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VALE3, CSNA3, USIM5: Stocks jump with iron ore, but not all are worth ‘buying’; check out

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On the Dalian Stock Exchange, China, iron ore reached its highest level in 23 weeks (Image: REUTERS/David Gray/File Photo/File Photo)

The sector of mining and steel industry was a positive highlight of Ibovespa this Tuesday (29). Driven by the advancement of iron ore at Chinathe actions of CSN 🇧🇷CSNA3🇧🇷 OK 🇧🇷VOUCH3) and other companies engaged sharply in the trading session.

The roles of CSN and its subsidiary CSN Mineração 🇧🇷CMIN3) were at the top of the index valuations, advancing 8.47% and 7.61%, respectively.

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THE Usiminas 🇧🇷USIM5) rose 6.04%, while Vale recorded gains of 3.86%. THE Gerdau 🇧🇷GGBR4) also rose, in the order of 5.98%.

On the Dalian Exchange, in China, iron ore reached its highest level in 23 weeks, supported by the series of measures by the Chinese government to support real estate developers in the country, which are experiencing a crisis.

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Benchmark iron ore for January on China’s Dalian Commodity Exchange ended day trading up 2.3% at RMB 770.50, or $107.45 a tonne. Earlier in the session, the contract reached 780.50 yuan, the highest since mid-June.

The stimuli that China is injecting into the local real estate sector gave traders extra encouragement. Among the measures is the permission by the country’s securities regulator for Chinese developers listed in China and in Hong Kong sell additional shares to acquire real estate assets, replenish working capital, or pay down debt.

The lifting of the ban on this type of refinancing is intended to help stabilize the world’s second-largest economy, which has been heavily penalized by Covid Zero policy restrictions.

Despite the advance this Tuesday, uncertainties about the pace of recovery of the Chinese economy remain high.

Stocks to invest now

Santander is more optimistic about the performance of iron ore than the steel🇧🇷 The bank also has Vale as a top pick stock in the mining and steel sector, with an “outperform” recommendation (expected performance above the market average, equivalent to a “buy”) and a target price of US$ 18 for the ADR ( American Depositary Receipt).

The outperform recommendation also applies to CSN, although the institution has recently cut the security target to R$20. The subsidiary CSN Mineração also has an outperform recommendation, with a target price of R$5.

With regard to Usiminas, Santander is more cautious. The recommendation was downgraded to “neutral” and the target price was cut from BRL 14.50 to BRL 9.

A positive highlight of the third quarter results season, Gerdau is an outperform for Santander and Itaú BBA’s preference in the sector. BBA analysts see solid momentum for the steelmaker’s North American operations, on the expectation that demand in the region will still prove resilient, with sectors benefiting from infrastructure stimuli.

In addition to the good expectations for demand, Fernando Ferrer, from Empiricus, reinforces that Gerdau is paying good dividends and it is a low-indebted company.

“Today, it has the lowest level of debt in its history. A large part of this has to do with its divestment strategy, which began in 2014, and with a greater focus on reducing costs and expenses”, argues the analyst.

Ferrer has recommendation in Metalúrgica Gerdau 🇧🇷GOAU4), holding company that controls Gerdau. According to him, even considering a 40% drop in the company’s Ebitda in 2023, it remains cheap, trading at 3.5 times the company’s value over Ebitda.

Empiricus also has a recommendation in Vale. The house recognizes that, after a weaker third quarter and with the risks of global recession and the closure of the Chinese economy, the intrinsic value for the mining company has worsened. However, Ferrer points out that the price drop was much greater.

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Source: Moneytimes

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