The FTSE 100 winners and losers in 2015
Anglo American and Glencore topped the list of the worst performers, followed by the banking company Standard Chartered. Also on the offenders list were BHP Billiton, Antofagasta and Rio Tinto, while the oil giant Shell was the ninth worst performer over the year-to-date.
Meanwhile house builders had a much better year with Taylor Wimpey topping the rankings, while Barratt Developments and Persimmon also made the top 10.
Danny Cox, head of communications at Hargreaves Lansdown, says: “The commodity rout has claimed numerous victims in 2015, not just in the oil and mining sectors, but also in sectors servicing those industries (Weir Group). Companies exposed to emerging markets have also suffered.”
Overall the FTSE 100 is down 8% year-to-date, but Cox says this mask some huge individual movements, as can be seen by the attached two tables.
With regards to the mining and oil falls, Cox says: “We may look back in five years and view this as a great buying opportunity. Much will depend on when commodity prices recover, but so far there is little sign of this happening.
“Chinese demand looks set to remain weak for a while, and new capacity commissioned in the boom years is still coming on stream. This supply-demand imbalance could take years to correct.”
Indeed while low commodity prices persist, Cox says the pressures on cash flows and companies will only intensify and notes Glencore has already been forced to raise equity to shore up its balance sheet.
“We would not be surprised to see Anglo American and Weir Group to follow suit,” he adds. “BHP Billiton, Rio Tinto and Shell are less leveraged so may be able to muddle through without recourse to shareholders – we hope – but would not count on dividends being maintained.”
Explaining Standard Chartered woes, Cox says it found itself in the wrong place at the wrong time, with weakness in Asia and emerging markets impacting profits and forcing the company into a rights issue. “In the long run, the group’s emerging market bias could be a huge positive but this also adds risk,” he adds.
Record low mortgage rates, a benign land market and favourable government policy all played their part in helping the house builders have a strong 2015, says Cox.
He adds: “The Bank of England will have to raise interest rates eventually, but any increases are likely to be gradual. This suggests to me the purple patch could last a while longer.”
In an uncertain economic environment, Cox explains that businesses with recurring revenues, robust balance sheets and strong cash flows have been in demand and in his opinion the software company Sage ticks all these boxes.