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<Research>JPM Favors CHALCO/ CHINAHONGQIAO, Envisions Coal, Aluminum to Shine in Short Term
Recommend 18 Positive 25 Negative 22 |
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Due to risk-aversion sentiment triggered by the war between the US, Israel, and Iran, Chinese metal stocks were sold off yesterday (the 3rd), according to a research report from JPMorgan. Coal stocks were the only sub-sector that performed strongly, likely because of rising market expectations for coal prices and relatively low investor positions. Their outstanding performance should go on for a while longer. While YANKUANG ENERGY (01171.HK) has a higher coal price beta and potential catalysts from asset disposals, JPMorgan noted that CHALCO (02600.HK) and CHINAHONGQIAO (01378.HK) could benefit from any disruptions in aluminum supply. JPMorgan also remains bullish on gold and copper stocks, adding that buying quality mining shares on dips is still attractive. It has selected ZIJIN MINING (02899.HK) as its top pick during market pullbacks. By metal sector, JPMorgan believes geopolitical premiums will push up coal prices in the short term, as escalating tensions in the Middle East have spiked crude oil and natural gas prices, prompting fuel switching that has supported coal demand. However, the sustainability of this positive performance will likely hinge on the potential turbulence in the Strait of Hormuz. In addition, JPMorgan's global commodities team estimates that the price of aluminum could move quickly towards USD4,000 per ton in the event of a major supply disruption. Higher energy costs (one-third of smelting costs) and freight costs could further lift aluminum prices as well. Stock | Investment Rating CHALCO (02600.HK) | Overweight CHINAHONGQIAO (01378.HK) | Overweight GANFENGLITHIUM (01772.HK) | Neutral TIANQI LITHIUM (09696.HK) | Neutral YANKUANG ENERGY (01171.HK) | Neutral ZIJIN MINING (02899.HK) | Overweight AAStocks Financial News |
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