Fed Cuts Rates by 50bps, A-Shares Sector Gains Momentum, Stocks Eye 30% Rise
Recently, the news of the Federal Reserve's interest rate cut has flooded the media, and the A-share market has also seen some new movements following the rate cut.
For instance, the index began to show signs of stopping the decline and rebounding, and sectors such as non-ferrous metals have seen a strong rise.
Institutions believe that the Fed's rate cut will help enhance the allocation opportunities for sectors like non-ferrous metals.
On September 18th, local time, the Federal Reserve announced that it would lower the target range for the federal funds rate to 4.75% to 5%, which is a cut of 50 basis points.
This is the first rate cut by the Fed since 2020, and the magnitude exceeded institutional expectations.
On the first trading day of A-shares after the Fed's rate cut announcement, which was September 19th, major indices showed a rebound, with the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index rising by 0.69%, 1.19%, and 0.85% respectively.
The total transaction volume of A-shares on that day increased to 629.3 billion yuan, a 30% increase compared to the previous day.
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Market views suggest that the Fed's rate cut will help improve liquidity in A-shares.
Haitong Securities stated that the Fed's preemptive rate cut may help improve liquidity in A-shares, but the fundamentals still need to be verified in the medium to long term.
Looking at the performance of sectors on September 19th, the vast majority saw varying degrees of increases, with non-ferrous metals, real estate, commerce, agriculture, light industry manufacturing, computers, building materials, food and beverages, and steel leading the way.
Non-ferrous metals saw the highest increase, surpassing 3%, ranking first in the sector increase.
Looking at the performance of individual non-ferrous metal stocks, on September 19th, stocks such as Pengxin Resources, Jinchengxin, Northern Copper, Jiaozuo Wanfang, Luoyang Molybdenum, and China Aluminum all experienced strong rebounds.
Pengxin Resources achieved a "10cm" limit-up, and on September 20th, the company's stock price once again hit the limit-up.
Pengxin Resources' main business is gold, copper, cobalt, and other metal mineral resources, and on September 13th, the company's stock price had already closed with a "one-word" limit-up.
In addition to Pengxin Resources, many non-ferrous metal concept stocks have also entered a continuous rise pattern, such as Zijin Mining, which has risen for four consecutive days from September 13th to September 20th, with a cumulative increase of over 10%.
Overall, the Fed's rate cut will have a synergistic impact on multiple sectors of the A-share market.
Looking at non-ferrous metals, many institutions believe that the Fed's rate cut will highlight the value of non-ferrous metals.
Regarding gold, Guojin Securities stated that historical experience shows that before and after the Fed's first rate cut, commodities other than gold are cautious, and as subsequent U.S. labor data weaken further, gold will continue to benefit from the "double-sided" drive of declining real interest rates and a weaker dollar.
For base metals, Pacific Securities stated that as the rate cut cycle begins, data supports the expectation of a soft landing, and with the peak demand season approaching, the outlook for base metal prices is positive.
In addition to the external stimulus of the rate cut, the internal fundamentals of the non-ferrous metal sector are also improving.
Overall, behind the good performance, it is closely related to the two factors of "rising prices" and "increasing volume".
Non-ferrous metals can be divided into heavy metals (such as copper, lead, zinc), light metals (such as aluminum, magnesium), precious metals (such as gold, silver, platinum), and rare metals (such as tungsten, molybdenum, lithium, etc.).
The downstream involves many application fields such as construction, electricity, transportation, communication, aerospace, etc.
In the first half of this year, the prices of many sub-species of non-ferrous metals have risen significantly, such as the Shanghai Copper 2411 contract, which rose nearly 30% from January to mid-May this year; the gold 2412 contract rose by more than 14% in the first half of this year.
Among the 135 non-ferrous metal concept stocks, 117 made a profit in the first half of this year, accounting for 87%; 84 achieved year-on-year growth in performance, accounting for 62%.
In terms of profit scale, companies such as Zijin Mining, China Aluminum, Luoyang Molybdenum, Jiangxi Copper, and Yunnan Aluminum all had a net profit of more than 2 billion yuan in the first half of this year, with Zijin Mining having the highest profit scale of 15.084 billion yuan.
In terms of performance growth, Yongmao Tai and Guocheng Mining both achieved a net profit increase of more than ten times in the first half of the year, and companies such as Changlu Shares, Hunan Silver, and Western Gold also achieved doubling growth.
Many companies stated that the main reason for the increase in performance is related to the rise in product prices and the increase in product sales volume.
Taking Guocheng Mining, which has a net profit increase of more than ten times in the mid-term report, as an example, the company achieved a net profit of 42.991 million yuan in the first half of the year, a year-on-year increase of 1116.58%.
The company stated that the increase in performance is mainly due to the increase in the output of silver concentrate and the sales price of silver concentrate and other products compared to the same period last year.
Another example is Luoyang Molybdenum, which has a higher net profit scale.
The company's main business involves base metals and rare metals.
In the first half of this year, the company achieved a net profit of 5.417 billion yuan, a year-on-year increase of 670.43%.
The company stated that the increase in performance is mainly due to the significant increase in the production and sales volume of main products such as copper and cobalt, cost optimization, and the strong trend of copper market prices in 2024.
Looking at the secondary market, the company's stock price has also recently rebounded from a low position, with a cumulative increase of more than 10% over three trading days from September 18th to September 20th.
Against the backdrop of the rate cut, listed companies have an optimistic attitude towards the industry outlook.
Shanghai Construction Engineering stated that the rate cut helps to stimulate investment, increase the valuation of real estate, indirectly boost the prosperity of the construction industry, and also help to reduce corporate financing costs.
With the start of the Fed's rate cut cycle, the long-term performance of gold has been good in previous rate cuts, which is beneficial for boosting the investment returns of the company's gold mining projects.
China Aluminum stated that from a macro perspective, the global economy is expected to maintain a moderate recovery trend in the second half of 2024.
The Fed's rate cut provides a loose macro environment for the rise in commodity prices, and it is expected that domestic aluminum prices will continue to fluctuate at high levels in the second half of the year.
Against the backdrop of the rate cut and the industry entering a "rising volume and price" situation, many non-ferrous metal targets have received concentrated recommendations from securities institutions.
Among them, some companies have been given expected target prices by securities institutions, and there is a certain room for increase based on the latest closing data.
Statistics show that since August, many non-ferrous metal companies, including Zijin Mining, China Gold, China Aluminum, Yunnan Copper, and Yunnan Aluminum, have received recommendations from securities firms.
Among them, most companies have received concentrated recommendations from institutions, such as Zijin Mining, which has been recommended by nearly 20 securities firms since August, such as CITIC Construction Investment, Shanghai Securities, Guolian Securities, Zhongtai Securities, and Shenwan Hongyuan.
Regarding the logic of focusing on Zijin Mining, institutions mainly focus on the company's operational fundamentals.
For example, Shanghai Securities stated that the company's copper and gold business is rapidly expanding, and the prices of copper and gold are expected to rise, maintaining a "buy" rating.
Another example is China Gold, which has been recommended by more than 10 institutions, such as Guangfa Securities, Minsheng Securities, China Merchants Securities, and Huatai Securities.
Regarding the logic of focusing on, Huaxin Securities stated that considering that there is still room for gold prices to rise, the company's new Sha Ling gold mine project is underway, and the long-term increase in self-produced gold mine output is expected, maintaining a "buy" investment rating.
In addition to the companies mentioned above, many non-ferrous metal targets have also received key recommendations from securities firms, such as Tin Shares, Tongling Nonferrous, Tianshan Aluminum, and Shenhuo Shares.
It is worth mentioning that many targets have been given relatively specific target prices by securities firms.
Based on the closing price as of September 19th, many targets have a room for an increase of more than 30% from the target price.
For example, China Aluminum, Guangfa Securities gave its target price of 11.32 yuan, which has a room for an increase of more than 60% compared to the closing price of 6.98 yuan.
In addition, Guotou Securities' target price for China Mining Resources, Guangfa Securities' target price for Tianshan Aluminum, Guotou Securities' target price for Shenhuo Shares, and Huatai Financial Holdings' target price for Chao Hongji are all more than 50% higher than the latest closing price.
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