A-Share Non-Ferrous:Stay Cautiously Speculative

Weekly Highlights

Given weakness in overall industry sentiment, discretionaryapproach and event-driven investing have become the bestinvestment strategies. Since the beginning of the year, hefty YoYnew energy vehicle (NEV) sales growth recorded each month hasbeen a driving force propping up the fundamentals of the lithiumcarbonate segment, with the continuous price increases keepingconsolidating this investment rationale. Before the emergence ofanother segment seeing rising sentiment, we believe lithiumcarbonate will still be one of a handful of investment themesattracting capital investment, while the recent purchasing andstockpiling of strategic minor metals, such as rare earth andtungsten, weighed on the supply side. Regarding the above twoinvestment directions, we suggest investors to participate actively,although we believe they have to remain vigilant in the meanwhile.

In the mid- to long-term, in the absence of fundamental changes inthe two major variables, namely the US dollar movement & thematerialization of Fed interest rate hike, and China’s economicrecovery, we don’t see trend trading opportunities in the non-ferrousindustry. For segment picking, we suggest to select good individualstocks under three major themes: First, segments witnessingcontinued improvement in downstream sentiment, such as nuclear,NEV-related industrial chains; Second, transformation bysmall-capped privately-owned companies; Third, minor metals withhighly concentrated supply markets and pricing mechanisms lesssusceptible to commodity trading, such as rare earth and tungstenstocks.