It’s been a tough couple of years for the materials sector but Trina Chen has some good news: she thinks the worst is over.
“It has been a very difficult year for the China market and given most of the slowdown has been investment related, base materials feel the slowdown more. Although companies are still facing difficulties in terms of profitability but I think the most painful point has passed,” she says.
However Chen’s bearish view on the sector is set to remain into next year. Her most negative outlook is on Chinese cement. She downgraded the sector in the fourth quarter of 2011 and says there has been a sequential deterioration in the construction sector since.
Any positives picks are made on a relative rather than absolute basis and one that stands out is copper.
“It’s not that demand has collapsed but it’s been stagnant and there has been over capacity. The sector with less oversupply is copper which means prices will be better supported,” says Chen.
Although stocks in her universe have experienced intermittent rallies throughout the year, Chen says the trick is not to get swayed by all the noise but stick with your long-term view. For her this still points to downside risks.
“The market is volatile and there has been lots of mini cycles so it can be frustrating. As analysts we have to look at both aspects. You might miss the mini rallies but as a long as you can call the big cycle you’ll have the right long-term view.”
Her four pet cats and yoga helps Chen to relax in her downtime but she finds it hard to completely switch off from the day job, even when on holiday.
“I like what I do so even when I go on holiday to China if I see coal trucks going down the road my heartbeat starts to pick up,” she says.