Chinese Investors Are Rushing to Buy Metal Stocks

Published on: Apr 11, 2024
Author: Amy Liu

Chinese investors are rushing to buy related metal stocks including copper and gold. The index tracking the Shanghai and Shenzhen resource stocks has risen by 10% in the past month, becoming the best-performing sub-index of CSI 300 benchmark. Major gold and copper producers ZiJin Mining Group and Shandong Gold Mining led the gains and both increased over 20% during this period.

The surge in demand for basic metals such as copper is driven by signs of recovery in China’s industrial sector, domestic supply constraints, and expectations of possible global interest rate cuts. While gold also benefits from easing monetary policies, the frenzy for precious metals in China is also indicative of investors’ desire for returns as bank deposit rates decline amid the exacerbation of China’s real estate crisis.

Analysts at Morgan Stanley, including Rachel Zhang, noted in a report that these factors “have led to a bullish view on copper prices and stocks.” Aluminum producers like Aluminum Corp. of China Ltd., and China Hongqiao Group Ltd. are expected to continue to enjoy high margins in the medium term due to tight supply.

The uptrend in metal stocks aligns with the bull market in commodities, pushing gold prices to new highs and copper prices approaching a 15-month high. This trend is one of the few supporting factors for the domestic Chinese stock market, which is starting to show signs of weakness after a two-month rally.

The CSI300 Index primarily consists of established Chinese state-owned stocks, ranging from liquor producers to banks and industrial companies. It has risen by 2.2% this year, making it still one of the worst-performing major indices globally.

Nevertheless, some observers believe that the rally in metal stocks may have become somewhat frothy. The director at Beijing-based firm Chanson & Co. remarked, “The recent sharp rise has also been driven by hot money, with the real motivation being the pursuit of immediate returns.”

Base Metals Copper Mining Personal Finance