David Cassidy, who correctly told investors to shun Australian mining stocks in 2015, says the worst is yet to come for the industry as China’s economy decelerates.
Investors should hold fewer commodity producers than are represented in the S&P/ASX 200 Index because shares are yet to bottom, says Cassidy, UBS Group AG’s head of equity strategy for Australia.
Instead of speculating on some of the stock market’s worst performers, he’s telling investors to buy firms with profits that are closely tied to an upswing in the economy, such as developer LendLease Group and retailer Harvey Norman Holdings Ltd.
“We’re closer to the bottom but not yet willing to call the bottom here,” Cassidy said in a phone interview from Sydney on Dec. 14. “China is still likely to slow into 2016 while at the same time we are likely to see supply increases, particularly for iron ore. Slowing demand and increasing supply gives us a bearish setup.”
A 25 percent plunge by Australian materials shares has put the nation’s benchmark equity measure on course for its first annual decline since 2011.
BHP Billiton Ltd. is trading near a decade-low and Rio Tinto Group is down 27 percent this year as analysts cut dividend forecasts and global peers from Anglo American Plc to Freeport-McMoRan Inc. shrink their businesses.
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