The best time to buy mining stocks is when the market is worried about China, according to Haitong Securities analyst Andrew Keen. And that is not now.

The analyst believes the mining sector is broadly 20% overvalued at present and ‘vulnerable to deterioration in news flow from commodity markets in China’.

The market currently favours the sector, as evident by a strong rally at the start of this week from miners on the back of rising iron ore and copper prices. The much-hyped infrastructure splurge promised by Donald Trump in the US has also lifted metals producers.

Keen believes Chinese demand for metals is going to soften over the coming months. He also notes that Chinese demand is seven times higher for steel and four times higher for copper versus the US. Therefore, China really matters when it comes to influencing commodity prices.

The analyst has ‘sell’ ratings on BHP Billiton (BLT), Glencore (GLEN) and Antofagasta (ANTO), together with a ‘neutral’ rating on Rio Tinto (RIO). He criticises Rio for cutting dividends at the start of 2016, only to then use spare cash to buy back stock 12 months later when the equity had doubled in price. He thinks special dividends would be a better use of the money.

In contrast, UBS believes Rio Tinto could be one of the highest returning stocks in the FTSE 100 this year. It believes the miner will boost shareholder returns by a material level in a year’s time.

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