Photographer: Alessandro Cinque\/Bloomberg <\/p>\n
(Bloomberg) — Global mining stocks have shot to the top of fund managers\u2019 must-have list, as soaring metals demand and tight supplies of key minerals hint at a new supercycle in the sector.<\/p>\n
With a nearly 90% gain since the start of 2025, MSCI\u2019s Metals and Mining Index has beaten semiconductors, global banks and the Magnificent Seven cohort of technology stocks by a wide margin. And the rally shows no sign of stalling, as the boom in robotics, electric vehicles and AI data centers spurs metals prices to ever new highs.<\/p>\n
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That\u2019s particularly true of copper, which is key to the energy transition and has surged 50% over the same period. But analysts are also bullish on a range of other minerals, including aluminum, silver, nickel and platinum. Gold, meanwhile, is expected to continue benefiting from US monetary and fiscal policy concerns, as well as geopolitical risks, even after hitting successive record highs.<\/p>\n
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The outperformance is a stark reversal from prior years when the sector was out of favor, hit by volatile commodity prices and fears of a growth slowdown in China, the world\u2019s largest metals consumer. But fund managers, who had piled into tech and financial stocks, now appear reassured by Beijing\u2019s pledges to support the economy, including via interest-rate cuts. <\/p>\n
\u201cMining stocks have quietly moved from a boring defensive sleeve to an essential portfolio anchor \u2014 one of the few sectors positioned to capture both shifting monetary policy dynamics and an increasingly volatile geopolitical landscape,\u201d said Dilin Wu, a research strategist at Pepperstone Group Ltd. in Melbourne.<\/p>\n
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A major driver for the change is that commodities such as copper and aluminum have become less correlated to economic cycles. Historically seen as short-cycle trades, dictated by how fast or slow the world economy is growing, they have gradually morphed into structural investments.<\/p>\n
In addition, they are benefiting from transition strategies, where investors buy assets such as metals to gain exposure to the AI theme.<\/p>\n
Hence, the rush to buy the dip whenever weak data knocks mining stocks. European fund managers now have a net 26% overweight on the sector, according to Bank of America Corp.\u2019s monthly survey. That\u2019s the highest in four years, though still well below the 38% net overweight held in 2008.<\/p>\n
Story continues <\/p>\n
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And yet, the sector looks pretty undervalued.<\/p>\n
The Stoxx 600 Basic Resources index trades at a forward price-to-book ratio of about 0.47 relative to the MSCI World benchmark. That\u2019s an about 20% discount to the long-term 0.59 ratio and well below prior cycle peaks above 0.7.<\/p>\n
\u201cThis valuation gap persists even as the strategic relevance of natural resources has risen materially,\u201d Morgan Stanley analysts led by Alain Gabriel wrote.<\/p>\n
Gabriel also notes companies\u2019 increasing preference for \u201cbuy over build.\u201d Various M&A transactions are underway \u2014 notably Anglo American Plc\u2019s acquisition of Teck Resources Ltd. and a potential merger between Rio Tinto Plc and Glencore Plc. While the industry\u2019s capital-intensive nature is driving the trend, Morgan Stanley also attributes it to miners\u2019 willingness to pursue scale and portfolio optimization, particularly in copper.<\/p>\n
Given this is happening at a time of supply deficits, the backdrop should support higher commodity prices and valuation multiples, Gabriel added.<\/p>\n
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To be sure, top miners including BHP Group and Rio Tinto still derive the bulk of their earnings from iron ore, which is feeling the effects of the collapse of the last China-led supercycle. That\u2019s motivating a push into copper M&A. Freeport-McMoRan Inc. and Antofagasta Plc are among the few firms offering pure exposure to copper.<\/p>\n
For some, the pace of the rally is a reason for caution. BofA downgraded the sector to underweight in Europe, citing risks from negative economic surprises. Nick Ferres, chief investment officer for Vantage Point Asset Management in Singapore, said he\u2019s trimmed gold exposure for now. <\/p>\n
\u201cI get concerned when the price of any asset moves non-linear or parabolic, that is why we are a bit cautious at the moment,\u201d Ferres said. \u201cBut the miners are very inexpensive. If gold remains elevated, we would re-enter or scale back up on a pullback.\u201d<\/p>\n
Bloomberg Intelligence sees copper remaining in deficit this year, with supply shortfalls possibly worse than in 2025. On gold, BI analysts say bullion could push toward $5,000 an ounce, while Goldman Sachs Group Inc. expects it at $5,400 by end-2026 \u2014 about 8% above current levels.<\/p>\n
\u201cThe upside drivers for commodities are now more powerful and more diversified,\u201d said Gerald Gan, chief investment officer at Singapore-based Reed Capital Partners Ltd. \u201cIn the coming months, we plan to gradually increase our portfolio exposure to mining stocks.\u201d<\/p>\n
–With assistance from Khuleko Siwele, Sagarika Jaisinghani and Mark Burton.<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
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