FTSE-listed miners boosted by HSBC note

10th Nov 2016 09:15

(ShareCast News) - Shares in Rio Tinto and Glencore gained on Thursday as HSBC initiated its coverage of the mining stocks with a 'buy' rating.HSBC said Rio's assets are positioned mainly in the developed world and hence less risky, while Glencore's are more evenly spread across the globe.BHP Billiton's prospects are also in the development world but HSBC gave it a 'hold' rating, saying it does not offer as much value at its current share price as Glencore and Rio. Anglo American was also given a 'hold' rating based on its share price."BHP stands out on its relatively superior asset quality vrsus Anglo and Glencore, but our valuation appears full at the current share price," HSBC said.Looking at the sector as a whole, HSBC said the FTSE Mining is up 130% since its January 2016 low. The growth is driven by improved sentiment, moderately higher commodity prices, short covering and sterling depreciation.However, HSBC noted that the sector is still 50% below its peak in November 2010, which was boosted by the expectation of continued commodity demand in China.Chinese demand is now substantially below peak levels despite stimulus measures. HSBC believes this is unlikely to change anytime soon as its economy transitions from investment-led to consumer-driven growth."Today there is oversupply and overcapacity in most commodity markets and in some instances immense inventory levels that should persist over the medium term at current depletion rates," said HSBC."In essence, the over-investment in supply growth that dominated the past decade is plaguing today's commodity markets."However, the four miners HSBC has mentioned are cash flow generative and debt levels are falling rapidly. The bank believes this is a catalyst for further capital investment and/or an increase in returns to shareholders.At 0938 GMT shares in Rio rose 3.14% to 3,165p and Glencore jumped 4.59% to 282.85p. Anglo American also edged up 4.60% to 1,236p and BHP grew 2.58% to 1,372.50p.