HSBC: PGMs ‘Fundamentally Oversold’ Yet Could Ease More Before Recovery
Singapore (Nov 13) HSBC says that platinum group metals are “fundamentally oversold” but nevertheless cautions that they could go lower yet before recovering. Ongoing investor liquidation continues, much of it from PGM exchange-traded funds, HSBC says. This adds additional near-term supply to the market as metal, put into storage to back ETFs, comes back onto the market. “While we find physical demand for the PGMs from industrial sources to be broadly steady, investors are retreating and we see no early signs of further production restraint,” HSBC says. “In our view, either a sector-wide rally in commodity prices or tangible evidence of production cuts are required to engineer a rally in the PGMs.
Platinum is down to levels not seen since the near implosion in the global auto industry (which uses PGMs in catalytic converters) in 2008. Since the auto industry is on a much better footing now than at that time – despite ongoing auto emissions concerns – the price actions strikes us as incongruent with the fundamentals. But, while our view that the market is fundamentally oversold may be correct longer term, this does not mean the market cannot sink further before prices recover.”