UBS upgrades Glencore to ‘buy’ after recent selloff

UBS noted that the shares are down around 26% from the January high, underperforming Rio Tinto and BHP by more than 10%. This is mainly due to increasing macro concerns and the weaker thermal coal price.

"We believe the risk/ reward is again attractive and concerns of further softening in thermal coal/curtailing of cobalt production are priced in," the bank said.

It prefers Glencore to Rio, BHP and Anglo American, all of which it rates at ‘sell’ and said it looks favourably on the company’s commodity mix medium-term, its restructuring and organic growth options (eg Cobar, Volcan, Viterra etc) as well as its strong near-term free cash flow generation and good capital discipline.

UBS estimated that Glencore’s free cash flow yield is around $10bn or 14% at spot.

"We remain cautious overall on the mining sector but are encouraged by recent China data which is somewhat stronger than expected," UBS said. It left its price target on Glencore unchanged at 560p.

At 1240 GMT, the shares were up 2.9% at 445.05p.