Today I am looking at the share price prospects of two battered FTSE heavyweights.
Bank on further losses
Many investors will be hoping that massive restructuring at Standard Chartered (LSE: STAN) will prove a turning point in the firm’s insipid share price performance.
The bank has seen its share market value crumble 30% since January, extending the steady decline of the past three years as revenues have fallen and impairments have racked up. But Standard Chartered has seen its shares rise 5% since the fourth quarter got underway, even though latest Bank of England stress testing indicated further weakness in the firm’s capital strength.
New chief executive Bill Winters got his new tenure off with a bang in November after announcing a $5.1bn rights issue, a move that had long been mooted as the bank strives to repair its weak balance sheet. On top of this, Standard Chartered also announced a massive restructuring of its retail banking, wealth management and corporate banking arms, resulting in 15,000 job cuts globally.
Still, there is plenty of uncertainty swirling around StanChart that could result in further heavy share price weakness, in my opinion. Said streamlining will obviously take time to develop tangible returns, and in the meantime revenues across Asia continue to tank and bad loans threaten to keep rising as commodity prices drop and currency pressures weigh.
With the business also facing increasing ire from regulators over the scale of previous sanction breaches, I believe Standard Chartered still carries too much risk to justify expectations of a strong share price turnaround.
Copper play keeps on collapsing
It comes as little surprise that dedicated copper producer Antofagasta (LSE: ANTO) has also seen its stock price collapse in 2015.
The Chile-focussed digger has seen it shares droop 35% during the course of the year, its deterioration accompanying a 25% dive in the copper price. And Antofagasta’s stock value has dipped 2% since the turn of October as declining ‘Doctor Copper’ values put paid to a perky start to the quarter.
Indeed, three-month copper futures at the London Metal Exchange have struck fresh six-year nadirs below $4,500 per tonne in recent weeks.
And it is difficult to see Antofagasta enjoying a bounce higher any time soon as bearish supply and demand data continues to roll in. Latest Chinese customs data showed copper imports slip almost 9% month-on-month in October, to 420,000 tonnes.
Optimists will be hoping that the possibility of further monetary stimulus by the People’s Bank of China, combined with plans by ten Chinese producers to cut 2016 production by 350,000 tonnes, will give metal prices some fuel next year and beyond.
But previous rounds of monetary stimulus by Beijing’s central bank have done little to stave off China’s rapid economic deceleration, while the aforementioned output reductions represent a small percentage of the country’s total copper supply.
Until global demand shows signs of a significant pick-up; ample Chinese stockpiles start to decline; and the rampant US dollar begins to lose steam, I believe copper prices — and consequently Antofagasta’s revenues performance — will continue to languish.
With all of these scenarios looking unlikely for some time yet, I believe investors should continue to give the resources play a wide berth.
