(MENAFN- ProactiveInvestors - UK) Investec has released a note in which it says China, and in particular, Chinese government policy is the main driver in the recovery of the mining sector along with selected commodities this year.
The broker cited coal as a particular example where Chinese 'supply restrictions' have had a material impact on prices.
Metallurgical coal is the best performing commodity this year, easily outstripping the performance of gold and silver.
The broker also argues that the Chinese government has intervened to stimulate demand with specific infrastructure projects, but that overall the demand picture remains 'unconvincing.'
Investec also notes that government policies elsewhere have also had an impact in pricing, in particular in nickel, where moves to shut mines by the Philippine government has had a direct impact on prices and follows an earlier precedent set by Indonesia.
Overall though, Investec remains cautious.
'Despite the run-up in many commodity prices, we do not see this as a blanket buying opportunity,' the broker said.
'Headwinds remain from expected US$ strength going forward. Our equity preference is for companies exposed to commodities that are likely to benefit from pollution control measures being taken by China, e.g. coking coal and manganese.'
The broker also expresses a preference for diversified miners as they are more 'defensive' with their exposure to a diverse range of commodities.
Its most preferred commodities are nickel, copper and manganese, its least preferred coking coal, platinum and iron ore. It is a buyer of Randgold (LON:RRS) and Rio Tinto (LON:RIO).
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