With a drop of 15.6%, the NESTOR Australia fund performed 5.5% worse than the S&P ASX 200. The increasingly bad news about trade war between the US and China, political uncertainties such as BREXIT, problems in France and Trump’s erratic behaviour put pressure on the global economy. Commodities naturally took a big hit and smaller companies in particular found few buyers for their shares.
Following a visit to Australia, investments in Inghams, Oz Minerals and Syrah Resources were sold, while positions were taken in Origin Energy (energy production and distribution) and Nufarm (agrochemicals). In addition, small positions in Bingo Industries, Pilbara Minerals, Ausdrill and Liontown Resources were opened.
The outlook for 2019 is mixed: whereas practically all base metals saw a major reduction in inventories during 2018, the economic situation at the start of the year is unclear. The World Bank may be forecasting growth of 2.9% in 2019 too, with 6.2% expected for China, but a major question-mark is hanging over achieving these goals.
However, Australia will still benefit from major exports of iron ore, liquid gas, coal and other raw materials, so there a good counterweight to the persistently weak real estate market. Over the long term, the fact that large miners are very reluctant to invest is an indication the current price level of raw materials is too low for sufficient capacity expansion, which means we can move confidently into the new year.markets are making us more and more interested in gold mines.