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Could China Be Driving Alcoa to Fresh 52-Week Lows?


Jan. 14 2016, Updated 12:25 p.m. ET

A 52-week low

Alcoa (AA) made a fresh 52-week low of $7.08 per share on January 13. With the recent fall, Alcoa has joined the ranks of other mining companies including BHP Billiton (BHP), Rio Tinto (RIO), and Vale (VALE) to hit fresh 52-week lows. Investors looking to diversify the risk of investing in a single security can consider the SPDR S&P Global Natural Resources ETF (GNR). Almost a quarter of GNR’s holdings are invested in metal companies.

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What’s driving Alcoa in January?

China’s December manufacturing activity was lower than expected and triggered a big sell-off in the Chinese equity markets whose repercussions where felt on other asset classes, including commodities and global equities. China’s steady devaluation of its currency didn’t help matters and sent its equity markets as well as global stocks southwards. Mining companies have seen a downward price movement in the current wave of metals meltdown.

Alcoa’s 4Q15 earnings

Alcoa’s 4Q15 earnings also failed to cheer investors. Although the company managed to post better-than-expected earnings, it missed revenue estimates. The graph above shows the falling trend in Alcoa’s revenues. Moreover, the company’s 2016 outlook also failed to cheer investors. You can read more about Alcoa’s 4Q15 earnings and the key takeaways from the earnings conference call in our series Alcoa’s 4Q15 Earnings Topped Wall Street Estimates.

China’s December trade data, released on January 13, came in better than expected. Though both exports and imports fell in December, the fall was less than what markets were expecting. However, even the better-than-expected trade data failed to soothe investor nerves and risk assets continued to fall.

In the coming parts of this series, we’ll explore what factors could drive Alcoa in the coming months.


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