Are we heading for a new ASX resources ‘supercycle’?

Are ASX resources shares like BHP Group Ltd (ASX: BHP) headed for a new resources ‘supercycle’? These fund managers think so
The post Are we heading for a new ASX resources ‘supercycle’? appeared first on The Motley Fool Australia. –

The word BOOM written in captital letters on a bright yellow background, indication a major surge or refresh in ASX share price

Any Australian of age would remember the ‘mining booms’ of the past 2 decades. This was the term referring to several periods over the 2000s and early 2010s when commodity prices were far above historical averages.

Especially iron ore, coal, gold and oil. All commodities that Australia has a fortunate natural abundance of.

Back in 2007 and 2011 especially, it was this ‘commodities boom’ that many economists have credited for keeping the economy afloat during the global financial crisis. As well as pulling the Australian economy out of the economic slump that followed.

That’s why back in 2007, the big ASX resources companies like BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) were smashing all-time highs. In fact, Rio has never been at the heights that it reached in 2008 again. But it is getting awfully close of late.

ASX resources shares have been some of the better performers on the S&P/ASX 200 Index (ASX: XJO) in 2020. Take Fortescue Metals Group Limited (ASX: FMG). It has surged more than 117% in value over 2020 so far. And BHP and Rio are approaching levels we haven’t seen in a decade. BHP shares themselves are up almost 183% since February 2015.

A new ASX resources ‘supercycle’?

So what’s going on here? Well, reporting in the Australian Financial Review (AFR) this week suggests we could be on the verge of a resources ‘supercycle’.

The report states that BHP, Rio and Fortescue are responsible for half the gains of the ASX 200 in December so far, not bad considering the index is up 2.1% since the end of November.

The AFR quotes AMP Limited (ASX: AMP)’s AMP Capital portfolio manager Dermot Ryan as saying: “These guys are making better margins than Louis Vuitton does on his handbags at the moment. The stimulus that’s coming in and the global synchronised recovery means we’re seeing higher commodity prices right across the board.”

Mr Ryan notes that many dividend-hungry ASX investors are expecting bumper shareholder payouts from ASX resources shares in February next year, and are buying in to secure a piece of these cash flows:

“Many of these producers are capable of paying out massive dividends so we’re expecting the potential for very large returns from this space. There’s potential for off-market buybacks too,” the AFR quotes him as stating.

Luke Smith, portfolio manager at Ausbil Investment Management agrees. The AFR quotes him as saying:

We think we’re entering the early stages of a multi-year bull cycle for resources and the backdrop is extremely positive… China’s economy is clearly very strong at the moment and when you combine that with the rest of the world, which is going to benefit from unprecedented stimulus, the backdrop is looking extremely compelling…

Not only is it a windfall environment for commodities, it’s a windfall environment for investors too and the real winners at the moment are the shareholders.

Looking For Bargain Buys? These Cheap Stocks Could Be Just What You’re After (FREE REPORT)

Scott Phillips has released a FREE stock report revealing 5 stocks that he believes are WAY undervalued by the market at these current prices.

Scott thinks these 5 stocks are a ‘must consider’ for any savvy investor.

Don’t miss out! Simply click the link below to grab your free copy and discover Scott’s 5 bargain stocks now.

Click Here For Your Free Stock Report

More reading

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Are we heading for a new ASX resources ‘supercycle’? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!