Australian resource stocks are experiencing a boost due to stronger-than-anticipated demand from China, according to UBS executive director Rob Taubman. This surge occurs even as other market sectors display signs of increased pressure.
China’s economy has demonstrated greater resilience than initially projected, positively impacting Australian exporters. Taubman noted that China’s continued growth of approximately 5 per cent and relative stability have been beneficial. He added that exports have exceeded expectations and are being directed to a wider array of countries compared to previous years.
This robust demand is directly influencing commodity pricing and leading to earnings upgrades. Spot commodity prices are currently exceeding most analysts’ forecasts for 2025 and 2026. As a result, earnings and cash flow for resource stocks are being revised upwards due to spot prices surpassing projected prices. However, sectors reliant on consumers are showing signs of weakening, and the technology sector remains susceptible to volatility. Taubman highlighted increased retail discounting since November as an example of weakness in traditional sectors like construction and consumer-related industries.
Technology stocks are particularly vulnerable when market sentiment shifts. Taubman explained that tech valuations tend to be very high and are often based on revenue multiples or concepts. Consequently, when a negative trend emerges, it becomes more challenging for valuation to stabilise or halt the decline.
