Commodities

Iron ore continues to rotate around the $US120/MT, ignoring the overwhelming bearish sentiment toward the bulk commodity. Analysts are focusing on the dire state of China’s property market, but we believe Beijing’s determination to revitalise its spluttering economy will ultimately be enough to take the iron ore price back up towards  $US140-150, a move which would catch many fund managers underweight the sector – the likes of BHP, FMG and RIO have been strong this month when many stocks/sectors have faltered illustrating the lack of selling around current levels.

• we remain bullish towards iron ore and can see another 10-20% upside.

Copper bounced last week after testing $US350 on Monday, helping the local names recover accordingly. e.g. Sandfire (SFR) ended the tough week up +3.56%. The global economy remains more robust than many thought likely as we approach Christmas, most analysts have been expecting central banks to push the global economy into a recession with their rate-hiking policy, which does open a window for the likes of copper to surprise on the upside, especially after its ~19% correction through 2023.

• No change, we are bullish toward China and copper in the medium term, but a break under $US350 remains possible.