Proactive Investors - After an eventful 2022, Canaccord Genuity (TSX:TSX:CF, LSE:CF) is bullish on industrial metals for this year, notably copper, as the world gets used to a new economic order.
Analysts reckon the first quarter could see macro pressure on such metals, but this will be followed by a positive performance from the second quarter onwards as the Chinese reopening accelerates, stimulus measures take hold, and the US central bank stops its rate tightening cycle.
Indeed, they see a global recession as not 'overly' a factor for commodity consumption, since they do not expect China to be part of the downturn.
"Perhaps perversely, a global recession could result in the Chinese government actually ramping up stimulus to offset a drop in export orders, which could be a net positive for commodities," noted the broker's analysts.
"2022 was a year when everything changed — we saw the return of double-digit inflation, aggressive tightening action from central banks, a peaking USD, the first land war in Europe since 1945, President Xi of China removing term limits on his tenure, and an accelerating split of the global economy into Eastern and Western blocs," added the Canaccord analysts.
"Over the medium and long term, we believe the ongoing polarization of the global economy coupled with the de-dollarization of the commodity trade by both major producers and buyers will ultimately be inflationary and support commodity prices in USD terms."
Among the broker's top stock picks in the sector are Hudbay Minerals (TSX:HBM) ('Buy' with target price of C$11.50), Filo Mining Corp (OTCQX:FLMMF, TSX-V:TSX:FIL) ('Speculative Buy' with target of C$36) and Ivanhoe Mines (TSX:IVN) Ltd ('Buy' with C$14 target).
However, analysts downgraded Champion Iron Ltd (ASX:CIA) to 'Hold' from 'Buy' given the "significant rally in the company’s share price" and the broker's belief that the iron ore price has run ahead of "near-term fundamentals".