Bearlyabull insight
Today’s stock market sentiments
The psychology of a stock market investor has long been a
captivating topic of conversation – especially when the stock in
question is one involved in the local mining game. Overlay that
with the white-knuckle ride of recent boom and bust cycles,
and your analysis develops yet further colour and depth.
Delve a little deeper in this interesting piece by Macquarie
Group’s Bevan Sturgess-Smith, as he considers how West
Australian investors have fared in the recent downturn, and
how the collective companies have been impacted too.
Bevan Sturgess-Smith
Investment Adviser
Macquarie Group Limited
It is this state’s significant resources industry that provides its
population with ample opportunities to invest in resources start-
ups, explorers, soon-to-be producers, cash/profit generating
producers and even companies recycling old projects. In recent
years, engineering, construction and resources service companies
have also been in focus as they too have participated in the state’s
resources ‘boom’. Historically, West Australians have been keen
participants in investing in the resources sector and, in the boom
times, have embraced the ‘punter paradise’.
The resources super-cycle, fuelled by commodity demands
from China and the developing world, has seen WA’s economic
fortunes and population increase significantly in the last 10 to
15
years. It has also witnessed substantial wealth generated in
the stock market by those investors who have picked the right
companies and timing for their investments.
Chat rooms were inundated with punters who claimed to
have made a killing in the market. The average person became
an expert on resources stocks. Resource grades, cash costs and
flow rates became staple terms trotted out between friends and
neighbours at barbecues, and by barbers and taxi drivers with
their clients, and the like. It became a sport to see who could pick
the next FMG or Sirius!
If you consider the movement in the ASX Small Resources
Index over the past 10 years it shows the roller coaster ride
punters have enjoyed. The early years of the resources ‘boom’,
the GFC ‘crash’ and the volatility of the post-GFC recovery
all reflect the dynamic and cyclical nature of this part of the
market, and how quickly sentiment and performance can change.
The downward trend in the resources market of 2012 and early
2013
suggested a move through the tail end of the super-cycle,
where the focus is more on the construction/completion of new
projects and expansion of current projects.
Barbers and taxi drivers are now more likely to chat about
football or politics, and solar panels are the likely discussion point
at neighbourhood barbecues!
WA’s punter paradise has disappeared over the past 12 to 24
months as the difficulties of shorter term speculative investing in
a resources bear market become evident.
In the stockbroking industry, this type of market movement
sees transaction volumes (and arguably stockbroker incomes)
go from feast to famine, and is also reflected in the ease/difficulty
in which companies can raise capital. The media reporting of
Minesite 2013
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