More value to be seen in sectors where equities are less stretched

Recent strong price gains across commodity markets, especially base metal equities, now urge caution to some degree.

While activity and demand has picked up, this has been largely a short-term reaction to sharp destocking earlier this year. It is still not yet clear whether demand is going to recover sustainably in the Western world, but we are concerned that many equities are pricing in the recovery. In addition, as risk appetite has returned, commodity currencies such as the Australian dollar, the South African rand and Brazilian real have continued to strengthen. The strength of these currencies will increase costs in US dollar terms for producers with operations in those countries and squeeze margi...