On the first trading day of August (August 3rd), the market experienced consolidation, with all three major A-share indices closing in the red. The non-ferrous metals sector followed the broader market in a pullback, as the Huabao Non-Ferrous Metals ETF (159876), which tracks the benchmark index with the largest scale and best liquidity, saw its intraday price fall by 0.65%. Capital is actively positioning in sectors with positive mid-year earnings forecasts, with the ETF recording net inflows of 7.2 million units throughout the day, following a cumulative 108 million yuan in net inflows over the previous five trading days. Among its 60 constituent stocks, 37 rose against the market trend, with 12 gaining over 2%. Leading the gains were Zhongxi Rare Earth surging over 5%, and Sirui New Materials rising more than 4%. On the downside, Youyan New Materials fell over 6%, and Yunnan Aluminium dropped more than 3%, dragging on the index's performance.
Notably, the mismatch between earnings and stock prices is creating a "golden pit" buying opportunity for the sector. Fundamentally, the non-ferrous metals sector is experiencing a wave of positive earnings surprises. As of August 2nd, among the 60 constituent stocks of the benchmark index tracked by the Huabao Non-Ferrous Metals ETF (159876), 39 listed companies have disclosed their 2026 mid-year earnings forecasts. All of these companies have reported projected profitability and growth, with Zijin Mining leading the pack with an expected maximum net profit attributable to shareholders of 39.1 billion yuan, followed by Luoyang Molybdenum and Aluminum Corporation of China (Chalco) with expected maximum net profits of 16.5 billion yuan and 12.2 billion yuan, respectively. This stellar performance is not a short-term spike. The sector's medium-to-long-term support logic is solid, with multiple core factors potentially driving a valuation recovery, mainly reflected in five dimensions:
1. Supply side: Insufficient capital expenditure creates a rigid constraint. Global capital expenditure on major mines has been persistently insufficient over the past decade, keeping supply growth for base metals like copper and aluminium low. Frequent production disruptions in major producing regions like Chile and Zambia continue to pressure copper concentrate supply. Meanwhile, China's domestic electrolytic aluminium production capacity is capped at 45 million tonnes, with hydropower restrictions in the southwest further constraining supply release. This "supply vulnerability" is a core force supporting the upward shift in price levels and could make the sustainability of profitability exceed expectations.
2. Demand side: Emerging industries reshape the demand curve. New energy, AI computing power, and energy storage are injecting structural growth into non-ferrous metals. The new energy vehicle, photovoltaic, and wind power sectors are driving demand for copper, aluminium, lithium, cobalt, and rare earths. AI data center construction expands applications for copper, aluminium, and rare metals—cabinets and liquid cooling pipes boost copper demand, servers and power supply housings drive aluminium demand, and computing chips, storage, and optical modules pull rare metal demand.
3. Macro environment: Expectations of moderate Fed rate cuts and China's steady-growth policies work in tandem. Current market expectations for the Federal Reserve's rate cuts remain on the moderate side. Historical analysis shows that copper prices generally rise during Fed rate-cutting cycles. The core reason is that gradual rate cuts are a response to an overheated economy, robust manufacturing, and an AI investment boom. While liquidity issues may pressure the non-ferrous sector's performance around the time of rate cuts, the commodity attribute (supply-demand fundamentals) of non-ferrous metals ultimately outweighs the financial attribute (interest rates/dollar) in the medium-to-long term. Additionally, China's "steady growth" policies, focusing on infrastructure, new energy, and manufacturing, are driving demand for base metals like copper and aluminium, injecting strong momentum into the industry.
4. Valuation dimension: Safety margins emerge after deep adjustments. After a prolonged period of adjustment, the dynamic price-to-earnings (P/E) ratios of some leading non-ferrous stocks have fallen to historically low ranges. The sector's overall dynamic P/E is around 13.3 times, with the copper and aluminium sub-sectors at just 11.2 times and 8.8 times, respectively. Under the "resource super-cycle" framework, this valuation level offers a good safety margin.
5. Asset allocation: Transition from cyclical commodities to strategic resource assets. Non-ferrous metals are evolving from traditional cyclical commodities into "strategic resource assets." Against a backdrop of rising global geopolitical uncertainty and nations competing for critical mineral resources, the strategic value of companies with rich resource reserves and integrated industry chain layouts is being systematically reassessed. The Huabao Fund Index R&D Investment Department points out that the combination of strong fundamentals and low valuations in the non-ferrous metals sector warrants attention to the right-side allocation value of the industry. In summary, the factors that caused the sector's pullback since March have largely been eliminated. Current commodity prices are stabilizing, supporting corporate earnings. Leading companies still have production growth contributions, making sector earnings highly certain. The combination of low valuations and high growth certainty makes this a high-quality window for allocating to the non-ferrous metals sector.
[Positive earnings forecasts + low-level accumulation, a rebound from oversold conditions is a viable prospect!] Different non-ferrous metals have varying business cycles, rhythms, and drivers, making divergence inevitable. For those bullish on non-ferrous metals, a more straightforward approach is to achieve full coverage to better capture the sector's beta. The Huabao Non-Ferrous Metals ETF (159876) and its linked funds (Class A: 017140, Class C: 017141) track a benchmark index that comprehensively covers industries such as copper, aluminium, rare earths, gold, lithium, tungsten, molybdenum, and tin. This full-category coverage allows for better capture of the sector's beta. Additionally, this ETF is a margin trading and short selling target, serving as an efficient tool for one-click investment in the non-ferrous metals sector. As of the end of July, the Huabao Non-Ferrous Metals ETF (159876) had a scale of 1.489 billion yuan, with an average daily turnover of 104 million yuan this year, making it the largest and most liquid ETF among the three tracking the CSI Non-Ferrous Metals Index.
Source: Shanghai and Shenzhen stock exchanges, etc., as of August 3, 2026. The Fund's investment in the ADR may involve risks, including the potential for illiquidity, volatility, and currency fluctuations. The Fund may invest in emerging markets, which may have greater political, economic, and social risks. The Fund is subject to additional risks, including those associated with the ETF structure, such as potential lack of an active trading market, trading at a discount or premium to net asset value, and potential delisting. The Fund may also be subject to high portfolio turnover, which could result in higher transaction costs. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains this and other information about the Fund. For a current prospectus, please visit the Fund's website. The Fund's investment in the ADR may involve risks, including the potential for illiquidity, volatility, and currency fluctuations. The Fund may invest in emerging markets, which may have greater political, economic, and social risks. The Fund is subject to additional risks, including those associated with the ETF structure, such as potential lack of an active trading market, trading at a discount or premium to net asset value, and potential delisting. The Fund may also be subject to high portfolio turnover, which could result in higher transaction costs. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains this and other information about the Fund. For a current prospectus, please visit the Fund's website. The Fund is distributed by ALPS Distributors, Inc. The Fund is not sponsored, endorsed, sold or promoted by the referenced index provider or any of its affiliates, and the index provider makes no representation regarding the advisability of investing in the Fund. The Fund's investment in the ADR may involve risks, including the potential for illiquidity, volatility, and currency fluctuations. The Fund may invest in emerging markets, which may have greater political, economic, and social risks. The Fund is subject to additional risks, including those associated with the ETF structure, such as potential lack of an active trading market, trading at a discount or premium to net asset value, and potential delisting. The Fund may also be subject to high portfolio turnover, which could result in higher transaction costs. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains this and other information about the Fund. For a current prospectus, please visit the Fund's website. The Fund is distributed by ALPS Distributors, Inc. The Fund is not sponsored, endorsed, sold or promoted by the referenced index provider or any of its affiliates, and the index provider makes no representation regarding the advisability of investing in the Fund. MACD golden cross signal forms, these stocks are rising well!
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