Morgan Stanley prefers aluminum stocks over iron ore amid China concerns
29/09/2021 15:19
** Morgan Stanley analysts say they prefer mining stocks
directly exposed to emission cuts in China which makes U.S.
aluminum giant Alcoa Corp AA.N their top pick
** MS analyst Carlos De Alba expects AA to benefit from a
structural shift in the aluminum market, led by China's
decarbonization policies (~5% of country's carbon emissions) and
the 45 metric ton capacity cap leading demand to outpace supply
by 2023
** They raise PT to $62 from $51; median PT $52
** MS analysts downgrade iron ore equities including Vale
VALE.K VALE3.SA and CSN Mineracao CMIN3.SA to
"equal-weight" on uncertainty around China's property sector,
the commodity's "challenging structural outlook", potential for
higher mining royalties in Brazil and rising freight cost
pressures
** "We still see both companies generating solid cash flows,
paying 8-12% avg. dividend yields in 2022-24 and maintaining
strong balance sheets," they add
** MS upgrades miner Nexa Resources NEXA.K exposed to Peru
to "overweight", citing easing stance of Peruvian government
nationalizing mining assets
(Reporting by Sruthi Shankar)
((sruthi.shankar@thomsonreuters.com;))