Resource stocks began the year with strong performance but have recently experienced significant volatility.
In 2025, the commodity market showed clear divergence. Driven by AI computing power expansion, rising demand for power infrastructure, and geopolitical risks, precious metals and industrial metals performed notably well: gold and silver surged by 67% and 149% respectively for the year; LME copper and aluminum also rose by 44% and 18%, contributing to the strong performance of the A-share nonferrous metals sector. In contrast, energy and agricultural commodities were weaker, with Brent crude oil and CBOT soybeans falling by 18% and 3% respectively. Early in 2026, nonferrous metals and some chemical products continued their upward trend, with cyclical sectors in the A-share market such as petroleum and petrochemicals, nonferrous metals, basic chemicals, and building materials showing impressive performance at times. However, over the past two weeks, due to factors like high trading concentration and the finalization of the Federal Reserve Chair nomination, significant volatility has emerged in precious metals, industrial metals markets, and related A-share sectors. This article reviews the correlation between four commodity upswings and the A-share market over the past two decades, offering a brief analysis of how commodity cycles are reflected in the A-share market.
**Review of Past Four Commodity Cycles and A-Share Linkages**
Historically, commodity rallies often stem from a combination of supply-demand imbalances and monetary conditions. The core logic involves global economic recovery driving rapid demand growth, while supply constraints—due to prolonged underinvestment in capital expenditure and delayed capacity expansion—lack elasticity when demand rebounds, leading to temporary shortages. This fundamental pattern is frequently accompanied by loose credit cycles, a weaker US dollar, and rising inflation, attracting substantial capital inflows and amplifying commodity price increases. Beyond supply-demand dynamics and liquidity, non-fundamental factors such as safe-haven demand from geopolitical conflicts and supply disruptions caused by extreme weather can also drive commodity prices higher.
Four notable commodity cycles over the past 20 years include: 1) 2006-2008: China's rapid industrialization and urbanization, coupled with robust domestic and international demand, led to broad commodity gains and catalyzed a cyclical stock rally in the A-share market. The nonferrous metals and coal sectors achieved excess returns of 200% relative to the Shanghai Composite Index, while steel and building materials sectors also saw excess returns exceeding 100%. Cyclical stocks peaked approximately 4.5 months earlier than the Nanhua Commodity Index. 2) 2009-2011: Post-financial crisis, the Federal Reserve launched quantitative easing (QE), and China introduced a four-trillion-yuan investment plan. Global liquidity easing, combined with domestic infrastructure demand and global economic recovery, drove a swift rebound in commodity prices. A-share nonferrous metals and building materials sectors achieved over 100% excess returns relative to the Shanghai Composite Index, with coal, agriculture, and other cyclical sectors also strengthening. Commodity-related stocks peaked about 3 months earlier than commodity futures in this cycle. 3) 2016: This cycle was characterized by supply-side reforms. While global commodities saw moderate gains, domestic steel and coal prices rose significantly due to supply-side restructuring. The A-share market generally trended upward with volatility during this period, with cyclical sectors peaking almost simultaneously with commodity prices; the relative performance of cyclical styles was not particularly prominent. 4) 2020-2022: As the global economy recovered from the pandemic and the Fed entered a rate-cutting cycle, major commodity prices accelerated upward from April 2020, moving in tandem with A-share market trends. The Russia-Ukraine conflict in early 2022 triggered an energy crisis, causing energy prices to surge and further pushing up commodity prices. During this period, the nonferrous metals and coal sectors achieved excess returns exceeding 100% relative to the Shanghai Composite Index; however, agriculture and building materials sectors underperformed due to weak traditional demand.
**Transmission from Commodity Prices to Resource Stocks: Drivers, Lags, and Elasticity**
Resource stocks (such as coal, nonferrous metals, petroleum and petrochemicals, certain chemicals, and steel) are highly correlated with commodity prices, but stock prices are not a simple reflection of spot prices. Equity pricing is influenced by future cash flows and their discount rates. Determining whether "rising commodity prices" translate into "rising resource stock prices" requires assessing the drivers of commodity gains and profit distribution patterns.
► Do resource stocks always rise with commodity prices? The nature of the price increase and the macroeconomic environment matter. Historical experience shows that if price increases stem from economic recovery and demand expansion, profits and risk appetite often improve simultaneously, with stock price elasticity typically exceeding that of the commodities themselves, favoring value/cyclical sectors. When price increases result from supply-side disruptions raising costs, while demand remains weak or is further pressured by high interest rates and a strong US dollar, upstream resource sectors and segments with cost-pass-through capabilities benefit relatively, while mid-to-downstream industry profits may be squeezed. Additionally, market performance depends on contemporaneous policy countermeasures, potentially leading to scenarios where "commodities rise, but stocks do not rise/rise modestly/rise then fall."
► Stock prices usually lead, but supply shocks can cause spot prices to move first. Historically, commodity-related stock rallies and peaks often precede commodity price movements, reflecting anticipation. For instance, when commodity prices have not yet risen significantly but leading macroeconomic indicators (such as PMI improvements) show strength, capital often positions early, driving stock prices upward first. In cases of sudden supply shocks like geopolitical risks or extreme weather, spot prices may spike instantly; equity markets require time to assess the shock's duration and profit impact, lagging behind commodity price changes.
► Resource stock elasticity vs. commodity elasticity. Theoretically, due to cost rigidity, commodity price increases often translate into disproportionately larger net profit growth through operating leverage (a 1% price increase yielding more than 1% profit elasticity). Combined with valuation expansion amid rising expectations, resource stocks can experience a "double boost," with price gains potentially exceeding commodity price increases. For example, during the demand-driven boom cycles of 2005-2007 and 2020-2022, the nonferrous metals index significantly outperformed gold, silver, copper, and aluminum futures.
However, recent market dynamics have introduced new changes, with commodities exhibiting stronger financialization attributes and enhanced cross-market risk contagion. Since the turn of the century, commodity price volatility has intensified. Academic research suggests that supply-demand changes alone cannot fully explain such large fluctuations, attributing the root cause to "commodity financialization" driven by rapid development in commodity futures markets and substantial inflows of financial investors [1]. In recent years, uncertainties in commodity markets have frequently intensified due to reshaping global trade patterns and geopolitical events like the Russia-Ukraine conflict. As financialization deepens, correlations between commodity futures and stock returns, along with cross-market risk contagion mechanisms, have significantly increased [2]. In this context, pricing logic is no longer confined to supply-demand fundamentals; non-fundamental factors such as geopolitical risks, supply chain security, and policies have gained substantial influence, making commodity prices prone to high volatility under specific shocks. In the current cycle, for example, silver—a commodity with strong financial attributes—exhibited price elasticity exceeding that of related stocks in certain phases. The recent broad decline in global commodities has altered market sentiment and risk appetite, spilling over into global equity markets and leading to significant adjustments in the A-share nonferrous metals sector.
**Are Resource Stocks Still Worth Buying?**
Commodities benefit from global capital diversification. Current valuations and costs for many varieties, including energy and chemicals, may be near lower ranges. Despite increased short-term volatility, rigid demand driven by AI computing expansion and energy transition, alongside structural supply-demand gaps for certain commodities, have not fundamentally changed. We believe the structural uptrend in commodities may not be over. The macro-asset strategy team suggests that decisions following Kevin Warsh's appointment may face multiple constraints, making significant balance sheet reduction unlikely in the short term; the Fed may not turn as hawkish as market fears suggest [3]. In summary, we believe that as short-term sentiment unwinds and trading concentration decreases significantly, the rally in related resource stocks is not over; after short-term adjustments, a mid-term upward trend may resume.
Regarding the market, positive factors for A-shares—such as ample liquidity, improving earnings, and catalytic industry trends—remain unchanged. We view recent volatility as beginning to offer opportunities for strategic buying on dips. In the medium to long term, as outlined in our "A-Share Market 2026 Outlook: Advancing with Momentum," the共振 between restructuring international order and China's industrial innovation trends is the core driver propelling this market rally and the revaluation of Chinese assets. The transformative impact of global monetary order restructuring and capital flows may far outweigh temporary, single-country, or single-market fundamental forces. We believe these two conditions remain intact and will continue to support Chinese asset performance in 2026. Alongside shifting macroeconomic paradigms and capital market system reforms, we contend that the foundational environment for A-shares has undergone qualitative change from quantitative accumulation, creating better conditions for a sustained bull market compared to the past, with medium- to long-term potential to maintain a "steady advance" trend.
Regarding allocation, recent focus areas include: 1) High-growth sectors: After three years of rapid development, AI technology is expected to gradually enter an industrial application realization phase in 2026. Opportunities remain in optical modules and cloud computing infrastructure, potentially leaning more toward domestic directions; application areas to watch include robotics, consumer electronics, and smart driving. Additionally, innovative drugs, energy storage, and solid-state batteries are entering their own growth cycles. 2) Export breakthroughs: Overseas expansion remains a relatively certain growth opportunity. Combining export trends and exposure to the US market, focus areas include home appliances, engineering machinery, commercial buses, power grid equipment, gaming, and globally priced resources like nonferrous metals. 3) Cyclical reversals: Based on capacity cycle positions, consider sectors nearing inflection points for supply-demand improvement or receiving policy support, such as chemicals, aquaculture, and new energy. 4) High-quality high-dividend stocks: Inflow of medium- to long-term capital is a enduring trend. From perspectives of quality cash flow, volatility, and dividend certainty, structurally allocate to leading companies with high dividends. 5) Sectors with bright annual report performance: Examples include the gold sector, TMT sectors benefiting from high AI growth, and non-bank financial institutions.
For resource-related areas, incorporating industry analyst views, key themes to grasp include: - Nonferrous metals: For gold, focus on companies with clear earnings releases, accelerated project commissioning, or those achieving production expansion through overseas gold mine acquisitions. For copper, prioritize leading players with high self-sufficiency in copper mines, strong potential for reserve growth, production increases, and external mergers and acquisitions. Also看好 the alumina industry for potential phased supply contraction and price recovery due to production cuts under loss pressure. In the electrolytic aluminum sector, transformation, upgrading, and cost improvements may lead to repricing of profits and valuations. - Chemicals: Against a backdrop of limited new capacity and rapidly growing energy storage demand, focus on varieties with price increase elasticity, those at price bottoms, and reversal plays with clearer marginal supply-demand improvements. Recovery in refining chain景气 may also contribute incremental profits for related enterprises.
Specifically, based on industry analyst recommendations, we have screened several resource stock-related targets (see Chart 6 in the original report) for investor reference.
Chart 1: Performance of A-Share Cyclical Industries During Commodity Rallies Over the Past 20 Years
Note: Excess returns are benchmarked against the Shanghai Composite Index. Data as of January 31, 2026. Source: iFinD, CICC Research Department
Chart 2: Four Typical Commodity Bull Markets Over the Past 20 Years
Note: Data as of February 6, 2026. Source: iFinD, CICC Research Department
Chart 3: Divergence Between Energy/Chemical and Metal Futures Indices Since 2022
Note: Data as of February 6, 2026. Source: iFinD, CICC Research Department
Chart 4: Commodity Index and Cyclical Style Performance Over the Past 20 Years
Note: Data as of February 6, 2026. Source: iFinD, CICC Research Department
Chart 5: Relative Performance of Cyclical Styles vs. Shanghai Composite Index in Past Commodity Bull Markets
Note: Data as of February 6, 2026. Source: iFinD, CICC Research Department
Comments