U.S. Markets

Aviva Investors EM fund leads Vale sellers in January: Morningstar

LONDON (Reuters) - International mutual funds run by Aviva Investors and Principal Global Investors were among the biggest sellers of Brazilian miner Vale’s stock in January, data from Morningstar showed.

The data from the industry tracker gives an early glimpse into the willingness of international investors to hold the stock after Vale’s mining waste dam collapsed on Jan. 25, killing hundreds. It was the second such disaster in just over three years.

In the weeks that followed, the company’s shares have fallen, the dividend was suspended, its credit rating was downgraded and a number of managers, including the chief executive, have been removed.

The disaster also triggered a rethink among investors, mining companies and policymakers about the use and oversight of such tailings dams in future.

Closure of some operations for safety reasons, however, buoyed the price of iron ore, Vale’s key revenue earner.

“There’s a valuation tug of war between the liability costs and the iron ore price. I think that’s what investors will be grappling with and making their investments accordingly,” Mathew Hodge, Sector Lead- Basic Materials, Energy & Utilities Analyst at Morningstar said.

Between the end of December and the end of January, Aviva Investors’ Emerging Markets Equity Income Fund, part of Britain’s second-biggest insurer, Aviva, sold more than two-thirds of its shares, Morningstar data showed.

(Graphic: Vale value poses question for international funds png link:

Two funds managed by U.S. asset manager Principal Global Investors sold down by a similar proportion over the period, the data showed.

While not all international funds chose to sell, the scale of buying was much less aggressive. In total the five biggest sellers sold a combined 4.82 million shares, while the five biggest buyers bought 2.29 million shares, the data showed.

Among the biggest buyers was U.S. systematic investor Dimensional, whose DFA Emerging Markets Core Equity Fund bought just over a million shares to take its total holding to 19.2 million shares, Morningstar data showed.

A more marked increase was made by Aberdeen Standard Investments’ AS SICAV I Latin American Equity Fund, which increased its holding by around 20 percent.

Vale stock is down 5.2 percent since the start of the year, lagging Rio Tinto, up just over 16 percent in line with front-month Dalian iron-ore futures.

Domestically, Vale is at least expected to keep the support of state pension funds and won a vote of confidence this week from Brazil’s mining minister who said the company was vital to the country’s economy.

Editing by Elaine Hardcastle