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Metal sector in Chinese A-share has risen greatly contributed from overcapacity reduction
Wang Chunsun  2017.07.13



In the A-share market, stocks of listed companies in the steel and nonferrous metal sectors have risen in recent days.

Overcapacity reduction and optimization of industrial structure in China are likely to boost not only output, product prices and profits of efficient listed coal and metal companies but their shares, experts said.

Higher product prices have improved companies' financial performance, especially of those in cyclical industries like coal, iron and steel, and nonferrous metals.

This, in turn, is fueling the uptrend in their shares, said Zhan Sheng, investment director of JZ Investment, a subsidiary of JZ Securities. "Higher product prices will boost profits as the costs are fixed."

According to forecasts of quarterly financial results, listed companies in these sectors will see significant growth. If their forecasts come to pass, shares would remain stable at the current level, he said.

According to companies' forecasts, total first-half net profit of 25 ordinary-steel enterprises will likely surge by 314 percent year-on-year, with Beijing Shougang leading the pack with a staggering 5,523 percent jump.

The company's stock closed at 7.44 yuan on Friday in Shanghai, up 108 percent from 3.58 yuan on June 24 last year.

As of July 14, 57 nonferrous metal companies issued earnings forecasts, and 49 of them expect higher first-half profits-and six, including Yunnan Tin, are estimated to see their profits rise more than 10 times year-on-year.

The Nonferrous Metal Index of the Shanghai Stock Exchange has risen more than 8 percent this month, outperforming the benchmark Composite Index that rose more than 7 percent.

Of the 83 stocks of nonferrous metal companies that are traded on the secondary market, 70 have risen this month, with China Minmetals Rare Earth up nearly 27 percent.
 
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