The platinum price will remain at current high levels for longer and not fall to a level of $1 000 per ounce as generally forecast by producers and analysts.
This is the personal view of Jonathan Garner, Morgan Stanley's head of global emerging-market strategy. At a brief meeting in Johannesburg he said that the platinum price should remain robust on the back of autocatalyst demand and environmental concerns becoming more paramount in developing markets.
Garner is optimistic about South African platinum stocks for the same reasons and the fact that local companies held almost exclusive control of trade in this commodity.
He preferred resources to financial stocks in the South African market as they are less exposed to cyclical risk.
South African banks trade at a price:earnings (PE) of between ten and 13 compared to banks in a country such as Turkey that trade at PEs of seven and nine while offering similar returns on equity (ROE).
In contrast, the earnings outlook for resources companies were "good", with Morgan Stanley rating mining companies Aquarius, BHP Billiton, Evraz, Grupo Mexico, Lonmin, Norilsk Nickel, POSCO and Rio Tinto as "overweight" and Impala and Antofagasta as equal-weight.
This is against the background of this year's expectations for global earnings growth rising, with higher increases of 15,6% expected in emerging markets compared to 8,3% in the developed world.
Stocks in emerging markets were still cheap and expected to show growth in earnings, while stocks in developed markets were more stagnant.
"Emerging stocks come at a 20% PE discount but carry double the growth expectations. They have a higher dividend yield and higher ROE.
Garner expects the economies of the United States and China to "re-accelerate" in the second quarter of 2007, boosting global growth and commodity prices.
He said that he had initiated coverage of platinum stock Impala as the company had a large market capital although most analysts favoured Aquarius.
"Portfolio managers seeking exposure to the sector want to put a meaningful amount of money in a large stock."
source news : moneyweb.co.za
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