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In recent weeks, a significant shift has occurred in the Chinese stock market, particularly within the commodities sector. Chinese investors, navigating through a period marked by economic uncertainties, have shown a pronounced inclination towards stocks associated with precious and industrial metals, including copper and gold. This trend has notably impacted the onshore market, contributing to an emerging rebound that had otherwise been struggling to gain momentum.
A specific indicator, a gauge monitoring resource firms listed in Shanghai and Shenzhen, has reported a 10% increase over the past month, positioning it as the leading sub-index within the CSI 300 benchmark. Companies such as Zijin Mining Group Co., a prominent player in the gold and copper sector, and Shandong Gold Mining Co., have experienced a surge, each recording gains of over 20% within this timeframe.
The burgeoning interest in base metal producers like those of copper can be attributed to several factors. The industrial sector within China is showing signs of revival, alongside a domestic shortage of supplies and anticipations of a global reduction in interest rates. Additionally, gold, benefiting from potential monetary easing, has captured the attention of investors seeking higher yields amidst the deepening property market challenges and diminishing returns on bank deposits in the country.
Analysts from Morgan Stanley, including Rachel Zhang, have expressed bullish sentiments towards copper prices and related stocks, such as Zijin Mining and CMOC Group Ltd. They also projected that aluminum producers, for instance, Aluminum Corp. of China Ltd. and China Hongqiao Group Ltd., might continue to enjoy substantial profit margins in the medium term due to ongoing supply constraints.
This rally in metals stocks arrives amid a broader commodities bull run, propelling gold to unprecedented heights and pushing copper towards a 15-month peak. It represents a rare lift for China’s local equities, which, despite a recent two-month gain, have begun to falter once again.
While the CSI 300 index has seen a modest increase of 2.2% this year, it continues to lag behind on a global scale, particularly when compared to a gauge of Chinese firms listed in Hong Kong, which has risen by 4.3%. Despite the optimistic turn in metal stocks, some market analysts, including Shen Meng from Chanson & Co. in Beijing, caution against overenthusiasm, pointing out the speculative nature of recent investments and questioning the stability of China’s economic recovery.
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