Glencore makes comeback after 30% plunge | Fin24
 
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Glencore makes comeback after 30% plunge

Sep 30 2015 07:51

Hong Kong - Under-pressure miner Glencore surged in Hong Kong on Wednesday, more than halving the previous day's 30% plunge after it assured investors its business was "operationally and financially robust".

The Swiss-based giant surged 18% in early exchanges following a similar rally in its London-listed stock with analysts saying the sharp selloff, which wiped tens of billions off the company's valuation, was overdone.

It later eased to sit 12.7% higher at HK$9.78.

The firm plunged in London on Monday and then Hong Kong after brokerage Investec questioned its future if commodity prices - which are wallowing at multi-year lows owing to weak demand from a slowing China - fail to recover soon.

On Tuesday it released a statement saying: "Our business remains operationally and financially robust - we have positive cash flow, good liquidity and absolutely no solvency issues. Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding."

Most resources-linked firms have taken a hit in recent months as the price of copper, aluminium, iron ore and oil have tumbled.

But Glencore has been particularly badly affected because of its huge $30bn debt load, even after the firm this month raised $2.5bn via a shares sale as part of a vast plan to rejig its finances.

"Investors can overreact on limited information," Keith Pilbeam, a professor of economics and finance at City University London, told Bloomberg News.

"You can't just sit back and take a 30% hit to your share price, this you have to react to."

The gains in Glencore on Wednesday came as Asian markets recovered slightly from a sharp selloff fuelled by concerns about a growth slowdown in China, the world's number two economy.

Glencore, a former commodities trader, has lost more than three quarters of its value since listing with much fanfare in London and Hong Kong in May 2011.

Two years later it relisted in the two cities after a mega-merger with Swiss mining behemoth Xstrata in a deal that made it the world's fourth-biggest commodities company in terms of market capitalisation. It then announced with confidence a dividend payment despite reporting a first-half net loss owing to billions in writedowns.

However, the firm's share price has continued to fall since the listings as China's slowing growth - at its weakest in 25 years - curtailed the country's voracious demand for commodities, sending prices tumbling.


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