Metal stocks tumble up to 5% amid lack of clear details on China’s stimulus plan

Metal stocks came under significant selling pressure in Friday's trading session, December 13, following a lack of specific details from a key Chinese economic conference, which led to disappointment among investors.

On Thursday, China pledged to increase the budget deficit, issue more debt, and loosen monetary policy to maintain a stable economic growth rate as it gears up for more trade tensions with the United States as Donald Trump returns to the White House.

However, the readout from China’s annual agenda-setting meeting did not provide specific details on the size of the proposed stimulus measures, as reported by Reuters. This week, officials promised bolder economic support for the coming year as Beijing braces for the possibility of a new trade war.

Reacting to this development, the Nifty Metal index fell by 2%, dropping to 9,314 points. All but one of the 15 constituents of the index were in the red. Leading the losses was SAIL, which dropped by 5%, followed by NMDC, Tata Steel, Hindustan Copper, and four other stocks, each of which is currently trading with losses exceeding 2%.

China, the world's second-largest economy, continues to grapple with challenges such as weak domestic consumption, a prolonged property sector crisis, and rising government debt. These issues pose risks to Beijing's ability to meet its official growth target for the year.

In response, Beijing has introduced a series of measures since September to support growth. These include interest rate cuts, the removal of homebuying restrictions, and efforts to alleviate local government debt burdens. In October, the central bank also reduced two key interest rates to record lows.

Despite these moves, economists caution that more direct fiscal stimulus targeting domestic consumption will be necessary to fully revitalize the economy, especially amid concerns over a potential escalation in trade tensions with the United States.

Uncertainty over China’s stimulus weighs on base metal prices

Following the lack of clarity regarding the size of China’s stimulus, base metal prices experienced a decline during Friday's trading session. LME aluminium dropped 0.2% to $2,595 per ton, zinc fell 0.5% to $3,061, nickel eased 0.2% to $16,130, lead decreased 0.3% to $1,999.5, and tin slid 0.3% to $29,460.

On the Shanghai Futures Exchange (SHFE), aluminium lost 0.5% to 20,380 yuan per ton, tin fell 1.1%-to-248,150-yuan, zinc declined 1.2%-to-25,570-yuan, lead dropped 0.9% to 17,365 yuan, while nickel rose 0.9% to 128,670 yuan.

Meanwhile, US economic data released on Thursday presented a mixed outlook. Producer price readings varied, and weekly jobless claims exceeded expectations. Wholesale inflation in the US accelerated in November, largely driven by a sharp rise in egg prices.

In Europe, the European Central Bank reduced borrowing costs by 25 basis points as expected, signaling the possibility of additional cuts in future meetings. The Swiss National Bank, however, delivered a larger-than-expected 50 basis point cut.

(with inputs from agencies)

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.