Metal Stock Outlook for the week – 25 to 29.04.2016
(Up
next week on governments’ trade protection steps)
( www.rupeedesk.in )
Shares
of major metal and mining companies are seen extending gains next week due to
improved
sentiment led by a slew of protectionist steps taken by the government for the
sector.
The Directorate General of Anti-Dumping & Allied Duties on Thursday
initiated
an
investigation into possible dumping of cold-rolled steel products by countries,
including
Japan, South Korea, Ukraine, and China.
In
addition, the Directorate General of Safeguards today recommended imposition of
a
provisional
safeguard duty of 5% on imported unwrought aluminium for 200 days with
immediate
effect.
In
its latest report on metals, Credit Suisse has assigned an 'outperform' rating
on shares
of
Tata Steel Ltd, JSW Steel Ltd, and Jindal Steel and Power Ltd, as it believes
global
inventory
cycles have bottomed out, a weak dollar has stabilised curves, and demand
from
China has given much needed stimulus to the steel sector. Even though Chinese
prices
have surged, we think protectionism is here to stay. NPA (non-performing asset)
is a
bigger issue. Thus, higher operating earnings should aid interest cover.
We
like Tata Steel most, given upside from the UK drag going away and lowest
bankruptcy
risk. JSW Steel too looks well placed to benefit from higher prices.
(However)
Major risk to our thesis is fall in steel prices, if demand in China fails in
H2
(second
half).
Traders
would continue to eye shares of Tata Steel next week as the UK government on
Thursday
said it is ready to buy up to 25% stake in Tata Steel Ltd's UK business and is
also
likely to offer hundreds of pound of debt relief to the acquirer.
Tata
Steel has put up its UK business for sale in a bid to save jobs and prevent the
steelmaker
from shutting shop. Late last month, the company announced it was looking
to
sell its UK assets in parts, as a bleak outlook for the global steel market had
made the
business
unviable.