Mining sector – was that the capitulation low?

Staring into a bottomless pit!

Anybody who has been trying to buy value down in the mining sector in recent days has been taught a lesson in just how much markets can overshoot. The moves in ENRC & KAZ this morning are something else…

This smells ominously like a capitulation low to me what with the rising volume, sheer number of days down, despondency on the bulletin boards and people now deciding to go short (always a good sign for a reversal) etc. As for the technicals, we are not one for superlatives but the oversold measure on KAZ is reaching levels one sees rarely in their time in the markets. Astonishing is the word.

In relation to KAZ & ENRC – we have relayed our thoughts on the fundamentals of both of these companies and, it’s fair to say, we have been well and truly p**sing in the wind in the last few weeks. At these levels they offer thhe cheapest valuations on price to book, EV:EBITDA etc within the global mining universe. There is either something the market as a whole is not aware of (but insiders patently are re the incessant selling for almost a month now) or this is a once in a cycle (5 year+) buying opportunity. Speculation has centred around the Chairman and other Eastern European investors being “in trouble” with their positions and forced selling has been taking place in recent weeks. This could be a reason as to sell at this level is, in our opinion, just utter madness.