Why China just gave these FTSE 100 stocks a shove higher
At multi-year lows until last week, this region is heading north again. City writer Graeme Evans explains what’s going on and which UK shares are affected.
24th September 2024 13:25
by Graeme Evans from interactive investor
The recovery potential of Glencore (LSE:GLEN), Rio Tinto Registered Shares (LSE:RIO) and Prudential (LSE:PRU) caught the eye in the FTSE 100 index today after China’s central bank (pictured above) unveiled long-awaited stimulus measures.
The boost for the world’s second-largest economy was slightly more aggressive than forecast as policymakers attempted to keep the country’s GDP growth target of 5% within reach.
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They reduced the amount of cash banks must hold in reserve by 50 basis points, with the potential for another 25-50 basis points later this year. Rates on existing mortgages will be cut by 50 basis points, narrowing the gap with new mortgages and reducing interest burdens.
UBS Global Wealth Management said the package should lift sentiment in the short term but wasn’t the “bazooka stimulus” of past years that has spurred lasting rallies.
It said: “To break the ongoing deflation-deleveraging loop, we think monetary easing alone is not sufficient, and that additional fiscal support must play a bigger role.”
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This could come in October should the next set of GDP figures disappoint, although for now Asia-focused markets were happy to enjoy the consumer upside of today’s support package as the Hang Seng index and Shanghai Composite both jumped 4%.
These gains translated into strong sessions for the likes of Baillie Gifford China Growth Trust Ord (LSE:BGCG) and FTSE 250-listed Fidelity China Special Situations (LSE:FCSS), while former FTSE 100 stock Burberry Group (LSE:BRBY) put back 17p to 616p on hopes of a luxury goods spending revival.
The biggest London market beneficiaries were in the mining sector as demand-side optimism pushed the copper, diamonds and steelmaking coal business Anglo American (LSE:AAL) up by 148p to 2270.5p at the top of the FTSE 100 risers board.
Its shares have now risen by 13% since mid-September, having also benefited from support for commodity prices caused by the weaker dollar at the start of the US rate-cutting cycle.
The shares of Glencore and Rio Tinto are also up by double-digit percentages in the past fortnight, putting back some of their heavy losses since mid-May.
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Glencore changed hands this afternoon at 400p but Jefferies analysts wrote last week that the shares were good value and with catalysts to go higher over the next three to six months.
They have a price target of 600p, naming Glencore as their top pick in the UK mining sector.
Jefferies said: “We expect prices for copper and metallurgical coal to rise from current levels, and we expect growth in capital returns and value creation from opportunistic M&A to lead to a higher valuation for Glencore's shares over time.”
Chile-based Antofagasta (LSE:ANTO), whose exposure to record gold prices recently helped its valuation to touch an all-time high, added 106p to 1932p as the second-best stock in the FTSE 100.
Today’s developments also revived interest in insurer Prudential, given that mainland China, Hong Kong and Taiwan accounted for 63% of new business profits in half-year results.
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Prudential warned in late August: “The weak growth in the Chinese mainland and concerns around its property sector continue to place downward pressure on China interest rates, which could also weigh on the broader Asian region and the global economy’s vitality going forward.”
The shares rose 25.4p to 664p to extend gains since mid-September to about 10%, having been as high as 827p in May. Asia-facing lender Standard Chartered (LSE:STAN) also rose 26.6p to 784p, close to the stock’s highest level this year.
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