Insights into Chinese #Commodity Demand – Free download
In recent months risk assets in general have performed strongly, yet as Deutsche Bank notes share prices for Australian resource stocks have been relatively subdued. This reflects concerns about the growth outlook for China, but these concerns appear overdone in Deutsche’s view. An overweight call on the sector is retained.
Such a positive view is supported by key indicators of commodities demand being stronger than they appear. As Deutsche notes, while indicators such as global steel production and Chinese Industrial Production are showing few signs of life, these indicators tend to lag at turning points.
The data suggest measures such as Chinese steel production actually bottomed late last year and are now improving. As well, Deutsche’s analysis suggests Chinese property is on track for a soft landing, especially given lower inflation should allow for further policy easing in China this year.
Commodities demand therefore appears to be strengthening rather than weakening, meaning it is only a matter of time until year-on-year growth rates turn higher. Once this improving demand trend becomes more evident, Deutsche expects mining share prices will outperform the market, this given mining share prices appear priced for a worse outcome than should actually occur.
Ric Deverell, Global Head of Commodities Research from Credit Suisse who presented at Commodities Week 2011 Middle East’s also supports this believe. Download the presentation here
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