‘Extraordinary’ Decline in Resources a Buying Opportunity: Expert
The “extraordinary” decline in global resources stocks is a buying opportunity for investors, one chief investment officer, told CNBC on Tuesday.
“We're seeing pull backs in some very big companies who are producing record levels of earnings at present,” James Chirnside, the CIO at Asia Pacific Asset Management told CNBC on Tuesday. “That decline has come to a halt, that actually we are buying material stocks at the moment.”
Chirnside said he is bullish on shares of Vale , BHP Billiton
and Fortescue Metals , which have declined 20, 13 and 33 percent respectively over the last 30 days.
Chirnside isn't alone in recommeding Austrlaian resources stocks.
"The values are cheap for some of these large, diversified resource companies such as BHP and some of the more pure play operators such as Woodside,” says Angus Geddes, CEO at Australia-based investment company Fat Prophets.
Resources stocks have faced a double whammy from growth fears sparked by Europe’s debt crisis and the prospect of a slowdown in China.
But Chirnside is confident that the Greek debt situation will be contained and he believes the sector’s key consumer, China is nearing the end of its tightening cycle.
“Greece has indicated that it doesn't need cash until the second week of November. That gives them time to ratify the increase in the stability fund, getting the cash over to Greece,” he said. “We only need a couple of very small positive developments here, and markets will be rallying.”
In terms of China, Chirnside says there is enough evidence of pain in the construction and property space, which makes further tightening by policymakers seem unnecessary.
According to Chirnside, even if demand from Western economies was to drop, emerging markets will grow sufficiently to absorb the supply from the resources sector.
“We’re still going to see very strong earnings in the sector,” he concluded.