Commodity demand in China, the largest metals user, "is back on track in a very big way", and copper and coking coal have the best prospects for price gains as the world economy accelerates, according to CLSA Research Ltd.
"Commodities that give investors the most upside potential when the rest of the world demand recovers" are those with supply constraints, Andrew Driscoll, head of resources research at CLSA, said in Shanghai.
"In the next twelve months, having exposure to copper is going to be a good investment," Driscoll said.
China's $586 billion stimulus plan and a record $1.1 trillion of lending in the first half of this year have countered a 10-month slump in the nation's exports, helping Asia to lead a global rebound from the worst slump since the 1930s. Copper futures have more than doubled this year.
"We've gone through a period in the first half when China's demand growth has recovered but the rest of the world demand has not," Driscoll said. "China's commodity demand is back on track in a very big way, and we expect this to continue for the second half."
Jiangxi Copper Co, China Coal Energy Co, Fushan International Energy Group and Hidili Industry International Development Ltd were among CLSA's preferred equities, Driscoll said. "You'll see strong momentum behind commodity markets and behind mining equities," he said.
There aren't many copper mines "that can be brought back into production and there isn't a lot of existing coking coal supply that can be ramped up," Driscoll said. "Because of current demand, those industries are already operating at very high utilization rates."
Copper futures on the London Metal Exchange traded yesterday at $6,280 a metric ton compared with $3,070 at the end of 2008, and the metal used for pipes is the top pick at Goldman Sachs Group Inc.
Coking coal has risen 7.5 percent to 1,720 yuan a ton in Shanghai since March, according to Bloomberg data.