CICC: The rally in related resource stocks has not ended; after a short-term correction, they are expected to regain upward momentum in the medium term.

CryptocurrencySniper · 2026-02-14T01:32:43+00:00

CICC research reports indicate that commodities are assets benefiting from the diversification of global capital. Currently, valuations and costs for multiple categories such as energy and chemicals may have already bottomed out. Despite increased short-term volatility, the rigid demand driven by AI computing power expansion and energy transition, as well as structural supply and demand gaps in certain varieties, have not undergone substantial changes. The structural trend in commodities may not have ended yet. CICC's macro asset strategy team believes that Kevin Walsh's decision-making after taking office may be subject to multiple constraints. The probability of a significant balance sheet reduction in the short term is low, and the Federal Reserve may not be as hawkish as the market fears. In summary, as short-term sentiment releases and trading congestion significantly decrease, the rally in related resource stocks has not ended. After a short-term correction, a medium-term rebound is expected.

CryptocurrencySniper

2026-02-14 01:32:43

CICC Research Report states that commodities are assets benefiting from the diversification of global capital. Currently, valuations and costs for energy, chemicals, and other sectors may already be near the bottom range. Despite increased short-term volatility, the rigid demand driven by AI computing power expansion and energy transition, as well as structural supply-demand gaps in some varieties, have not undergone substantial changes. The structural trend in commodities may still be ongoing. CICC’s macro asset strategy team believes that Kevin Walsh’s decision-making after taking office may face multiple constraints, and the probability of a significant balance sheet reduction in the short term is low. The Federal Reserve may not turn hawkish as the market fears. In summary, as short-term sentiment releases and trading congestion clearly decline, the rally in related resource stocks has not ended. After a short-term correction, a mid-term rebound is expected.

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CICC: Can Resource Stocks Still Be Bought?

Resource Stocks Perform Strongly at the Start of the Year, but Recently Volatile

In 2025, the commodity market showed clear divergence. Driven by AI computing expansion, rising demand for power infrastructure, and geopolitical risks, precious metals and industrial metals strengthened significantly: gold and silver rose by 67% and 149% respectively for the year; LME copper and aluminum increased by 44% and 18%, to some extent boosting the performance of China’s A-share non-ferrous metals sector. Conversely, energy and agricultural products were weaker, with Brent crude oil and CBOT soybeans falling 18% and 3%. In early 2026, non-ferrous metals and some chemical products continued their upward trend. Cyclical sectors such as oil & petrochemicals, non-ferrous metals, basic chemicals, and building materials in A-shares performed well temporarily. However, in the past two weeks, due to high trading congestion and factors like the appointment of the Fed chair, markets for precious and industrial metals, as well as related A-share sectors, experienced significant volatility. This article reviews the past 20 years of four commodity bull cycles and their linkage with A-shares, analyzing the mapping mechanism of commodity cycles in the A-share market.

Review of the Four Commodity Bull Cycles and Their Linkage with A-shares

Historically, major commodity rallies have often stemmed from supply-demand mismatches and monetary environment resonances. The core logic involves global economic recovery, which rapidly boosts demand, while supply-side capacity expansion lags due to long-term underinvestment, leading to phased shortages. This fundamental pattern often coincides with a broad credit cycle, a weakening dollar, and rising inflation, attracting large capital inflows and amplifying commodity price increases. Besides supply-demand and liquidity factors, geopolitical conflicts, risk aversion needs, and extreme weather events causing supply disruptions can also drive commodity prices higher.

Over the past 20 years, four typical commodity bull phases include:

2006-2008: China entered rapid industrialization and urbanization, with demand resonating domestically and internationally, pushing up commodity prices and triggering a cyclical rally in A-shares. Non-ferrous and coal sectors outperformed the Shanghai Composite by over 200%, with steel and building materials exceeding 100%. The peak of cyclical stocks occurred about 4.5 months ahead of the Nanhua Commodity Index.
2009-2011: Post-financial crisis, the Fed launched QE, and China introduced a “4 trillion yuan” investment plan. Global liquidity easing, combined with domestic infrastructure demand and global economic recovery, led to a rapid rebound in commodity prices. A-share non-ferrous and building materials sectors gained over 100% relative to the index, with coal, forestry, animal husbandry, and fishery sectors also strengthening. Commodity stocks peaked about 3 months before commodity futures.
2016: Characterized by supply-side reforms, global commodities saw moderate increases, with domestic steel and coal prices rising significantly. Meanwhile, A-shares experienced overall oscillation, with cyclical sectors peaking nearly simultaneously with commodity prices, and relative gains not particularly prominent.
2020-2022: As the global post-pandemic recovery and Fed rate cuts accelerated, major commodities’ prices surged from April 2020, with A-shares and commodities resonating. The Russia-Ukraine conflict in early 2022 triggered energy crises, causing energy prices to soar and commodity prices to rise further. Non-ferrous metals and coal sectors outperformed the index by over 100%. However, due to weakening traditional demand, forestry, animal husbandry, and construction materials underperformed.

Focus on Commodity Price Transmission to Resource Stocks: Drivers, Lag, and Elasticity

Resource stocks (coal, non-ferrous metals, oil & petrochemicals, some chemicals, steel) are highly correlated with commodity prices, but their stock prices are not simple reflections of current commodity prices. Stock valuation depends on future cash flows and discount rates. Whether commodity price increases translate into resource stock gains depends on the drivers of the price rise and profit-sharing patterns.

Does a rise in commodity prices always lift resource stocks? It depends on the nature of the increase and macro environment. Historically, if price rises stem from economic recovery and demand expansion, profits and risk appetite tend to improve together, and stock prices often show higher elasticity than commodities, favoring cyclically aligned sectors. Conversely, if supply-side shocks push costs up while demand remains weak or is suppressed by high interest rates and a strong dollar, upstream resource sectors with cost pass-through ability may benefit, while mid- and downstream profits could be squeezed. Policy responses also matter; sometimes, commodity prices rise without corresponding stock gains or may even decline after initial increases.

Stock prices often lead commodity prices, but supply shocks can cause spot prices to move first. Historically, resource stocks tend to peak and bottom earlier than commodity prices, reflecting market expectations. For example, when macro leading indicators (like PMI) improve before commodity prices rise significantly, funds tend to front-run, pushing stocks higher. Sudden supply shocks from geopolitical risks or extreme weather can cause spot prices to spike instantly, but the stock market takes time to confirm the persistence and profit impact of such shocks, lagging behind.

Elasticity of resource stocks versus commodities: Theoretically, due to cost rigidity, commodity price increases can translate into larger profit growth via operating leverage (a 1% price increase may generate more than 1% profit growth). Coupled with valuation expansion under rising expectations, resource stocks can experience “Davis double play,” with share price gains exceeding commodity price increases. For example, during demand-driven booms in 2005-2007 and 2020-2022, non-ferrous metal indices outperformed gold, silver, copper, and aluminum futures.

However, recent market logic has shifted. The financialization of commodities has become more prominent, with increased cross-market risk transmission. Since the early 2000s, commodity price volatility has intensified. Academic research suggests that these fluctuations are partly due to the rapid development of commodity futures markets and the influx of financial investors, leading to “commodity financialization.” Recent geopolitical events like the Russia-Ukraine conflict have further increased market uncertainty. As financialization deepens, correlations between commodity futures and equities, as well as cross-market risk spillovers, have strengthened. Price formation is no longer solely driven by supply-demand fundamentals; geopolitical risks, supply chain security, and policy factors have become more influential, causing high volatility under shocks. For instance, in this cycle, silver, with strong financial attributes, showed price elasticity exceeding related stocks at times. Recently, global commodity prices declined broadly, affecting market sentiment and risk appetite, which also impacted global equity markets, including a significant correction in China’s non-ferrous sector.

Can Resource Stocks Still Be Bought?

Commodities are assets benefiting from the diversification of global capital. Currently, valuations and costs for energy, chemicals, and other sectors are near bottom levels. Despite short-term volatility, the rigid demand driven by AI expansion and energy transition, along with structural supply-demand gaps, suggest that the structural commodity cycle may still be ongoing. CICC’s macro asset team believes that Kevin Walsh’s decision-making may face multiple constraints, and the likelihood of a sharp balance sheet reduction in the short term is low. The Fed may not turn hawkish as market fears. In conclusion, as short-term sentiment eases and trading congestion declines, the rally in resource stocks has not ended. After a short-term correction, a mid-term rebound is expected.

On the market front, A-shares currently benefit from ample liquidity, improving earnings, and industry trends. We believe recent volatility offers opportunities for tactical positioning. Looking ahead, in our report “A-shares 2026 Outlook: Riding the Wave,” we highlight that the restructuring of the international order and China’s industrial innovation are core drivers of the current market rally and asset revaluation. The reconfiguration of global monetary order and capital flows may have a greater impact than short-term or country-specific fundamentals. Since these conditions remain unchanged, 2026 is expected to continue supporting Chinese assets. With macro paradigm shifts and ongoing reforms in the capital market system, we believe the A-share environment has evolved from quantitative to qualitative change, making a sustained “slow bull” more feasible in the medium to long term.

In terms of allocation, recent recommendations include: 1) Growth sectors: AI technology, which has developed rapidly over three years, is expected to enter an application phase by 2026, with opportunities in optical modules, cloud infrastructure, and domestically oriented applications like robotics, consumer electronics, and intelligent driving. Also, innovative medicine, energy storage, and solid-state batteries are entering cycles of prosperity. 2) External demand: Overseas expansion remains a relatively certain growth opportunity, especially in appliances, engineering machinery, commercial vehicles, grid equipment, gaming, and global pricing resources like non-ferrous metals. 3) Cyclical reversal: Based on capacity cycle positioning, focus on sectors nearing demand-supply inflection points or with policy support, such as chemicals, aquaculture, and new energy. 4) High-dividend stocks: Long-term capital inflows favor high-quality dividend-paying leaders with stable cash flows, volatility, and dividend certainty. 5) Earnings highlights: sectors like gold, TMT benefiting from AI boom, and non-bank financials.

Regarding resource-related fields, based on CICC industry analyst insights, key clues include: In non-ferrous metals, focus on companies with clear earnings releases, accelerated project commissioning, or overseas gold mine acquisitions for capacity expansion; in copper, target leading firms with high self-sufficiency, strong reserve growth, and potential for external acquisitions; also, the aluminum industry’s phased supply contraction due to cost-cutting under loss pressures and the potential for revaluation. In chemicals, focus on varieties with pricing flexibility, low-cost capacity, and clearer supply-demand improvements amid limited new capacity and rising energy storage demand; refining sector recovery may also boost related profits.

Specifically, based on analyst recommendations, we have selected some resource stocks (see original report’s chart 6) for investor reference.

Figures and Charts:

Chart 1: Performance of cyclical sectors in A-shares during past 20 years of commodity cycles