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2026-02-06 16:18:08 Commodity prices have leapfrogged and appeared to be consolidating at higher levels, Citi said in its report. The broker analyzed the impact on various sectors in China. Positively, the basic materials industry is a major beneficiary, especially suppliers of aluminum, copper, and lithium. The broker rated Buy on CHALCO (02600.HK), CHINAHONGQIAO (01378.HK), and ZIJIN MINING (02899.HK), and was optimistic about pure copper plays such as MMG (01208.HK), CMOC (03993.HK), and JIANGXI COPPER (00358.HK). Additionally, gold and jewelry merchants will benefit from rising gold prices, and the increase in copper prices will expand the GM of copper-clad laminate (CCL) manufacturers like KB LAMINATES (01888.HK). On the negative side, automakers will be pressured by rising bill of materials (BOM) costs. Citi estimated that the cost per unit for mass-market BEVs and PHEVs will ascend by approximately RMB6,565 and RMB4,310, respectively. Among the industry players, XPENG-W (09868.HK) and GAC GROUP (02238.HK) are more vulnerable due to their smaller scale and cheaper ASP. In contrast, BYD COMPANY (01211.HK) and GEELY AUTO (00175.HK) have larger scales and can pass on more than 50% of the cost increases to upstream suppliers. Furthermore, the broker anticipated short-term pressure on second-tier companies in the battery industry, but CATL (03750.HK) has bargaining power, and its Jiangxi lepidolite mine is expected to resume production in 2Q26, making it more defensive than its peers. In the tech industry, XIAOMI-W (01810.HK) may face pressure from mounting memory costs, squeezing the smartphone margins. Memory prices account for about 10-20% of the BOM costs for its smartphones. ~ AASTOCKS Financial News Website: www.aastocks.com | |