BofA Securities has released a report stating that 2026 is the "Red Horse Year," which is favorable for China's base metals market, particularly benefiting electrification and AI power infrastructure this year. The primary drivers include a weak US dollar and a US interest rate cutting cycle that bodes well for metals; persistent supply tightness for copper and aluminum; and key demand drivers this year encompassing grid investment (up 10% year-on-year), electrification (EV battery growth of 27%), energy storage systems (growth of 41%), and AI power demand. While anti-involution policies are becoming more balanced, recent enforcement has been relatively weak.

In terms of stock recommendations, BofA Securities favors aluminum stocks as a top pick, viewing them as alternative investments for AI power supply, with forecasted P/E ratios ranging between 8 to 10 times. The firm maintains a "Buy" outlook on gold, copper, lithium (including battery materials), and cobalt stocks; it holds a neutral view on coal; and is bearish on solar and construction materials such as steel. This bearish stance is primarily due to weak demand, the short-term weakness in enforcing anti-involution policies, and declining steel profit margins.

The bank's top individual stock selections include Aluminum Corporation of China (02600), Zijin Mining (02899), China Hongqiao (01378), Shandong Gold (01787), and Ganfeng Lithium Group (01772).

BofA Securities identified key underperforming stocks as Tongwei Co., Ltd. (600438.SH), Xinyi Solar (00968), Angang Steel Company (00347), and China Resources Building Materials Technology (01313).