The world’s miners are starting the new year as must-have darlings in stock portfolios. But some money managers are beginning to question whether the industry’s surprise rebound is built on rock.
Soaring prices for commodities from coal to zinc and manganese caught many investors off guard in 2016, sending mining stocks from Sydney to Toronto on a tear that outdid banks, retailers and utilities.
The S&P/ASX 300 Metals and Mining Index on Australia’s resources-heavy stock exchange surged in December to its highest intraday value since 2014, while the MSCI World Metals and Mining Index recently touched an 18-month high.
Those indexes climbed 53% and 54% respectively in 2016, marking their first annual rise since 2010. Phoenix-based Freeport-McMoRan Inc., one of the world’s biggest copper miners, jumped roughly 95% in 2016, while Fortescue Metals Group Ltd., the world’s No. 4 iron-ore exporter, surged 215%.
The mining sector’s resurgence has prompted a raft of upgrades from brokers over the past couple of months, with some confident the comeback will continue well into this year. Citigroup analysts in December switched their stance on mining stocks to bullish from bearish.
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