Nonferrous Metal Investment Opportunities Under the "Currency War"

We are in the midst of an international currency war. The currency devaluation has been common in all countries. This has formed a buzz for us because it has reduced our competitiveness.

Brazilian Finance Minister Mantega

“The tide of foreign exchange market intervention” triggered the devaluation of the currency as a whole. The economic downturn in the world, especially in the United States, was the root cause of the “exchange rate intervention”. US housing, employment, sales, and other data show that the U.S. economic recovery has slowed in recent months. The unemployment rate that has attracted much attention has remained at more than 9% for a long time. The U.S. economy has still not been able to shake off the shadow of the financial crisis.

On the other hand, in the case of maintaining low interest rates and quantitative easing for a long time, lower inflation levels and the ensuing expectations and fears of low inflation or even deflation in the future are similar to the liquidity traps of Japan in the 1990s. Concerns or implicit or present, these provide the appropriate environment and reason for the United States to further implement loose monetary policy. The “quantitative easing” monetary policy further promoted by the United States has released a large number of liquidity expectations. While promoting the further depreciation of the US dollar, it has also led to a surge in the appreciation pressure on other countries. Since the end of June, the euro has appreciated by 12% against the U.S. dollar, while other real currencies such as the Brazilian real, the Japanese yen and the Korean won have also started to appreciate significantly against the U.S. dollar.

Countries around the world are beginning to compete in the gambling market. The U.S. achieved a depreciation of the U.S. dollar through easy monetary policies in order to facilitate the restoration of exports and curb imports, and protect domestic employment opportunities. At the same time, many U.S.-based export-oriented countries, which are the main trade partners, are feeling pressure. Since April this year, the yen has risen by more than 10% against the US dollar. Exports have contracted for 5 consecutive months. The contribution of net exports to GDP has dropped from 0.7% in the first quarter to 0.5% in the second quarter.

On September 15th, in the face of continued appreciation of the yen against the US dollar, Japan began to intervene in the market for the first time in six years, selling approximately 1.76 trillion yen to 1.86 trillion yen to the market, restraining the appreciation of the currency to stimulate exports; Japanese Finance Minister said that if the yen continues to fluctuate significantly in the future, further intervention will be carried out. Soon, this move triggered competition among economies such as Brazil and South Korea.

The market expects that more economies will join this global "interference tide of foreign exchange market." The result of countries competing to intervene in the foreign exchange market may be the devaluation of the currencies of various countries, and the inflationary expectation will push up the price of commodities and eventually lead to the realization of inflation expectations.

The “exchange rate war” will lead to the systematic devaluation of the global currency, and this risk expectation will be a stimulus to the recent rise in resource prices.

"The foreign exchange intervention" will stimulate the rise of resource prices The two major factors that affect metal prices are supply and demand and currency. On the supply and demand side, demand growth slowed down in the second half of 2010. In addition to copper, aluminum, lead, zinc and other LMEs maintained a premium structure, and inventory levels continued to remain high. The data shows that the metal demand has not risen at the same time as the metal price, and there are no factors that will cause drastic changes in the short term.

At the currency level, the free-flowing low interest rate US dollar and yen are flooded with commodity markets, and in various forms of hot money flows into emerging economies where local currency appreciation expectations exist. At the same time, some emerging countries that have taken the lead in presenting an economic recovery are caught in a dilemma. On the one hand, according to the Mundell triangle, they will be forced to follow up on low interest rate easing policies in order to resist the appreciation of their currencies. On the other hand, they must Face the risk of inflation caused by the proliferation of liquidity in a monetary easing environment; maintaining the comparative advantage of exports at a relatively low exchange rate and combating inflation with a stable or tight monetary policy can only be one of two alternatives.

At present, the tendency of countries to follow up the “interference tide of foreign exchange market” with more loose monetary policy is even more obvious. Maintaining a monetary easing orientation within the range of inflation tolerance may lead to an increase in the prices of various commodities, especially as represented by gold. Metal investment demand for financial attributes may heat up.

In fact, in the absence of significant changes in the fundamentals of supply and demand, loose monetary policy has actually promoted a modest increase in metal prices in the second half of this year. The "exchange rate war" may further stimulate metal prices in the short term. Gold has reached a new high, and silver has also hit a new high in price for 30 years. It is expected that metals such as copper with the strongest financial properties in industrial metals and zinc, which is in short supply, will also hit new highs in the short term.

Similar stocks of resources, many people enjoy the appreciation of supply and demand in the same, simply increase the money supply caused by the decline in the purchasing power of money, in theory, the prices of various types of resource prices should remain the same magnitude. The metal reserves owned by listed companies are equal to those on the balance sheet. The value of metal reserves is correspondingly increased when the corresponding metal prices continue to rise. If the value of the listed company is measured by the “reserve value/market value”, the greater the company’s ratio, the more sensitive it will be to currency depreciation and the more it will benefit from rising metal prices.

At present, the "intervention rate" will become the trigger for stimulating metal prices. The recent rally in colored stocks will also arouse investor's concern for colored enthusiasm. In summary, we believe that the rise in non-ferrous metal prices and stock prices will create trend opportunities. (CIS)

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This is a wonderful journey to enjoy the unique scenery and ethnic customs around the country. It is a journey to explore the treasures of the land of China and a journey of wisdom to understand the investment value of China's commodity listed companies.

The Shanghai Composite Stock Index, the first domestic stock index based on the Shanghai stock market, covers 50 large commodity stocks with high market value and good liquidity, and is one of the good targets for investment.

We will take you to unveil the mystery of the leading plates and companies in the constituent stocks of the index, and explore the attractiveness of investment in commodity stock ETFs.

Intervention ** market to follow suit in all economies

Time State Devaluation Measures The United States continued to loose its monetary policy on September 27. If necessary, it will take further measures to stimulate economic recovery. On September 15, Japan used the sell-off yen to buy dollars and directly intervene in the yen exchange rate in the Tokyo ** market. This is the first time that the Japanese government has directly intervened in the ** market since March 2004. On September 22, Colombia started buying at least US$20 million each day to prevent its currency from rising. In September, South Korea purchased the US dollar to avoid the rise of the Korean Won and is still brewing. Other measures The Brazilian finance minister said in September that he would not sit in for the devaluation of other countries and cause Brazil’s interests to be damaged. In September, Thailand, Malaysia, Indonesia, and other currencies were also at high levels against the US dollar, triggering speculation that the central banks will adjust their exchange rates. On the 5th, Japan's Bank of Japan announced that it lowered its benchmark interest rate to 0 to 0.1%. The Bank of Japan also said that it will purchase about 60 billion U.S. dollars in government bonds and other assets to boost the speed of economic recovery. On October 7th, the European maintenance index will keep interest rates unchanged at 1.0%, and maintain overnight rates and overnight deposit rates. At 1.75% and 0.25% unchanged, the Shanghai Stock Exchange ETF witnessed the non-ferrous plate fluttering. The first domestic commodity stock ETF launched by Guo'an Security Co., Ltd. will track the SSE Composite Stock Index, which will bring together large-scale SSE stock exchanges. The 50 large commodity stocks that are good in nature mainly cover gold, non-ferrous metals, coal, petroleum, agricultural products, and other industries. They cover most of the non-renewable resources listed companies in China, and their scarcity characteristics are obvious. Among them, non-ferrous metals listed companies have a market value weight of 33%, which is the largest weight sector. Investing in commodity stock ETFs will help reduce the risk of investing in single stocks and a single sector.

The fifth plenary session of the 17th Central Committee was held in Beijing on October 15. The meeting focused on the review of the outline and overall framework of the "Twelfth Five-Year Plan," and the "12th Five-Year Plan" for capital markets officially debuted. In the past month, "cooperate together", "aluminum innovation is high", "zinc is flourishing," "lead is unprecedented," "tungsten cannot be" and "titanium is crazy" has been performed in turns. After the collective madness, the colored plates face short-term adjustments, but from the current global economic and policy level, the colored plates are still fascinating in the middle and long term.

The Guotai Junan report pointed out that the current market environment with oversupply of the US dollar and excessive liquidity provides investors with a good opportunity to invest in non-ferrous gold stocks. Due to factors such as supply and demand and currency, metal prices will remain high. On the level of supply and demand, the available data show that metal demand has not risen with metal prices, and that it will not see the factors that will cause drastic changes in the short term. On the monetary level, the loose monetary policies of various countries may lead to the rise in the prices of various commodities. In particular, investment demand for metals with financial attributes may heat up, leading to high prices. Therefore, in the absence of significant changes in the fundamentals of supply and demand, loose monetary policy has actually promoted modest increases in metal prices in the second half of this year.

As an important strategic material, production material in the world, and an important material for consumer information in human life, the medium and long-term development of the non-ferrous metal sector has strong and strong support. Guolian Anshun Securities Co., Ltd. is willing to take you a pair of "eyes" so that you can enjoy the colorful stocks in the numerous markets, and truly benefit from the future development of the non-ferrous sector.