Many natural resources managers are becoming bullish on the mining sector as they report increased investor interest and inflows into their funds in the past few months.
Commodity prices have rallied strongly since the start of the summer, which has fed into improved performance for equities in some sectors, and resources managers have tipped the mining sector to continue its rally this year.
The managers spoke as gold rallied past $1,400 an ounce for the first time since the start of June, and oil prices spiked on fears of an escalation of conflict in Syria and the Middle East.
Neil Gregson, manager of the £1bn JPM Natural Resources fund, said sentiment in the sector may have “bottomed out” but that it now needs to “hold on to its gains to give a bit more confidence to investors that the sector is stabilising”.
The FTSE World Mining index has rallied by more than 15 per cent since the start of July, outperforming the wider global index, which has been flat.
Catherine Raw, manager of the £1bn BlackRock World Mining Investment Trust, said the stronger metal prices had been brought on by improving sentiment towards China, which “seems to have started to reaccelerate” in terms of commodity demand.
Ms Raw said commodity prices were range-bound and had hit the bottom in June and July, and said the “short-term business cycle is positive and I expect momentum to continue further”.
George Cheveley, who co-manages Investec’s £159.7m Enhanced Natural Resources fund with Bradley George, has been adding to positions in mining in the past month, although he is still more positive on oil in the long term.
The net position of the fund, which can take short positions on stocks – making money if a share price goes down – has increased to 70 per cent from 60 per cent at the end of July, which Mr Cheveley attributed mainly to increasing long positions on mining stocks and taking off some short positions.
He said: “I have generally been more conservative on mining side, but I am becoming slightly more bullish.”
Mr Cheveley said there could be further upside in base metal miners because the market was pricing in a much larger fall than he expected in the iron ore price next year.
BHP Billiton, the diversified mining company and third largest iron ore producer in the world, is currently the fund’s largest positive bet, double the size of the next highest bet.
Mr Gregson said his fund had experienced consistent monthly outflows up until the past month, when he had seen a reversal of that and money started coming back in.