Broker snap: Buy miners on the dips

28th Jan 2010 09:35

Miners have had a tough time this month, with the sector down almost 14% from its high, but Nomura is advising clients to buy the current dip. The broker thinks fears about draconian monetary tightening in China and its impact on metals demand is 'misplaced' and expects Chinese demand for industrial metals to continue to surprise on the upside through 2010.'More importantly, history suggests that the mining sector actually outperforms through tightening cycles,' it said. 'The current correction in mining equities reminds us of the short-lived correction at the beginning of China's tightening cycle at the end of 2004.'Mining equities are expected to remain 'choppy' through the first quarter of this year due to the expected short-term rise in Chinese inflation and likely peak in OECD leading economic indicators, but Nomura 'would buy the sector now'.Its top picks are Rio Tinto, which remains a 'buy' with £43 price target, and Anglo American, also a 'buy' with £35 target.Analysts at Royal Bank of Scotland are also hot on miners. Their preferred exposures for 2010 are bulk commodities, copper and Platinum Group Metals (PGMs)'In the lead up to iron ore/coal price negotiations, our top picks are BHP and Rio,' read a research note today. 'We prefer BHP to Rio on a 12-month view.''Our preferred commodity exposures remain those with supply constraints. In particular, we believe copper, iron ore, and coal should outperform other commodity prices on the back of growing demand from China, infrastructure constraints (bulks) and a lack of large new projects (copper),' it said.