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Recent trade data illustrate a near-collapse in Asian exports to the European Union which, if it continues to accelerate, would signal the end of the mining supercycle.
Over the past decade, Canadian mining stocks have closely tracked the path of Asian export data, highlighting the importance of Asian manufacturing growth on demand for base metals.
The incredibly sharp decline in exports from South Korea and China to Europe suggest a dire outlook for Canadian mining stocks and sustained selling pressure in the sector.
“Asia’s export growth to the E.U. fell from –5.0 per cent in June to –15.6 per cent in July, and the trajectory is becoming as steep as during the global financial crisis” writes Nomura economist Rob Subbaraman.
South Korea is the only Asian country to release trade data for August and the results are alarming. Exports to the euro zone cratered 50 per cent year over year and 45 per cent month over month. An abrupt halt to demand from the euro zone, which remains the world’s largest trading block by gross domestic product, has caused a major decline in intra-Asian trade, highlighted by declining shipments between South Korea and China.
The pace of trade within Asia, which is an indication of manufacturing growth in the region, has provided an effective leading indicator for the global economy and for Canadian mining stocks. (See this infographic)
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/globe-investor/markets/market-blog/asian-trade-data-point-to-dire-outlook-for-mining-stocks/article4523576/