Merrill bailing on the metals
forbes.com
Merrill Warns Of Pricey Miners
Chris Noon, 12.08.06, 5:04 PM ET
The mining stocks bull run may be over.
Merrill Lynch cut its rating on the global metals, mining and minerals sector to "neutral" on Friday and recommended investors reduce holdings in the industry on concern demand for metals will slow.
The "sector downgrade is based on concerns about the impact of a slowing global economy in 2007 on metals consumption and our view this will impact stock performance," Merrill said in a downbeat sector note published Friday.
Still, the weakness it sees is for the first half of next year. “We remain confident of a strong 12-month view,” the note added.
However, the damage was done. In London, where many of the major metals firms are actively traded, Antofagasta led the decline, losing 22.75 pence (44 cents), or 4.21%, to 517.5 pence ($10.12), while Kazakhmys shed 37 pence (44.5 cents), or 3.09%, to 1,160 pence ($22.70), Vedanta dropped 72 pence ($1.41), or 5.48%, to 1,241 pence ($24.28), BHP Billiton gave up 27 pence (53 cents), or 2.78%, to 945 pence ($18.49), Xstrata lost 78 pence ($1.53), or 3.23%, to 2,337 pence ($45.72), Rio Tinto slid by 52 pence ($1.02), or 1.85%, to 2,754 pence ($53.90) while Lonmin gave up 21 pence (41 cents), or 0.66% to close at 3,177 pence ($62.19).
Merrill thinks that copper and nickel prices are too high. It told clients it is forecasting a significant correction in copper prices in the first half of 2007, driven by weakening demand and significant supply growth. "Gold, silver, and steel plays present the most defensive exposure with the best diversified exposure recommended in CVRD and Anglo American," it added. |
