Highway for Precious Metals; Base Metals to be Left Behind
Key Takeaways:
▪️ The market’s recent hoarding towards US treasuries as the Fed’s pivoting signal becomes more readily apparent to take place in 2Q23 and some even speculating as soon as 1Q23, points towards a strong upside for gold; prices could reach beyond c. USD2,150/ton in 2H24.
▪️ Supply’s outpacing of demand in FY24F should subdue nickel price movements; the 5Y futures curve have slid from FY22’s USD22.2k-33.3k/ton down to USD16.4k-21.4k/ton and reformed a contango from FY21’s backwardation trend, but should be bullish on the longer term on the global electrification push.
▪️ The Fed’s pivoting narrative should revamp vigor back into copper prices, but that is unlikely before FY2025F or after the Chinese economy jumpstarts from its government’s accommodative policies; copper is likely to hover at USD8,500/ton throughout 2H24.
▪️ We call a NEUTRAL rating for the metal mining sector. We incline towards ANTM and INCO with a TP of IDR2,080/share and IDR5,500/share (potential return of 26.8% and 31.9%), due to their undemanding valuations. MDKA, on the other hand, a positive profit turnaround in FY24F, while still carrying risk of margin-chipping processing costs.
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