The new financial year, commencing Wednesday, is tipped to bring a rebound for Australia’s energy stocks and a rare earths mining company backed by Gina Rinehart. This follows a challenging June, as Middle East peace talks sent commodity prices tumbling. Normally, tax-loss selling impacts underperformers; however, federal capital gains tax changes have complicated this strategy. While CSL and Cochlear were prime candidates for such selling, both defied expectations with significant rallies in June, according to Atlas Funds Management chief investment officer Hugh Dive.
In contrast, the energy sector emerged as June’s weakest performer on the S&P/ASX 200 Index, declining nearly 10 per cent. This downturn followed decreasing oil prices, returning to pre-war levels amidst US-Iran peace discussions, impacting giants like Woodside and Santos. Hugh Dive noted these stocks appear oversold, suggesting a rebound given persistent Middle East tensions despite market reactions. Similarly, the broader mining sector saw a 6 per cent fall, pressured by declining iron ore prices, which dipped to their lowest intraday level since February. Gold also faced headwinds due to prospects of higher US interest rates.
Despite these recent struggles, experts anticipate a July rally for the mining sector. ETF Shares chief investment officer David Tuckwell highlighted ASX-listed Arafura Rare Earths as his top pick. Arafura Rare Earths is a company focused on the exploration and development of rare earth mineral projects. It aims to supply critical materials essential for modern technologies. Its shares recently fell to 23 cents, below the 26 cents per share price at which Gina Rinehart’s Hancock Prospecting significantly increased its stake in May. This “coattail investing” scenario, where retail investors follow major figures, presents a compelling entry point. Outside resources, Wilson Asset Management’s Hailey Kim favoured plastics giant Amcor, citing an attractive risk/reward profile as resin prices fall and volumes recover.
