[Cu] CBI Forecast - Copper Price

LONDON, July&nbsp;6 --&nbsp;Morgan Stanley (MS.N) has hiked its 2009 and 2010 copper price forecasts, partly because of a strong recovery in China, the world's largest consumer of the metal used in power and constrution.
&nbsp;&nbsp;&nbsp; The bank raised its 2009 copper price forecast by 48 percent to $2.14 per lb from $1.45 previously. For next year, the forecast was raised 52 percent to $2.50 per lb.
&nbsp;&nbsp;&nbsp; &quot;Demand from China for strategic reserve purposes and commercial restocking has been a main driver of price support,&quot; Morgan Stanley said.
&nbsp;&nbsp;&nbsp; &quot;This is consistent with a view that stimulus packages and easing access to credit are encouraging demand.&quot;
&nbsp;&nbsp;&nbsp; In the near term, however, there was a risk that an end to Chinese restocking and a seasonal lull in demand will contribute to a price correction.
&nbsp;&nbsp;&nbsp; Morgan Stanley expected this would be short lived, partly because China's economic recovery continued to widen and deepen.
&nbsp;&nbsp;&nbsp; Surveys of manufacturing showed the sector in China expanded modestly in June. [ID:nPEK138883]
&nbsp;&nbsp;&nbsp; Also, leading indicators of global industrial production like purchasing managers indices have started to reverse the strong downtrend seen in the second half of 2008.
&nbsp;&nbsp;&nbsp; Other positive factors include unprecedented global fiscal and monetary stimulus packages and expected cyclical weakness in the dollar.
&nbsp;&nbsp;&nbsp; A weak U.S. currency makes dollar-priced metals like copper cheaper for non-U.S. investors.
&nbsp;&nbsp;&nbsp; Demand for copper outside China remained weak on account of the global recession, but Morgan Stanley noted copper has held up better than most investors expected.
&nbsp;&nbsp;&nbsp; &quot;In base metals, our preferred exposure is copper, with short term downside price risk providing a new entry point after the recent strong rally,&quot; it said.
&nbsp;&nbsp;&nbsp; (Source: Reuters)
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