Standard Life head of smaller companies Harry Nimmo says the mining supercycle is over, which will have a knock-on effect on other sectors such as engineering.
Nimmo, who runs the £1bn UK Smaller Companies fund, says he sold a 2.5 per cent position engineering company Spirax Sarco and reduced his position in engineeering firm Rotork from 2.5 per cent to 1.8 per cent in the third quarter.
He says: “Quite a lot of these engineering companies depend on mining and extractive industries to grow their businesses and that has been fantastic for them over the last seven years. However, the mining supercycle is over and we are going to be in a long barren period on the back of slowing growth in China. It could last for decades.
“Mineral prices shot up over recent years so mining companies developed new mines. Demand has started to tail off as they have brought them into production.”
TM Darwin founder David Jane, who runs the £22m TM Darwin Multi Asset fund, says: “The huge period of outperformance in miners has finished. Capacity has now caught up with demand for minerals and growth is going to be more normal going forward.”
But City Asset Management head of research James Calder says mining companies are still atttractive.
He says: “Even if GDP growth in China falls to 7 per cent, it is still very chunky growth. Emerging markets’ use of commodities, mining included, will still be substantial.”