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Buy Australian Materials and Resources Plays

Martin Lakos is keeping watch down south. The division director at Macquarie Financial Services is overweight on Australian equities and upbeat about the country's materials and resouces stocks, betting that these counters will benefit from growing sales of commodities.

"We are seeing significant inventory rebuilding, including China as it picks up more iron ore, coking coal and copper, and that's going to continue for the next six to 12 months," Lakos said on CNBC Asia's "Protect Your Wealth".

BHP Billiton on Wednesday reported its first profit fall in seven years but its second-half earnings beat analysts forecast. The world's top miner said that demand in China and India had returned earlier than expected largely driven by restocking of depleted inventories. Demand is also showing signs of improving in advanced economies like North America, Europe and Japan.

Lakos viewed global miner BHP as a low-risk play, saying BHP has positioned itself very well in the bulk commodities space and "has low levels of gearing and high levels of cash flow."

Lakos also advised roping BHP's smaller rival, Rio Tinto, into one's portfolio, as well as some pure copper plays, as they offer diversity and allow investors to take advantage of the projected run for commodities that will likely resume when countries ramp up their economic engines in an upturn.

"The bigger picture still is that we've not seen significant new finds in terms of commodities over last 10-12 years," he said. "No doubt a number of companies, particularly BHP and Rio, have spent a lot of money in developing and improving production volume. But there is still no new supply coming on stream in significant numbers and therefore Chinese and overseas buyers really want to buy good quality coking coal and iron ore. And Australia is one of the places to come to for that."

Other Australian stocks he likes include retailer David Jones as he expects sustained discretionary spending. Boral is also on his radar, which he believes will be a big beneficiary of a real pick up in the housing cycle in Australia.

As for his outlook on the Australian stock market, Lakos sees a pull back of some 5 percent by next month, that will offer good buying opportunities for the stocks he mentioned.


Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."