"Currency War" triggered frenzy of investment in non-ferrous metals

"The tide of foreign exchange market intervention" triggered the risk of currency warfare. In the context of the global economic downturn, developed countries and emerging market countries all want to use the exchange rate to solve domestic problems, then there is the risk of triggering a currency war.

The “exchange rate war” will lead to the systematic devaluation of the global currency, and this risk expectation will become the main factor in the price rise of the resource prices in the near future. The two key factors affecting 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 the short-term, there are still no factors that will cause drastic changes.

At the monetary level, 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, which has weaker industrial properties, has reached a new high. It is expected that the metals with the strongest financial properties in industrial metals and metals such as zinc, which is in short supply, will also hit new highs in the short term.

Resources are similar to stocks, and many people enjoy appreciation. In the process of currency devaluation leading to the appreciation of resources, in theory, the magnitude of appreciation of all resources should be the same. The larger the "reserve value/market system," the more sensitive the currency will be to devaluation, and the more it will benefit from appreciation. From this perspective, we recommend Zijin Mining, Jiangxi Copper, HTC, Western Mining, Tin Industry, and Zhongjin Lingnan.

The recommended related stocks have low valuations and have been sideways for a long time and have become a breakthrough. The dynamic price-earnings ratio of these six stocks is basically between 20-40 times. Whether they are horizontally compared in the non-ferrous sector or compared with historical valuations, they are all at a low level.

Since the second half of 2009, these stocks have been in a state of sideways consolidation. In the same period, the prices of metals such as gold and copper have generally been viewed as a modest upward trend. Therefore, we think these stock prices are gaining momentum. What is needed for the upside is a trigger: Triggering further metal price gains, it also triggers investors’ enthusiasm for buying these colored white horse stocks. 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 judge that these six stocks first have a margin of safety in terms of valuation. At the same time, based on the judgment of the general trend of currency devaluation, we believe that the rise in non-ferrous metal prices and stock prices will create trend opportunities.