LIVE MARKETS-Pricey copper miners face rotation risks, says MS

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PRICEY COPPER MINERS FACE ROTATION RISKS, SAYS MS

Copper miners' valuations are flashing amber, with Morgan Stanley urging investors to be more selective as takeover speculation, in the wake of Rio RIO.L and Glencore GLEN.L talks, and strong metal prices push stocks to new peaks.

The U.S. bank says the M&A narrative, initially driven by diversified majors, is now spreading to pure-play copper producers, driving multiples sharply up over the past year.

But that rally has created risks, particularly for companies with limited growth pipelines.

"While a rising tide lifts all boats, we argue the buy-over-build narrative is more supportive for copper plays with superior growth optionality," Morgan Stanley analysts led by Ioannis Masvoulas write in a note.

In this view, they downgrade Antofagasta ANTO.L, warning its valuation premium has reached extremes and noting the stock implies a copper price around 27% above spot LME levels.

"Expensive stocks face rotation risk".

(Danilo Masoni)

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