Wilson Asset Management has around 27 per cent of its $1.8 billion Leaders Fund in mining businesses, as it expects dividends and capital appreciation ahead.
China’s pivot to economic stimulus and move to cut lending rates means iron ore prices and miners can record a strong second half of 2023, says Matthew Haupt, Wilson Asset Management’s portfolio manager.cut its one-year prime lending rates for the first time in 10 months by 10 basis points from 3.65 per cent to 3.55 per cent and five-year prime lending rate by 10 basis points to 4.2 per cent.
In anticipation of a rebound in Chinese construction, Mr Haupt has been gradually increasing his exposure to the materials companies. As of May 31, he allocated 27.8 per cent of the $1.8 billion WAM Leaders Fund to the sector, with major stakes in iron ore powerhouses BHP Group, Rio Tinto, and Fortescue Metals.In October, the fund allocated 20.1 per cent to the materials sector and had 24.2 per cent invested in February of this year.
The broker said weak demand from China would lead to a surplus of the steel-making ingredient and additionally cut its three-month price target to $US80 a tonne. Citi has also said this month that it didn’t expect the rally in iron ore prices would last, citing a lack of meaningful stimulus in China.
In addition, the potential for big dividends and share buybacks make the iron ore mining giants an attractive alternative to Australian banks that “will be under a bit of pressure” as rising rates threaten an uptick in bad debts and housing slowdown, Mr Haupt said.
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