Steel Stokes Coal ETF’s Rebound
OREANDA-NEWS. August 18, 2014. The once downtrodden Market Vectors-Coal ETF (NYSEArca: KOL) is proving that friending fear can be a winning strategy. KOL is up 1.3% today , trading near its highest levels of 2014 while extending its one-month gain north of 5%.
In just the past week, KOL is up nearly 2%. The ETF’s rally, which started in earnest this month, has brought the fund comfortably above its major moving averages and has it knocking on the door of critical resistance in the USD 19.65- USD 19.70 area. A move through that level could take KOL to its first close above USD 20 since December.
Predictably, China, the world’s largest coal consumer, is being cited as the catalyst behind KOL’s bullishness. During Wednesday’s Asian ’session, data “showed China retail sales posted 12.2 percent growth last month, compared with expectations for a 12.5 percent rise. China’s M2 money supply grew 13.5 percent from a year earlier, less than the 14.4 percent forecast,” reports Kana Nishizawa for Bloomberg.
However, industrial output in the world’s second-largest economy rose 9% last month, missing estimates calling for a 9.2% gain, stoking speculation that Beijing will employ added stimulus measures to keep the Chinese economy humming.
That was enough to send shares of Yanzhou Coal (NYSE: YZC), which commands a 2.4% weight in KOL, surging by 4.2% on volume that has already eclipsed the daily average in U.S. trading. Shares of China Shenhua Energy, KOL’s largest holding at a weight of 8.4%, rose nearly two-thirds of a percent in Hong Kong trading. Indeed, China is pivotal to KOL’s fortunes as the country is the ETF’s second-largest geographic weight at 22.9%.
The resurgence in steel stocks is also boosting KOL. Earlier this week, the SPDR Metals & Mining ETF (NYSEArca: XME), an ETF that devotes over 40% of its weight to U.S. steelmakers, hit a new 52-week high. XME is up 4% in the past month thanks to epic rallies in stocks such as U.S. Steel (NYSE: X), AK Steel (NYSE: AKS), Cliffs Natural Resources (NYSE: CLF) and Steel Dynamics (NasdaqGS: STLD). [Steel Stocks Boost This ETF]
KOL’s leverage to the rebound in steel stocks comes by way of the ETF’s exposure to producers of metallurgical coal, the grade of coal used to produce steel. U.S. metallurgical coal producers found among KOL’s 36 holdings include Consol Energy (NYSE: CNX), Arch Coal (NYSE: ACI), Alpha Natural Resources (NYSE: ANR) and Walter Energy (NYSE: WLT).
Those stocks combine for 8.8% of KOL’s weight, according to Market Vectors data. The ETF also allocates 5.7% of its weight to Peabody Energy (NYSE: BTU), which has significant exposure to international metallurgical coal demand through its Australian operations.
Investors appear to be betting on more upside for KOL as the USD 180.3 million ETF has added USD 5.7 million in new assets over the past week and USD 8.6 million since the start of the third quarter.
Комментарии