagship Growth Portfolio.
- We believe in today’s rapidly evolving market investors must assess the resource stocks on their individual merits as opposed to buying the sector on mass.
- In the future China is clearly looking to become less dependent on Australia’s resources but for now as they look to create growth we are on the menu.
MM is long and bullish BHP
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