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market | IST

Current correction an opportunity to enter commodity markets: Fat Prophets' David Lennox

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According to David Lennox of Fat Prophets, traders were already jittery with slowdown and regulatory changes in the Chinese economy and Evergrande probably going into liquidation, has given them the opportunity to sell down on resources.

Evergrande shares extending losses to hit a more than 11-year low on Monday as executives try to salvage the Chinese property developer's business prospects. The sharp plunge in the Evergrande stock comes amid investors' fears over a looming deadline for the company's debt repayment obligations due this week.
Evergrande has been scrambling to raise funds to pay back its lenders, suppliers and investors, with regulators warning that its $305 billion of liabilities could spark broader risks to China's financial system if not stabilised.
According to David Lennox of Fat Prophets, traders were already jittery with the economic slowdown and regulatory changes in China.
"Traders were already somewhat jittery when it came to China with slowing of their economy. The changes that we have seen in regulations from the authorities in that country over many of their industries had already put traders on the back foot. Now that we are seeing Evergrande probably go into liquidation, that has given them the opportunity to sell down on resources. However, we think there is significant cash on the sidelines that is just coming in and buying on dips."
However, he believes that the current correction is an opportunity to enter the commodity market if one is not exposed to it yet.
"We do think that the metrics remain in place for stimulatory spending coming out of governments around the world and that is good for commodities. So provided we still see those programmes ongoing, then we believe that this correction is an opportunity to come in if you are not exposed to commodities and pick up some good stocks at very good prices."
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