CITIC Securities released a research report stating that the allocation ratio of domestic A-share non-ferrous metal sector funds in 2024Q1 increased significantly by 1.58pct compared to the previous period, with a noticeable increase in the allocation ratio of industrial metals and minor metals sectors. During the bull market of non-ferrous metals, there is a clear feature of sub-sector rotation taking the lead alternately, with the usual sequence being precious metals-industrial metals-minor metals. The rise in gold prices may be a leading signal for other commodity bull markets, and the cumulative return of the minor metals sector during the bull market is relatively high. If this round of non-ferrous metals market follows historical patterns, it may only rotate to the "precious metals" phase. However, the difference is that the proportion of supply in pricing has increased, and resource commodities with limited supply have already seen a bull run even though demand has not significantly improved, mainly due to constraints such as decreasing resource grades, inadequate capital expenditure in the mining industry, and supply bottlenecks. If accompanied by loose monetary policy in the future, global economic recovery could make demand the second major driver of commodity prices. CITIC Securities' main points are as follows: The allocation ratio of non-ferrous metal sector funds in 2024Q1 increased significantly compared to the previous period. In the first quarter of 2024, the allocation ratio of non-ferrous metal sector funds in the CITIC primary industry was 5.21% (considering only actively managed funds). Since the second quarter of 2023, the allocation of non-ferrous metal sector funds has increased quarter by quarter. Faced with a new wave of global technological revolution, the essential consumption status of non-ferrous metals in global industrial development has gradually emerged, and the scarcity of non-ferrous metal resources has become increasingly obvious. Long-term supply tightness has become an inevitable trend, combined with the gradual end of the Federal Reserve's rate hike cycle, de-dollarization acceleration, rising anti-globalization and rising resource nationalism, the proportion of global resource allocation in the field is showing a systematic increase. Looking at sub-sectors, the allocation ratio of industrial metals and minor metals sectors has significantly increased, while the allocation ratio of energy metals has declined. In terms of the SW secondary sub-sectors, the fund holdings and proportions from high to low are as follows: industrial metals 807.05 billion yuan (3.0%), precious metals 211.14 billion yuan (0.8%), minor metals 185.62 billion yuan (0.7%), energy metals 145.68 billion yuan (0.5%), and metal new materials 31.84 billion yuan (0.1%). Industrial metals holdings remain in the first place, with the proportion of holdings increasing significantly from 1.9% in the fourth quarter of 2023 to 3.0%; the value of minor metal holdings is approaching precious metals, with the proportion of holdings increasing significantly from 0.4% in the fourth quarter of 2023 to 0.7%, a significant increase compared to the previous period; while the reduction in energy metal allocation is evident, with the proportion of holdings decreasing from 0.7% in the fourth quarter of 2023 to 0.5%. In terms of individual stocks, the total holding value of the top ten heavyweights accounts for 71%, with Zhijin Mining as the largest heavyweight stock, accounting for 36% of the total holding value in the non-ferrous metal sector in the first quarter of 2024. The top ten heavyweight stocks in the non-ferrous metal sector in the first quarter of 2024 has a holding value and proportion of 498 billion yuan (36.1%) for Zhijin Mining, 92 billion yuan (6.7%) for Luoyang Molybdenum, 74 billion yuan (5.4%) for Yintai Gold, 59 billion yuan (4.2%) for Shenhua Stock, 51 billion yuan (3.7%) for Zhongjin Gold, 50 billion yuan (3.6%) for Shandong Gold, 45 billion yuan (3.3%) for Tianqi Lithium, 44 billion yuan (3.2%) for Huayou Cobalt, 38 billion yuan (2.8%) for Chinalco, and 33 billion yuan (2.4%) for Jinchengxin. The total holding value of the top ten heavyweights is 98.4 billion yuan, accounting for 71.3% of the total. Regarding the increase and decrease in holdings of individual stocks, the increase in holdings is concentrated in copper-related stocks. The top five stocks with increased positions are Luoyang Molybdenum (603993.SH) with an increase of 850 million shares, Zhijin Mining (601899.SH) with an increase of 646 million shares, Chinalco (601600.SH) with an increase of 201 million shares, Zhongjin Gold (600489.SH) with an increase of 121 million shares, and CGN Mining (01164) with an increase of 87 million shares. The top five stocks with decreased positions are Zhongjin Huangqiao with a decrease of 63 million shares, Chifeng Gold with a decrease of 61 million shares, Dinergy New Materials with a decrease of 39 million shares, Huayou Cobalt with a decrease of 28 million shares, and Jinli Permanent Magnet with a decrease of 26 million shares. Resource commodities with limited supply are expected to rise, and minor metals may shine more brightly. The end of the Federal Reserve rate hike cycle and the imminent start of an interest rate cut cycle have sparked expectations for the weakness of the US dollar, stimulating the "financial properties" of non-ferrous metals. Domestic and international demand recovery will drive the growth of non-ferrous commodity consumption, the ongoing global green energy revolution, the potential for new quality productivity domestically, and the possibility of starting a new cycle of demand for certain commodities. On the supply side, constraints such as resource protectionism, inadequate capital expenditure, and supply bottlenecks have led to limited supply of resource commodities represented by copper and aluminum, which may usher in a bull market. Minor metals, with stronger resource scarcity, more prominent supply rigidities, and closer ties to the development of new quality productivity, may perform particularly well. The market may have certain expectations for minor metals, and the central prices of related commodities and equity targets in the capital market may resonate upward, marking the start of a bull market. Looking back at the internal rotation rules of the non-ferrous metal industry, it can be seen that during the bull market of the non-ferrous metal industry, there is a clear feature of sub-sector rotation taking the lead alternately, with the usual sequence being precious metals-industrial metals-minor metals. Due to data availability, the bank selected four rounds of non-ferrous metal stock bull markets since 2008 as the analysis objects, selecting the Shanghai-Shenzhen stock index for minor metals, industrial metals, and precious metals as the sub-sectors respectively. The corresponding excess return was calculated as "cumulative return of sub-sector - cumulative return of non-ferrous industry". The first cycle (2008.11-2010.10) had a relatively long sequence, with the first half rotating as "precious metals-industrial metals-minor metals", and the second half as "minor metals-precious metals-minor metals"; the second cycle (2014.10-2015.6) had the pattern of "precious metals-industrial metals", with no outstanding performance in minor metals; the third cycle (2016.2-2017.9) followed the pattern of "precious metals-industrial metals-minor metals"; the fourth cycle (2020.4-2021.8) followed the pattern of "precious metals-minor metals-industrial metals-minor metals". Overall, the rise in gold prices may be a leading signal for other commodity bull markets, and the cumulative return of the minor metals sector during the bull market is relatively high.The characteristics of the rotation of favored sectors: In the non-ferrous metals sector, the pricing factors of each variety are different. Precious metals mainly consider financial attributes (in recent years, geopolitical disturbances have increased the impact of safe-haven properties), industrial metals need to consider both financial attributes and commodity attributes, while minor metals only need to consider commodity attributes. In each economic cycle, with the continuous decline of the economy, monetary policy often becomes more loose, interest rates continue to fall, and gold has the highest interest rate sensitivity and is also the first to rise in price. As the real economy recovers, the commodity attributes of industrial metals and minor metals become apparent. However, due to the existence of certain financial attributes of industrial metals, the pace of price increases varies. In the context of the stock market, since the cost changes in the metal industry are generally not large, fluctuations in commodity prices will lead to changes in profits, and the sectors where prices rise first will also release profits faster.Current position in this cycle: Prices of precious metals and limited supply commodities are on the rise significantly, indicating a rotation to the "precious metals" stage when compared to historical trends. This cycle is somewhat different from previous ones. Firstly, the increase in gold prices is not simply following the framework of real interest rates as before. The weakening of the US dollar credit has led to central banks increasing their gold purchases, along with growing geopolitical instability driving gold prices up. However, this does not mean that the anchor of real interest rates is ineffective. If real interest rates further decrease, the opportunity cost of holding gold will rise, and there is still room for gold prices to rise. Secondly, the proportion of supply in pricing has increased, with limited supply resources experiencing a bullish trend even without a significant improvement in demand. This is mainly due to constraints such as decreasing resource quality, insufficient capital expenditure in the mining industry, and supply bottlenecks. If accompanied by loose monetary policy in the future, as the global economy recovers to the stage of revival or even prosperity, demand is expected to become the second driving force behind commodity prices. Currently, it is advised to focus on investment opportunities in gold and limited supply resources.