Credit Suisse has downgraded the mining sector to "underweight" on the back of increased caution about Chinese growth, growing supply following years of poor capital discipline and the sector's underperformance relative to metal prices.
The bank says it has changed its stance from "tactically neutral but strategically underweight" to "underweight" on both counts.
One of the reasons, it says, is that mining is no longer a "conventional high beta sector", responding to the market. Commodity prices have lagged the rise in equity markets, and basic resources stocks have lagged metal prices.
"Put simply, if mining stocks cannot outperform when industrial commodity prices rise, then it is much harder for them to outperform when iron ore prices fall," Credit Suisse analysts say in a note.
"Over the last three years, 80 percent of the time iron ore prices have fallen, the European mining sector has underperformed."
Credit Suisse forecasts a year-end iron ore price of $110 per tonne, down from the current level of $145.
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