Returns for investors in Chinese rare earths stocks are looking anything but scarce.
Investors are piling into the sector on speculation the materials may be weaponized in China’s tit-for-tat trade war with the U.S. President Xi Jinping’s visit to a rare earth facility in Jiangxi last week fueled an initial rally, with shares surging again on Wednesday after a slew of Chinese media reports advocated the threat of using rare earths as retaliation against the U.S.
Analysts say domestic producers are the big winners as any curb may boost rare earth prices enough to counter a decline in demand. China Rare Earth Holdings Ltd. ended up 24 percent Wednesday after gaining as much as 41%, and JL Mag Rare-Earth Co., the plant Xi visited, climbed by the 10% daily limit for the seventh time in eight trading sessions. Other companies posted more muted gains, with China Northern Rare Earth Group High-Tech Co. adding 8.7% and Xiamen Tungsten Co. advancing 3.8%. Both JL Mag and China Minmetals Rare Earth Co. had more than doubled this year.