Daily Gains Letter's Moe Zulfiqar explains why a China-led decrease in copper prices presents investors with a long-term chance for financial growth.
www.DailyGainsLetter.com), an e-letter published by Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is revealing that slumping copper prices represent a solid long-term opportunity for investors.— Daily Gains Letter (
“Copper prices have been slumping since the beginning of the year, being down more than 10% due to weak economic indicators. Most recently, data from China, the world’s largest copper consumer, reveals that manufacturing activity slowed to an eight-month low in March, with the outlook remaining unstable,” says Daily Gains Letter’s financial analyst Moe Zulfiqar. “This is sparking fears of a prolonged retrenchment in the price of copper.”
There are a number of economic indicators suggesting that China’s manufacturing sector is stalling. In March, the HSBC Flash China Manufacturing Purchasing Mangers’ Index, the earliest indicator of the country's industrial activity, declined to 48.1 from 48.5 in February, marking its lowest level in eight months. The Flash China Manufacturing Output Index declined to 47.3 in March from 48.8 in February, an 18-month low. (Source: “HSBC Flash China Manufacturing PMI,” Markit Economics web site, March 24, 2014; www.markiteconomics.com/Survey/PressRelease.mvc/b6e487b86c1a4ec48044fb9e79b0e282.)
Zulfiqar explains that over the past decade, China has been building a massive infrastructure, which requires a significant amount of copper; in fact, China accounts for roughly 40% of all copper use. While some expect Beijing to step in and unveil new stimulus measures to stabilize growth, there is widespread speculation that the Chinese government will not step in. Further, in spite of the weak economic sentiment and depressed prices, copper remains a great opportunity for long-term investors.
“Investors too often hear that they should buy low and sell high, but when the prices are low, few really take any action. Instead, investors turn too pessimistic and start to believe that prices will go lower,” Zulfiqar notes. “One of the greatest examples of this was in March of 2009, when key stock indices made their lows; some very well-known, well-run companies were selling for massive discounts. Those who bought profited heavily and those who didn’t missed out. Copper is presenting a very similar opportunity.”
“Even with the Chinese economy cooling, there is still global demand for copper, and there will continue to be,” he concludes. “The recent pullback in the price of copper is a knee-jerk reaction to a short-term problem; after all, it’s not as if China will not need copper anymore. On top of that, there are a large number of industries in both developed and emerging markets that have an increased demand for copper.”
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