Miners: Extraction to distraction

Lurking behind this week’s news that reforms to UK banks are being shunted into the next decade is the positive impact upon everyone’s pension fund following the rebounds to their share prices given their index weighting. Another sector of great importance to every mutual fund are the major miners, making up a serious percentage of any benchmark index you care to mention. While the press tend to focus purely on their weaknesses, we assess how the major funds are positioned in these behemoths?

The big mining firms are sandwiched between two powerful arguments as to whether they are under or overvalued. The truth could be neither if you look at investor sentiment. A dashboard of sentiment towards EMEA Materials firms does not bring up any of the big guns. This means that short selling is dormant in the likes of Rio Tinto (LON:RIO), Anglo-American (LON:AAL), BHP Billiton (LON:BLT). The main interesting trades in BHP Billiton concern a situation whereby funds who lend reduced their holdings of the London listing in the second-quarter by 7%. Meanwhile holdings in the Australian listing have increased by 17% of total shares.

While the shares are down over 10% year to date (see table), it seems the major institutions are yet to work out where they are going from here.

The dashboard below shows those names that did see meaningful movements in short selling and institutional ownership in Europe’s Materials sector this past two weeks. Switzerland’s Clariant AG (VTX:CLN) is a stand out being a large firm seeing unequivocally positive sentiment – this despite little respite in the share price fall. Does this mean short covering and funds buying on weakness and if so, this is only a lukewarm endorsement for the future of this chemical firm.