Following unexpectedly weak U.S. non-farm payroll data, which led markets to scale back bets on Federal Reserve interest rate hikes, the nonferrous metals sector remained active today (July 3). The Huabao Nonferrous Metals ETF (159876), the largest ETF tracking its underlying index, saw its intraday price surge nearly 2.7% and is currently up 2.28%.
Accompanying the strong market performance, significant capital flowed into the sector. Data from the Shenzhen Stock Exchange shows the Huabao Nonferrous Metals ETF (159876) recorded real-time net subscriptions exceeding 100 million units, following a single-day capital inflow of 109 million yuan yesterday.
Among the index constituents, leading gold stocks spearheaded the gains. Western Region Gold Co.,Ltd., Chifeng Gold, and Shanjin International all hit their daily price limit. Shandong Gold rose over 7%. Copper industry leader Western Mining advanced more than 6%, while rare earth leader China Rare Earth and heavyweight constituent Zijin Mining both gained over 6%.
On the news front, data released by the U.S. Bureau of Labor Statistics on July 2 showed the U.S. economy added 57,000 non-farm jobs in June, significantly below market expectations and the lowest level in four months. Following the data release, traders reduced their bets on Fed rate hikes, now pricing in a potential hike in December this year, compared to previous expectations for October.
Industry analysis indicates that market expectations for Fed rate hikes had already been largely priced in. However, cooling inflation and weak employment figures have substantially reduced the perceived necessity for a rate hike within the year, suggesting the pressure high interest rates have placed on precious metals will gradually ease. In the medium to long term, global geopolitical risks, ongoing gold purchases by central banks worldwide, and the trend of de-dollarization continue to provide solid support for gold prices, laying a foundation for a sustained rise in the metal's price center. Capital is concurrently increasing allocations to the precious metals sector.
Huatai Securities points out that the current relative valuation of the nonferrous metals sector is at an extremely low historical level, presenting a high risk-reward profile. Although the sector faces short-term pressure from rate hike expectations, it is expected to return to being driven by fundamentals in the medium term. CITIC Securities believes that with significant changes in the external environment, the nonferrous metals sector, which was among the hardest hit previously, is poised for a rebound. Coupled with expectations for mid-year financial results, the duration and intensity of this rebound may surpass previous cycles.
Nonferrous Metals Sector Momentum and Investment Tools
The Huabao Nonferrous Metals ETF (159876) and its feeder funds (Class A: 017140, Class C: 017141) track an index that comprehensively covers industries including copper, aluminum, gold, rare earths, lithium, tungsten, molybdenum, and tin. This broad coverage allows for better capture of the sector's overall beta performance. Additionally, this ETF is a margin trading and securities lending instrument, serving as an efficient tool for gaining exposure to the nonferrous metals sector.
As of the end of June, the Huabao Nonferrous Metals ETF (159876) had a latest size of 1.345 billion yuan, making it the largest ETF among the three products tracking the same underlying index in the market.
Note: The previous on-market abbreviation for the Huabao Nonferrous Metals ETF (159876) was "Nonferrous Metals Leaders ETF."
ETF Fee Information: When subscribing for or redeeming fund shares, subscription/redemption agents may charge a commission of up to 0.5%. On-market trading fees are subject to the actual rates charged by securities firms. This ETF does not charge a sales service fee.
Risk Disclosure: The Huabao Nonferrous Metals ETF passively tracks the CSI Nonferrous Metals Index. The index base date is December 31, 2013, and it was published on July 13, 2015. The index constituents are adjusted according to its compilation rules, and its back-tested historical performance does not indicate future results. The index constituents mentioned herein are for illustrative purposes only. Descriptions of individual stocks do not constitute investment advice in any form, nor do they represent the holdings information or trading trends of any fund managed by the fund manager. The fund manager's assessed risk rating for this fund is R3 (Medium Risk), suitable for Balanced (C3) and above investors. Suitability matching opinions are subject to the sales institution. Any information appearing in this article (including but not limited to stocks, commentary, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors are responsible for any independent investment decisions. Furthermore, any views, analyses, or forecasts herein do not constitute investment advice of any kind to readers, and no responsibility is taken for any direct or indirect losses arising from the use of this content. Fund investment carries risks. The past performance of a fund does not represent its future performance. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. Caution is advised in fund investment.
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