The non-ferrous metals sector is showing renewed strength today, August 17, with the Non-Ferrous Metals ETF Huabao (159876), the largest and most liquid fund tracking the same index, opening with a gap up. Its intraday price climbed as much as 2.25% and is currently trading 2.04% higher. This upward movement suggests that the sector, currently positioned with a solid fundamental backdrop and easing macro headwinds, is attracting capital as investors anticipate a medium-to-long-term trend.
Data shows that the Non-Ferrous Metals ETF Huabao (159876) attracted net inflows of 41.01 million yuan over the previous two trading days. Among its constituent stocks, Northern Copper and Youyan New Materials hit their daily price limits, Yunnan Germanium rose over 6%, and Hunan Silver and Hengbang Co. gained more than 5%. Other stocks, including Jiangxi Copper, Yunnan Copper, Western Mining, Zhongjin Gold, and Tongling Nonferrous Metals, also saw gains.
On a weekly basis, the ETF had risen for three consecutive weeks from July 24 before pulling back 4.02% last week. The Index Research and Investment Department of Huabao Fund provided a rapid analysis, attributing last week's decline to a confluence of three short-term factors. First, profit-taking by short-term traders created technical selling pressure. Second, a slight rebound in oil prices, coupled with ongoing market debate about the Federal Reserve's potential rate hikes despite weak employment and inflation data, repeatedly disrupted risk appetite. Third, rising expectations of a rate hike in Japan triggered a unwinding of carry trades that used the yen as a funding currency, creating a temporary drag on global risk assets, including non-ferrous metals.
However, Huabao Fund emphasizes that these three disturbances are all temporary shocks related to short-term sentiment and capital flows, and they have not undermined the core industrial logic and supply-demand fundamentals of the non-ferrous metals sector. In other words, last week's decline was a "fake fall" caused by trading structures, not a reversal of the market trend. Investors are advised not to over-worry about short-term volatility. The key factors to watch are the two pillars supporting the medium-to-long-term cycle of the non-ferrous metals sector: the marginal weakening of macro headwinds and the persistent tightness of the supply-demand balance.
The Macro Picture is Improving as Headwinds Fade
From an oil price perspective, high oil prices are not in the core interests of the U.S. and would also increase inflationary pressure and economic burdens on other major economies like China, Europe, Japan, and South Korea. Furthermore, high oil prices would significantly increase the difficulty of Iran gaining control of the Strait of Hormuz, creating a convergence of constraints from multiple forces. Therefore, the probability of oil prices breaking through previous highs is low, and they are likely to oscillate within a range of $70-120 per barrel. The suppressive effect of oil prices on the non-ferrous metals sector is expected to gradually weaken. Regarding the Fed's monetary policy, a mild rate hike, once implemented, would represent a "buy the rumor, sell the news" event where the known negative factor is priced in. After a rate hike is confirmed, it will be difficult to find a headwind of equal magnitude. Therefore, if the sector experiences a pullback, it could be a suitable opportunity for bargain hunting. The core reason is that a mild rate hike is a normal response to an overheating economy, strong manufacturing activity, and high AI investment. While liquidity concerns may weigh on the sector around the time of a rate hike, over the medium-to-long term, the commodity attributes (supply-demand fundamentals) of non-ferrous metals will ultimately outweigh their financial attributes (interest rates/dollar).
The Fundamental Backdrop Remains Solid with Tight Supply
The current supply-demand landscape for the non-ferrous metals sector remains tight, placing it in the "fundamentals right side" phase. Looking at different sub-sectors: In precious metals, global central banks' continued gold purchases provide strong support for gold prices. The narrative of a peak in the tech cycle could eventually impact U.S. fiscal revenue, raising concerns about the ability to service the nearly $40 trillion U.S. national debt. This could revive the "de-dollarization" narrative as a core market pricing theme, potentially pushing gold prices to new highs. For industrial metals, the expectation of U.S. copper tariffs is continuously drawing non-U.S. inventories. If these tariffs are implemented, domestic copper prices could potentially rise to 150,000 yuan per ton between 2028 and 2030 with little chance of a significant correction. Inventories of metals like aluminum and tin are also declining, maintaining a tight supply-demand balance and providing solid price support. In the minor metals segment, supply is very rigid. Demand benefits from the expansion of AI hardware, and price movements are correlated with the beta of the tech sector. Combined with their strategic attributes, this sub-sector offers significant upside potential.
In conclusion, Huabao Fund states that the non-ferrous metals sector is currently in a "fundamentals right side, macro left side" position. Last week's short-term correction was a macro sentiment-driven disturbance that did not break the core industrial and supply-demand logic. As macro headwinds, such as oil prices and Fed monetary policy, gradually dissipate, the negative factors for the sector are likely to be fully priced in, opening up potential for medium-to-long-term upward movement. The suggested strategy is to focus on buying on dips, increasing positions during significant corrections, and waiting for the macro headwinds to clear, thereby capturing the medium-to-long-term allocation value of the non-ferrous metals sector.
Strong Earnings and Low Position Offer Rebound Potential
The performance, momentum, and catalysts for different non-ferrous metals vary, leading to inevitable divergence. For investors bullish on the sector, a more straightforward approach is to use a broad-based product to capture the overall beta of the market. The Non-Ferrous Metals ETF Huabao (159876) and its linked funds (Class A: 017140, Class C: 017141) track an index that comprehensively covers industries like copper, aluminum, rare earths, gold, lithium, tungsten, molybdenum, and tin. This full coverage allows for better participation in the sector's overall beta. The ETF is also a margin trading and short selling target, serving as an efficient tool for a one-click investment in the non-ferrous metals sector. As of August 14, the Non-Ferrous Metals ETF Huabao (159876) had a total net asset value of 1.640 billion yuan and an average daily turnover of 103 million yuan this year, making it the largest and most liquid among the three ETFs tracking the CSI Non-Ferrous Metals Index.
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