With the release of China’s February 2014 lending data, Axiom Capital Research analyst Gordon Johnson drew the conclusion that “the news was again poor. More specifically, Feb. ’14 bank and non-bank lending collapsed to 644.5bn (from 1,319bn CNY in Jan. ’14) and 409.4bn CNY (from 1,232bn CNY in Jan.’14), respectively.”
Gordon observed that, “With steel inventory at the 86 large and mid-sized steel mills in China still at worrying levels, against a backdrop of port iron ore inventories at record levels, as we have warned over the past 6-to-7 weeks, we believe the capitulation of the port stock hoarders we have been worried about for months now is upon us.”
And he added that, “Barring new stimulus from the Chinese government in some form (which we expect to emerge as a cut to the RRR in June), the bounce in iron ore prices during the seasonally strong period in China (i.e., Mar.-Apr.), when it comes, will likely disappoint in pricing terms.”
Here’s a round up of hedge funds’ May returns
Tyro Absolute Return Fund was down 1.5% for May. The fund's main contributors in May were Super Micro Computer, which gained 1.6%, Shyft Group, which was up 1%, and GCI Liberty, which gained 1%. Detractors in May include Recro Pharma, which fell 2.6%, index shorts and hedges, which declined 2%, and DXC Technology, which was Read More
Because Gordon believes that iron ore prices are “likely to face further downside over the near term,” during a time where China should be seasonally strong, Gordon is recommending SELL Cliffs Natural Resources Inc (NYSE:CLF), SELL Rio Tinto plc (NYSE:RIO), SELL United States Steel Corporation (NYSE:X) and SELL Joy Global Inc. (NYSE:JOY).
Gordon is ranked number 2 out of 2444 analysts and has a 13.4% average return with a 79% success rate of recommendations.
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