China Hongqiao rises nearly 4% in early trading, with Citi believing that coal and aluminum stocks are likely to outperform the market in the short term.

China Hongqiao (01378) surged over 4% intraday. As of the latest report, the stock price increased by 3.53%, currently trading at HKD 39.88, with a turnover of HKD 870 million.

Recently, escalating tensions in the Middle East have led to force majeure factors in the electrolytic aluminum industry. Morgan Stanley believes that short-term, coal and aluminum-related stocks are expected to outperform the market, recommending buying quality mining companies on dips. The market has underestimated the risk of supply disruptions in the aluminum industry. The Middle East produces 6.8 million tons of aluminum annually, with a net export surplus of about 5 million tons, accounting for 7% of global aluminum production.

Morgan Stanley estimates that if there is a substantial supply interruption in the region, aluminum prices could quickly rise to $4,000 per ton, making it one of the most asymmetric upward-moving base metals. Rising energy costs, which account for one-third of smelting costs, along with increased shipping costs, will further push up aluminum prices. The bank believes that if supply disruptions occur in the aluminum industry, China Hongqiao will become a key beneficiary.

(Edited by: Wang Zhiqiang HF013)

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