Fuelled by US jobs data tempering Federal Reserve rate hike expectations, the nonferrous metals sector continued its ascent on Friday, July 3rd. The largest ETF tracking the sector, the HuaBao Nonferrous Metals ETF (159876), saw its intraday price surge as high as 3.52%, closing up 1.45%.
Data from the Shenzhen Stock Exchange reveals the ETF attracted a net inflow of 107 million units for the day, following a substantial 109 million yuan inflow the previous session. This sustained influx of billions in capital reflects active positioning in the pro-cyclical direction.
Among its constituents, gold leaders posted significant gains, with Western Region Gold, Chifeng Gold, and Shandong Gold International Mining hitting their daily limit-up, while Shandong Gold rose over 7%. Copper leaders also delivered strong performances: Western Mining climbed over 6% and Zijin Mining Group advanced more than 6%. Leaders in rare earths like China Northern Rare Earth and aluminum such as Shenhuo Shares also followed the upward trend.
Macroeconomic Backdrop
US Non-Farm Payrolls for June increased by a mere 57,000, significantly missing market forecasts. The weak employment data directly cooled market bets on further rate hikes. Concurrent declines in the US Dollar Index and short-term Treasury yields, combined with exhausted negative sentiment and valuation repair needs, propelled a strong rebound in non-yielding precious metals like gold.
In a recent report, Goldman Sachs noted that comments from official Waller signaled a dovish tilt, stating that both inflation expectations and risks have declined since the June FOMC meeting, with the expectation that the Fed will maintain the federal funds rate unchanged for the remainder of 2026.
Sector-Specific Investment Rationale
Examining specific segments within the nonferrous metals complex reveals distinct, supportive investment logics that are aligning positively.
Firstly, regarding gold, analysis suggests a high probability of a significant decline in US inflation during the second half of the year. Such a drop in inflation coupled with a growth slowdown would weaken tightening expectations, creating space for a potential shift towards easier Fed policy. The gold bull market is not over, and a turning point may be nearing. Entering July and August, the narrative around Fed tightening could reverse rapidly, bringing the gold inflection point closer.
Secondly, for copper, research indicates that August-September may present a key window for a recovery in undervalued copper stocks. Currently, these stocks are in a phase characterized by low P/E ratios, resilient EPS, and unrefuted commodity fundamentals. The market continues to price them based on the macro-driven valuation compression framework of the past decade, but the current cycle for nonferrous metals is being driven by EPS. The re-rating of copper sector profitability and resource value is not yet complete, with a high probability of strong price catalysts around the fourth quarter.
Thirdly, in the rare earths sector, analysis points to a confluence of supply-demand dynamics and technological factors driving a timely revaluation. The average price of praseodymium-neodymium oxide in the first half of 2026 was 731,000 yuan per ton, a 73.6% year-on-year increase. On the supply side, enforcement of domestic rare earth management policies is tightening, leading to sustained tight supply. On the demand side, rising production of new energy vehicles and robots, coupled with strong export order growth, suggests continued demand expansion. From 2026 onwards, the global rare earth supply-demand deficit is expected to widen consistently, providing long-term support for prices, underscoring the strategic allocation value of the rare earths industry chain.
Other research highlights that the relative valuation of the nonferrous metals sector is currently at a historically extreme low, presenting a high risk-reward profile. Furthermore, with significant changes in the external environment, nonferrous metals—as one of the sectors hardest hit previously—are poised for a rebound. Coupled with interim earnings expectations, the sustainability and strength of this recovery could exceed past episodes.
Strategic Investment Vehicle
The HuaBao Nonferrous Metals ETF (159876) and its feeder funds provide comprehensive exposure to 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. Additionally, as a margin trading and securities lending eligible instrument, it serves as an efficient tool for a one-click allocation to the nonferrous metals sector.
As of the end of June, the ETF 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.
Investors should note that the ETF passively tracks the CSI Nonferrous Metals Index. The index's base date is December 31, 2013, and it was launched on July 13, 2015. Its constituent stocks are adjusted per its compilation rules, and its back-tested historical performance is not indicative of future results. Constituent stocks mentioned are for illustrative purposes only and do not constitute investment advice or represent the holdings or trading动向 of the fund manager. The fund manager assesses this fund's risk等级 as R3-Medium Risk, suitable for Balanced (C3) and above investors. Suitability matching opinions are subject to销售机构. All information presented is for reference only, and investors are responsible for their own investment decisions. The views, analysis, and forecasts herein do not constitute investment advice of any kind, and no liability is accepted for any direct or indirect losses arising from the use of this content. Fund investment carries risks. Past performance of a fund is not indicative of its future results. The performance of other funds managed by the manager does not guarantee this fund's performance. Invest with caution.
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