"Coal" fly "color" dance difficult to continue

The recent surge of "coal" and "color" (nickel) stock rallies has come to a sharp halt, as top players in the Panjiang Group and Jinneng Nickel saw their shares fall out of favor. The decline in colored plates exceeded 1.5%, marking a reversal after they had led the market's momentum. For a moment, the coal sector seemed to be on a strong upward trajectory, but it quickly turned into a cautionary tale for investors. Traditional cyclical stocks like coal and non-ferrous metals have drawn significant attention, with analysts expressing a more cautious outlook. On Monday, coal-related stocks showed mixed performance, with some struggling to maintain their gains. Although the resource sector experienced a rebound that helped lift the broader market, the rally was short-lived, as the overall market turned negative again. Coal stocks opened with mixed signals, some rising while others fell, leading to a downward trend within the sector. While companies like Yanzhou Coal and Hengyuan Coal managed to hold strong, the sector as a whole failed to sustain its momentum. At the end of the day, Yunmei Energy hit a daily limit down, with several other coal stocks falling by over 4%. Since mid-March, coal stocks had been on a roll, fueled by strong demand and price increases. However, this momentum has started to fade. Panjiang’s shares dropped sharply by 4.01%, closing at RMB 8.13 per share. Only Yanzhou Coal continued to hit daily limits, while Hengyuan Coal rose over 3%. More than 2% of coal stocks declined, with nearly 30 stocks falling by more than 2%. In late April, policies from Inner Mongolia and Shanxi aimed at stabilizing the coal market began to take effect, helping to stabilize prices. This led to a temporary boost in coal stock performance. Panjiang Co., which had surged early in March, climbed by 63% due to state-owned asset reforms. Despite this, analysts remain cautious, noting that most coal companies still struggle with weak fundamentals. While the sector is showing signs of recovery, the short-term potential for growth is limited, and the recent drop in Panjiang’s shares serves as a warning for investors. CSC analysts pointed out that although coal stocks have gained momentum, the lack of solid fundamentals makes it difficult to sustain the upward trend. BOC International analysts also noted that many coal stocks remained sluggish despite a previous day’s rise, with no significant increase in trading volume. Additionally, coal prices are still declining, driven by weak demand. Whether the sector can stabilize remains uncertain, and the rating for the industry remains neutral. Meanwhile, the nickel sector faced a similar fate. After a week of strong gains, the “nickel tycoons” such as Zynn Nickel and Waze Cobalt & Nickel suffered heavy losses, with the latter falling by 6.22%. Huaze Cobalt & Nickel, once a leader in the sector, saw a massive sell-off, with its turnover rate reaching an all-time high of 46%. Behind-the-scenes data revealed that large institutional funds were actively selling off their positions, signaling a shift in sentiment. According to the Dragon Tigers rankings, the first buy-in seat for Huaze Cobalt only purchased 22.34 million yuan, while the China Galaxy Securities Shaoxing branch sold over 37.08 million yuan. Even the well-known Guotai Junan trading unit appeared in the selling list, netting 12.79 million yuan. On May 9th, the unit had bought 11.7 million yuan worth of Huaze Cobalt, but after a wave of selling, the hot money that had driven the stock up had already exited. Despite these declines, some stocks like Hengshun Electric still managed to rise by 6%. However, the Longhu list showed that while a major securities firm bought nearly 52.89 million yuan, five selling seats included an institutional one, which sold 61.95 million yuan, accounting for 9.11% of the day’s turnover. This highlights the ongoing pressure from both hot money and institutional investors. With the nickel sector’s decline, the entire non-ferrous metals industry followed suit, with Yunnan Shuye and Dongfang Shuye falling over 4%, and Tongling Nonferrous Metals and Western Mining dropping over 3%. Analysts attribute this weakness to the recent surge in London Nickel prices and the influx of hot money into nickel stocks. However, after a sharp rise, many of these stocks faced heavy selling from both hot money and institutions, as investors took profits. With short-term gains too high, the market seems to be cooling down, leaving the sector in a state of uncertainty.

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