Tag: Motley Fool

The Westpac Banking Corp (ASX: WBC) share price fell slightly in November, but could December be a better month?

Westpac shares fell 1.4% in November to close the month at $23.77. For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) climbed 6.1% in November.

Let’s take a look at the outlook for the Westpac share price in December.

What’s going on at Westpac?

The ASX bank share had one major announcement that appeared to impact its share price in November. On 7 November, the Westpac share price slid 4% on the back of the company’s full-year results.

The bank’s cash earnings fell 1% to $5.276 million in the 12 months ending on 30 September. However, despite this, the board still declared fully franked dividends of $1.25 per share . The bank’s net interest margin fell 17 basis points to 1.87%.

However, overall, Westpac shares have still climbed 10% year to date.

Meanwhile, the team at Morgans has named Westpac among the best ASX share ideas for December.

Analysts said they view Westpac as having “the greatest potential” for return on equity improvement among the major banks, provided its business transformation initiatives are successful. Morgans added:

The sources of this improvement include improved loan origination and processing capability, cost reductions (including from divestments and cost-out), rapid leverage to higher rates environment, and reduced regulatory credit risk intensity of non-home loan book.

Yield including franking is attractive for income-oriented investors, while the ROE improvement should deliver share price growth.

Morgans has placed an add rating on the Westpac share price with a $25.80 price target. Its shares are currently swapping hands for $23.44 apiece.

Goldman Sachs has a buy rating on the Westpac share price despite the lower net interest margin (NIM) in FY22. The broker said:

While on the surface, the FY22 result suggested WBC’s NIM leverage was underwhelming relative to some peers, we think 2H22 was adversely impacted by late-in-the-half liquidity build, and management’s guidance on its FY23 NIM trajectory was better than we had previously anticipated.

What else?

The Reserve Bank of Australia lifted the official cash rate by a further 0.25% to 3.10% earlier this week. Following this announcement, Westpac announced it would increase its home loan variable interest rates by 0.25% for new and existing customers from 20 December.

Commenting on the impact of inflation and interest rates on the bank’s approach to capital management in The Australian this week, Westpac CEO Peter King said:

When I think about the bank, we’ve built our capital levels and we’ve got good liquidity buffers — so the bank is in really good shape heading into 2023, where we expect growth to slow.

We’re in a good position to help customers get through some of the challenges that the current environment is producing.

Share price snapshot

The Westpac share price has risen nearly 12% in the last year.

For perspective, the ASX 200 has fallen around 3% over the past 12 months.

Westpac has a market capitalisation of about $81.5 billion based on the current share price.

The post After sliding into the red last month, what’s the outlook for the Westpac share price in December? appeared first on The Motley Fool Australia.

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More reading

• 3 passive income ASX 200 dividend shares that can help make you richer
• Morgans names 2 more of the best ASX shares to buy in December
• 5 things to watch on the ASX 200 on Tuesday
• Will the RBA raise rates again next week? Here’s what Westpac expects
• Buy Westpac and this ASX dividend share: broker

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Downer EDI Ltd (ASX: DOW) share price is under pressure again on Friday.

In morning trade, the engineering and construction company’s shares are down a further 7% to $3.54.

This means the Downer share price is now down 26% over the last two trading sessions and 40% since this time last year.

Why is the Downer share price being sold off?

Investors have been selling off Downer’s shares this week after the company revealed that it has identified historical misreporting of its Australia utilities business’ revenue and work in progress in one of its maintenance contracts.

According to the release, the company estimates that this misreporting could result in a historical overstatement of pre-tax earnings of between $30 million and $40 million.

What else?

Another disappointment that has put pressure on the Downer share price was the scrapping of its guidance for FY 2023 for unrelated matters.

Downer’s CEO and managing director, Grant Fenn, revealed that “the challenge for the last seven months of [FY 2023] has become too large” to achieve its profit growth guidance of 10% and 20%.

Fenn advised that its “road services and utilities businesses have been heavily impacted by weather” and its “businesses have been battling with staff shortages and supply chain issues.”

In other news, this morning Macquarie responded to the update by downgrading Downer’s shares to a neutral rating and slashed its price target to $4.05.

The post Carnage continues for Downer share price on Friday appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why Core Lithium, Downer, Link, and Renascor shares are dropping today
• Why is the Downer share price sinking 20% on Thursday?
• Why CogState, Downer, Temple & Webster, and Woodside shares are dropping

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Medibank Private Ltd (ASX: MPL) share price is in the red on Friday amid news the company will be shutting down its systems to undertake a cybersecurity overhaul this weekend.

The company famously suffered a cyberattack in October that saw criminals take off with the personal – and often sensitive – data of 10 million Australians.

The Medibank share price is $2.975 right now, 0.17% lower than its previous close.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.38% at the time of writing – spending its first morning in the green since Monday.

Let’s take a closer look at the latest from the private health insurance company.

Medibank share price slumps amid cyber shutdown news

The Medibank share price is defying the market’s gains this morning.

Meanwhile, the company is preparing to take its Medicare and ahm systems offline from 8:30pm AEDT tonight to strengthen its security protections and undertake maintenance. Its retail stores and customer contact centre will also close on Saturday.

It clarified there’s been no suspicious activity detected since 12 October and the company apologised for any inconvenience caused by this weekend’s works. Continuing:

This is the next necessary phase of our ongoing work to further safeguard our network, called ‘Operation Safeguard’.

Since the cybercrime we have bolstered existing monitoring, added further detection and forensics capability across the Medibank system and network, and have scaled up analytical support via specialist third parties.

IT security experts from Microsoft will be onsite at the company’s Melbourne headquarters to complete the operation, which has been in the planning stages for several weeks.

Latest on Medibank data hack

Medibank is also continuing to analyse stolen data the group behind its cyberattack published to the dark web.

It confirmed the number of customer files impacted by the breach remains the same. It will soon begin to contact customers who had limited provider related data made public, such as provider number, admission date and discharge date.

The Medibank share price is still 16% lower than it was before news of the attack broke. It is also down 14% year to date and 11% over the last 12 months.

Comparatively, the ASX 200 has dropped 5% in 2022 and 2% since this time last year.

The post Medibank share price slumps ahead of major shutdown and cybersecurity overhaul appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 3 high-yielding ASX dividend shares near their 52-week lows
• Medibank share price lifts despite latest data dump to ‘dark web’
• Guess how much NIB shares have gained since Medibank’s cyber attack?
• Top 10 signs you’ve been crypto-scammed

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The returns you can generate from investing in the right ASX penny stock can be huge. However, the trade-off is that these types of investments can be very risky.

One penny stock that I believe offers a compelling risk/reward for investors over the long term is Arafura Rare Earths Ltd (ASX: ARU).

It is the rare earths developer behind the Nolans Project in the Northern Territory.

The company notes that this globally significant and strategic project is underpinned by low-risk mineral resources that have the potential to supply a significant proportion of the world’s neodymium and praseodymium (NdPr) demand. Once developed, Nolans will become a major supplier of these critical minerals to the high-performance neodymium magnet (NdFeB) permanent magnet market.

The NdFeB permanent magnet market is the largest market for NdPr oxide, and Arafura’s product mix is ideally suited to meet demand from leading magnet producers in Japan and China, as well as automotive and wind turbine end users in Europe, Japan, Korea and the USA.

Why could this be a penny stock to buy?

I think Arafura Rare Earths could be a great long-term option due to the growing demand for NdPr and the lack of supply. In 2020, the total global supply of NdPr oxide was 46,000 tonnes. To meet projected demand in 2030, global supply for NdPr oxide needs to expand by a further 52,000 tonnes.

The company notes that this increasing demand is being driven by the permanent NdFeB magnets market. These magnets typically contain up to 30% NdPr metal and are shaping the future of the automotive and wind power energy generation industries.

In respect to the automotive industry, maturing powertrain technologies in the sector are driving growth for permanent magnet electric motors used in hybrid EVs (HEV) and battery EVs (BEV). This is being supported by leading automotive manufacturers across the world increasingly avoiding traditional petrol and diesel combustion engines for more efficient and cleaner HEV and BEV alternatives.

A testament to this is that Arafura has already signed agreements with Hyundai and Kia for almost half of its planned annual production that will be made available on long-term sale arrangements.

Recent capital raising

One of the reasons why I think now is a good time to buy Arafura shares for the long term is the company’s strong balance sheet following its recent capital raising.

Earlier this week, Arafura received firm commitments for a $121 million placement to accelerate the Nolans Project development schedule. This will see the company’s construction program kick off in 2023, which means production isn’t too far off.

It is also worth noting that mining magnate Gina Rinehart took part in this capital raising. Her Hancock Prospecting business put $60 million into the placement, which leaves it with a 10% shareholding.

Given Rinehart’s track record, I wouldn’t bet against her on this penny stock.

The post One ASX penny stock I’d buy for 2023 and hold for a decade appeared first on The Motley Fool Australia.

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More reading

• 5 ASX shares involved with rare earths (aside from Lynas)
• Why Arafura, Mayne Pharma, Pilbara Minerals, and Tyro shares are dropping today
• Arafura share price sinks 12% as Gina buys up big
• Why is the Arafura Rare Earths share price on hold today?
• Why is the Arafura share price crashing 9% today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Core Lithium Ltd (ASX: CXO) share price is up 1% in early trade, at $1.19 per share.

This comes after some hefty losses earlier in the week for the ASX lithium stock, including a 4.4% loss on Monday and yesterday’s 9.9% plunge.

After surging 196% this year between 4 January and its 14 November peak, this begs the question, has the Core Lithium share price gotten ahead of itself?

Has the Core Lithium share price ‘run ahead of fundamentals’?

Time will prove the ultimate judge of whether investor overexuberance has pushed the lithium miner into overvalued territory.

But after polishing their crystal ball, analysts at Goldman Sachs offered a rather bearish near-term outlook for the Core Lithium share price.

Part of that is based on their expectations that lithium prices while remaining high in the first half of 2023, will decline in the second half.

Spodumene production at Core Lithium’s Finniss project, in the Northern Territory, is meant to commence in the first half of 2023. But Goldman notes the “upside case is unlikely to be achieved before lithium prices decline”.

The broker also notes (quoted by The Australian):

The policy stimulus in China to boost the domestic electric vehicle industry has pulled forward battery metals demand to this year which we expected in 2023-24.

The team believes the battery maker overcapacity, on the back of accelerated capacity build-out amid a decelerating growth of new energy vehicles sales will eventually weigh on lithium prices and expect this dynamic to start playing out in 2H23.

As for their outlook on the Core Lithium share price, Goldman’s analysts said, “We see Core Lithium as having run ahead of fundamentals.”

Goldman Sachs initiated coverage on the miner’s shares with a sell rating and a $1 price target.

How has Core Lithium performed longer-term

Despite the sizeable retrace over the past few weeks, as you can see in the chart below, the Core Lithium share price is still up a whopping 128% over the past 12 months.

For some context, the S&P/ASX 200 Index (ASX: XJO) is down 3% over the full year.

The post Has the Core Lithium share price ‘run ahead of fundamentals’? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why Core Lithium, Downer, Link, and Renascor shares are dropping today
• Core Lithium share price falls after being hit with sell rating from Goldman Sachs
• Here’s the lithium price forecast through to 2025
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BHP Group Ltd (ASX: BHP) share price is pushing higher on Friday morning.

At the time of writing, the mining giant’s shares are up 2% to $47.18. This follows news that the iron ore price surpassed US$110 a tonne overnight.

This extends its strong run since early November and means the BHP share price is now up 17% over the last 12 months.

Where next for the BHP share price?

According to a note out of Morgans, its analysts believe that the BHP share price may have peaked for the time being.

This morning, the broker has downgraded the Big Australian’s shares to a hold rating with a trimmed price target of $44.80.

Based on the current BHP share price, this implies potential downside of 5% for investors.

Why did the broker downgrade its shares?

Morgans made the move on the belief that investors are getting ahead of themselves in respect to China’s recovery from COVID-19. It commented:

While hopeful of a China growth recovery, which would be positive for steel/iron ore demand, we are less comfortable with the equity market already moving to price in the recovery before it unfolds.

Over the last month iron ore price (+27%) and share prices for BHP (+16%), RIO (+20%) and FMG (+27%) have bounced hard off their November lows. We agree that the developments are likely to see improved demand conditions in early 2023, but the issue is how fast the equity market has moved to price in this recovery.

In light of the above, the broker has downgraded BHP and Rio Tinto Ltd (ASX: RIO), as well as reaffirming its reduce (sell) rating on the shares of Fortescue Metals Group Limited (ASX: FMG).

The broker concludes:

We can certainly see the potential green shoots for a recovery in demand drivers for steel, but it is also not hard to see a fresh bout of volatility before that recovery takes hold. We view current share prices on our large-cap iron ore miners as suggesting we have to ‘pay up front’ for that potential recovery, leaving us with lower conviction. As a result we downgrade our rating on BHP and RIO to HOLD (from ADD), while maintaining a REDUCE on FMG.

The post Top broker says the BHP share price has peaked appeared first on The Motley Fool Australia.

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More reading

• Own BHP shares? Here’s what China’s reopening could bring for 2023
• 5 things to watch on the ASX 200 on Friday
• BHP shares lose top dividend-payer title, what happened?
• Where will BHP shares be in 5 years?
• Is the SPDR S&P/ASX 200 Fund (STW) an ETF?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Let’s face it, not every ASX share brings excitement to market watchers.

The Aussie bourse is crawling with incredibly interesting businesses aspiring to change the world, or at least make a significant dint in their industries. As a result, it’s easy to overlook more traditional, arguably ‘boring’, stocks.

But those that did overlook these companies in favour of more exciting entities might be kicking themselves now. Let’s take a look at three ‘boring’ ASX shares posting huge returns in 2022.

3 ‘boring’ ASX shares posting massive 2022 gains

Inflation, interest rate hikes, the war in Ukraine, continued COVID-19 impacts, oh my – 2022 has been a hectic year for markets.

In the big end of town, the S&P/ASX 200 Index (ASX: XJO) has slumped 5% this year. The benchmark All Ordinaries Index (ASX: XAO), meanwhile, has slipped 7%.

But Origin Energy Ltd (ASX: ORG) has had a buoyant year amid volatile energy prices and a recent takeover bid.

Of course, the utilities sector isn’t exciting to everyone. Still, the ASX utilities share has gained 50% since the final close of 2021.

As the above chart demonstrates, the Origin share price didn’t truly kick off until last month. That was when suitors came knocking, offering the company $9 per share to take it off the market. That offer proved enough to grant the potential buyers due diligence.

Another perhaps dull ASX share outperforming this year is AMP Ltd (ASX: AMP). The 173-year-old financial institution’s stock appears to have been driven by the divestment of its Collimate Capital businesses.

The AMP share price has gained 35% since the end of last year.

Collimate Capitals’ domestic leg will be sold to Dexus Property Group (ASX: DXS), while its international business will go to DigitalBridge. AMP intends to return most of the proceeds to shareholders.

Finally, not many of us love going to the pharmacy, but shares in pharmaceutical distributor and wholesaler Sigma Healthcare Ltd (ASX: SIG) have been rocketing this year.

It comes as the healthcare stock works to enhance its operating performance and reduce debt. The company posted a $1.5 million loss for the six months ended July despite its revenue lifting 6% to $1.8 billion.

The Sigma share price has lifted 28% from its final close of 2021.

The post 3 ‘boring’ ASX shares with returns over 25% in 2022 appeared first on The Motley Fool Australia.

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More reading

• Why Air New Zealand, Chalice, Evolution, and Origin shares are rising today
• ASX index beaters: 5 shares that have supercharged portfolios in 2022
• Why did the AMP share price surge 8% in November?
• These 3 ASX 200 dividend shares led the pack in November. Here’s why
• Why did the Origin share price rocket 41% in November?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Rural Funds Group (ASX: RFF) share price has been falling in recent times. With the ASX dividend share getting close to a 52-week low, this could be an opportunistic time to invest.

Rural Funds is a real estate investment trust (REIT) that owns a portfolio of farms across Australia. It has 68 properties located in multiple climactic zones. Those assets are spread across cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

Why is the Rural Funds share price dropping?

Rising interest rates may be impacting the underlying value of Rural Funds, or at least impacting investor sentiment.

Warren Buffett, a legendary investor, once said about interest rates:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.

I’m not exactly sure what the prices of farms will do from here.

We’ve already heard from Centuria Industrial REIT (ASX: CIP) – which owns warehouses – that its portfolio valuations were down a little but rental growth was supportive.

In FY22, which was the 12 months to 30 June 2022, Rural Funds saw a 24% increase of the adjusted net asset value (NAV) to $2.69, which is the underlying capital value of the ASX dividend share. That implies the current Rural Funds share price is at a 9% discount to this. But, that was before many of the many interest rate rises this year.

The underlying value of the business also includes the fair value of water entitlements.

Increasingly attractive

While the exact underlying value of Rural Funds is up for debate, the distribution yield that it’s paying is worth knowing.

The business is expecting to pay a total distribution of 12.2 cents per share in FY23 after its latest 4% annual distribution increase. The FY23 distribution yield is therefore projected to be 5%, which seems attractive even in this higher interest rate environment.

Rural Funds continues to develop its portfolio. For example, it recently announced a 40-year lease with The Rohatyn Group for 3,000 hectares of macadamia orchards forecast to be developed by 2024. A key feature of the lease is an annual indexation within the 1.5% to 2.5% range, plus a profit share above a certain threshold for the duration of the lease.

The ASX dividend share continues to invest in productivity improvements, such as increasing water storage, increasing irrigation area and installing flood protections.

With some of the rental income linked to inflation, investors could see a boost in rental growth during this elevated inflation period.

We all need to eat food, so the underlying demand for produce from farms is likely to be solid. But, it’s the tenant that has to deal with the issues relating to operational farming.

Rural Funds share price snapshot

Rural Funds has dropped 23% in the year to date, and it’s down almost 10% in the month of December to date.

The post Near a 52-week low, this enticing ASX dividend share could be bottoming out appeared first on The Motley Fool Australia.

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More reading

• Boost your passive income with these ASX dividend shares: analysts
• 2 ASX dividend shares that have raised their payouts by 20% in 5 years
• 2 safe and reliable ASX dividend shares to buy for 2023: analysts
• Here’s how I’d invest $5,000 in ASX dividend shares to earn a second income
• Why I’m buying ASX shares in this once-in-a-lifetime market to try and retire early

Motley Fool contributor Tristan Harrison has positions in Rural Funds Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Rural Funds Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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National Australia Bank Ltd (ASX: NAB) shares have been providing investors with a portion of the major bank’s profits in the form of dividends since 1983. Though, its stock has failed to keep up with the market over the last decade.

The S&P/ASX 200 Index (ASX: XJO) has gained more than 50% since December 2012. The NAB share price, meanwhile, has lifted nearly 30% in that time to trade at $30.12 today.

An investor who bought $1,000 of the big bank’s stock this time 10 years ago would likely have walked away with 42 shares paying $23.34 apiece and $19 change. Today, that same parcel would be worth $1,265.04.

Have NAB’s dividends made up for its share price’s underperformance? Let’s take a look.

How much have NAB shares paid in dividends in 10 years?

Here are all the dividends handed out to those invested in NAB shares over the last decade: 

NAB dividends’ pay date	Type	Dividend amount
December 2022	Final	78 cents
July 2022	Interim	73 cents
December 2021	Final	67 cents
July 2021	Interim	60 cents
December 2020	Final	30 cents
July 2020	Interim	30 cents
December 2019	Final	83 cents
July 2019	Interim	83 cents
December 2018	Final	99 cents
July 2018	Interim	99 cents
December 2017	Final	99 cents
July 2017	Interim	99 cents
December 2016	Final	99 cents
July 2016	Interim	99 cents
December 2015	Final	99 cents
July 2015	Interim	99 cents
December 2014	Final	99 cents
July 2014	Interim	99 cents
December 2013	Final	97 cents
July 2013	Interim	93 cents
December 2012	Final	90 cents
Total:		$17.74

Did you buy NAB shares for $23.34 apiece 10 years ago? If you did, you’ve likely received $17.74 in dividends per share over the years since.

Thus, a near-$1,000 investment in the big bank a decade ago would have yielded $745.08 by now. That’s certainly nothing to scoff at!

It also means our figurative investor has earned more in capital gains and dividends than they forked out to begin with – discounting the initial purchase price, their investment would have returned a total of $1,029.88 over its life so far.

Of course, they might have boasted an even larger return if they worked to compound their dividends by making use of NAB’s dividend reinvestment plan (DRP).

Additionally, all dividends paid by the bank in that time have been fully franked. That means they might have provided more benefits at tax time.

Right now, NAB shares trade with a 5% dividend yield.

The post Bought $1,000 of NAB shares 10 years ago? Here’s how much dividend income you’ve received appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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BHP Group Ltd (ASX: BHP) shares have gained a whopping 24% since the closing bell rang on 31 October, currently trading for $46.23 apiece.

Not coincidentally, the big lift in the S&P/ASX 200 Index (ASX: XJO) iron ore miner coincides with a 40%-plus increase in the price of iron ore over that same period. Not to mention a 13% spike in the price of copper.

While BHP shares generate roughly half their revenue from iron ore production, copper is the miner’s second biggest revenue earner. And the company has plans to expand its copper footprint.

As BHP notes on its website:

We believe the demand for copper will grow due to grade declines at existing copper mines, the radical urbanisation of large populations in China and India and the electrification of energy and transportation. Renewable energy sources, such as wind and solar, also require copper for their infrastructure.

Which brings us to what China’s reopening could mean for BHP shares in 2023.

What impact will China’s reopening have?

After fighting to stamp out all traces of the virus for almost three years, Chinese authorities are rapidly rolling back the nation’s strict, economy-hindering zero COVID policies.

And as the world’s most populous nation and number two economy moves to fully reopen, it could well send the iron ore price sharply higher and see the copper price hit new all-time highs. Both of which would offer some strong tailwinds for BHP shares.

On the iron ore front, Citi analysts have a bullish outlook heading into 2023. The broker cites both China’s reopening moves as well as the Chinese government’s recent liquidity support measures for the nation’s beleaguered, iron ore-hungry property sector.

Should China continue on its reopening path and should the government provide significant further assistance to the property industry, Citi believes the iron ore price could retest US$150 per tonne. That’s some 36% above the current price, a boost that would support the BHP share price in the new year.

According to the Citi analysts (quoted by The Australian Financial Review):

China is making meaningful progress towards further reopening. We believe iron ore prices could rally towards $US150 a tonne if China rolls out meaningful credit easing in the next three [to] six months.

“Policymakers appear determined to support debt-trapped property developers. This reduces the downside risk for iron ore,” the broker added.

But it’s not just resurgent iron ore prices that could bolster BHP shares in 2023.

According to Goldman Sachs, the copper price could hit new record highs next year. That’s due to a combination of a forecast reduction in copper output from Chile coupled with a big increase in forecast demand from China.

Goldman also cites China’s reopening along with expected surging demand from China’s booming green energy sectors.

“The sequential increase in policy targets and commitments to green transition, alongside a minimal supply response so far … have resulted in earlier and larger open-ended deficit conditions that essentially are already here, not beginning at some point in the future,” Nicholas Snowdon, metals strategist at Goldman Sachs, said.

Copper prices hit their last all-time highs on 4 March this year, reaching US$10,670 per tonne, helping propel BHP shares higher.

Goldman Sachs is forecasting the copper price will hit US$11,000 per tonne next year. That’s some 30% above the current price of US$8,457 per tonne.

How have BHP shares been performing?

Atop some outsized dividend payments, BHP shares, pictured below, have gained 14% over the past 12 months. For some context, the ASX 200 is down 3% over the full year.

The post Own BHP shares? Here’s what China’s reopening could bring for 2023 appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• BHP shares lose top dividend-payer title, what happened?
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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