Fortescue shares sink as Morgans downgrades stock, China stimulus disappoints
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The news: Shares in mining giant Fortescue tumbled on the ASX after Morgans downgraded the stock from 'add' to 'hold' and China's key policy meeting left investors guessing on fiscal stimulus specifics.
The numbers: Fortescue shares were down 3.86% to $19.44 by 2:54pm AEDT, having shed more than 30% since January.
Morgans lowered its rating on the Fortescue and cut its target price from $21.50 to $20.50 after a 16% total return since its upgrade in August.
The wider materials sector (-1.88%) was the worst performing compared to the ASX 200 (-0.47%). Fortescue peers BHP ( 1.69%), and Rio Tinto (2.84%) also tumbled.
Iron ore futures slumped 2.4% on Friday following China's key policy meeting on Thursday which was light on details regarding its promised stimulus measures.
China flagged more public borrowing and spending in the new year and a shift of policy focus to consumption, according to reports from Bloomberg. However, it did not reveal details and the government's growth target and budget will only be revealed in March during the annual legislative session.
The context: Morgans analysts said that regardless of whether Fortescue is successful or not in new markets such as green iron, energy technology and hydrogen, the hurdles to achieving an attractive return have increased in recent years.
The analysts cited "exceptional competition levels, depressed global economic growth conditions, added red and green tape, and widespread inflationary pressures" as challenges facing the wider industry.
They flagged that benchmark iron ore prices could trend lower as new supply comes into the seaborne market and the Chinese steel industry matures.
