Don’t underestimate how much industrial stimulus Beijing will inject in the economy to keep growth on-target.
A rampaging epidemic in the country that consumes about half of the world’s metals has to be bad news for mining stocks, right? Investors are certainly making that bet.
The week started with the Bloomberg World Mining Index falling the most in nearly six months, and a six-day losing streak continued Tuesday on expectations that a slowdown in economic activity will cut China’s voracious appetite for commodities.
Australian shares of Rio Tinto Group fell as much as 5.9% when trading resumed after a public holiday Monday, on track for their biggest slide in three-and-a-half years. Those of iron-ore producer Fortescue Metals Group Ltd. slumped as much as 8.7% in early trading.
That looks overdone. In the grip of an epidemic, it can feel like the sky is falling — but most such viruses die down in a matter of months, and people shouldn’t underestimate how much industrial stimulus Beijing will inject in the economy to keep growth on-target in the aftermath.
Consider Severe Acute Respiratory Syndrome, which swept through southern China and east Asia in the early months of 2003. Like most coronaviruses — and indeed, most infections of the nose and throat, such as influenza — it exhibited a pronounced winter seasonality, with infections beginning in November and dropping rapidly through April, before approaching zero in June.
For the rest of this article: https://www.bloomberg.com/amp/opinion/articles/2020-01-28/coronavirus-commodities-selloff-is-overblown-look-for-stimulus