* Australian building materials stocks rise on economy hopes

* Expectations U.S. and Australian housing markets will rise

* JPMorgan underweight Boral, James Hardie; overweight CSR (For more Reuters BUY OR SELL stories, click [BUYSELL/])


WELLINGTON, June 23 (Reuters) - Australia's building materials sector has outperformed in recent months as investors bet the worst of the housing slump is over in both Australia and the United States.

Since the bottom of the market in early March, both Boral Ltd (BLD.AX) and CSR Ltd (CSR.AX) have soared about 75 percent, James Hardie (JHX.AX) 45 percent and New Zealand-based Fletcher Building (FBU.NZ) 32 percent.

The benchmark S&P/ASX 200 index .AXJO has risen by about a quarter over the same period.

As a global rally in stocks pauses, questions are being asked as to whether the sector is an indicator of recovery or whether the optimisim has been overdone.

FIRST TO RECOVER

Building materials stocks are highly geared to the economic cycle and have been driven higher by signs of economic recovery, said Richard Morris, investment manager at Constellation Capital Management.

"Most of them have exposure to U.S. housing and there may be some hopes out there that U.S. housing is finally bottoming out as well," he said.

Building materials are typically among the hardest hit stocks in a downturn, but are also first to recover, said George Clapham, head of equities at Fortis Investment Partners.

"They're normally the first cabs off the rank in terms of market recovery, and to some degree they got beaten down well below their intrinsic values," he said, adding: "People look through the downturn."

"The rises have been driven by a view on the price being normalised to mid-cycle earnings, as opposed to what those companies might earn in the near future," said Simon Rutherford, portfolio manager at Northward Capital.

"So building materials as cyclicals are being bought by investors anticipating earnings, although clearly not in the near term," Rutherford said.

"There's still some room there for them to rise given how oversold they were before," Constellation's Morris said. "But there's certainly question marks about the housing recoveries both here and in the U.S."


source : http://www.reuters.com