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Politics : Welcome to Slider's Dugout

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To: SliderOnTheBlack who wrote (3173)	10/30/2006 5:37:31 PM
From: 8bits	of 50726

And now... the other boys speak: DJ JP Morgan Upgrades Resources Sector To Overweight MELBOURNE (Dow Jones)--Sustained growth in China and a sluggish supply response will continue to drive the resources boom, Wall Street investment bank JP Morgan said Monday, moving to overweight from underweight in the sector. The broker cited compelling stock valuations, tight markets, Chinese growth and an expected increase in iron ore prices. "We moved to underweight the resources sector back in February and suffered some pain as commodity prices, and the resource majors, continued their rise," JP Morgan analysts said in a client note. JP Morgan said its decision was partly vindicated by the pullback in commodity prices and resource stocks that followed, but it is now time to move back to overweight. The analysts said initial indications are that contract iron ore price will rise again in the current round of negotiations. "If the opening ambit claim by the Chinese is for a reduction of only 5%, coupled with recent production reports from BHP (BHP) and Rio (RTP) where iron ore production performance was less than exemplary, then the eventual price settlement could end up higher than the current consensus view of a 5-10% rise," the note said. JP Morgan expects Chinese growth of 10.6% in 2006 and 9.5% in 2007 and said it is possible the economy will overshoot market expectations. It also has a more positive view of the United States than consensus and believes the housing downturn will not drag down the whole economy. JP Morgan said miners claim the supply side response to surging demand for commodities is proceeding slowly, a view backed up by recent BHP and Rio Tinto production reports. The analysts said BHP and Rio have underperformed the recent resurgence in base metals prices and their valuations are looking much more attractive in terms of price to net present valuations.

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