While Shanghai was the hardest hit, down 5.5% on the day as it was revealed that a number of securities firms were under investigation for rule valuations that may have led to August’s stock market crash, it was the sharp cuts in commodities stock prices on the FTSE that stood out more in a Thanksgiving-thinned market.
Anglo American was down almost 8% partly on news that it plans to shut its Drayton coal mine in Australia, after a state planning panel recommended the government should block the expansion of the mine.
The news compounded the general sense of malaise afflicting mining stocks and those with heavy debt burdens in particular; Glencore was the second hardest hit of the large diversifieds down just over 5% on the day. BHP Billiton was 3.47% down while Rio Tinto was trading 4% lower at 16h00.
The question is, is there reason to be tempted by the sales, or do mining stocks remain the equity equivalent of a pair of XXXL trousers that no one else wants and will likely cost a lot to have altered to fit?
Chris Beauchamp, senior market analyst at IG said the nose-dive in Chinese stocks overnight likely brought back unhappy memories of August which didn’t help the attractiveness of the miners, nor did the expectations of further cuts in demand and a hit to dividend payments but he pointed out that the sector has been in retreat for almost the whole of 2015.