Broker snap: Copper bulls too abundant, says Nomura

4th Dec 2009 11:00

Nomura Securities remains bullish on the prospects for mining shares in 2010 but for those short-term investors who like to buy on a dip, now is not a good time to dive in, the broker reckons.'In 2010, we continue to expect mining equities to benefit from a weaker US$, accelerating Chinese investment, restocking in OECD economies, the potential for large share buy-backs and M&A [mergers and acquisitions],' Nomura analyst Paul Cliff writes.The broker has preferred copper miners in 2009 and still likes them as holdings for 2010 but thinks 'copper bulls are now too abundant and recommend switching into iron ore and coking coal exposure.' Cliff is forecasting a 50% increase in iron ore contract prices over the next three years and a 75% increase in hard coking coal contract prices over the next two years. 'Although we remain bullish on long-term copper exposure, prices now appear to be running slightly ahead of improving fundamentals,' Cliff reckons.Nomura's preferred picks in the sector are Rio Tinto and Anglo American. 'Although we remain bullish on the miners on a six- to 12-month view, any reversal of US$ weakness, rolling-over of OECD leading economic indicators (which we expect in 1Q10) or an earlier and more aggressive hike for Chinese interest rates are likely catalysts for a short-term correction, in our view,' Cliff concludes, adding that any future outperformance of mining shares is 'likely to be driven by positive earnings momentum.'