JPMorgan has released a research report stating a constructive view on China's basic materials sector through year-end, as fundamentals remain resilient while market expectations stay subdued.

On individual stocks, the bank raised its target price for Zijin Gold International (02259) from HK$146 to HK$165, maintaining an Overweight rating.

It downgraded Shandong Gold (01787) from Neutral to Underweight, cutting the target price from HK$25 to HK$15.

Zijin Mining (02899) remains the top pick in the copper and gold mining space, rated Overweight with a target price of HK$50.

Jiangxi Copper (00358) keeps its Overweight rating and HK$44 target price.

Ganfeng Lithium (01772) retains an Overweight rating, though its target price was lowered from HK$70 to HK$40.

Tianqi Lithium (09696) remains Neutral, with its target price cut from HK$36 to HK$25.

The bank noted that the sector has delivered a positive return of about 4% quarter-to-date but has lagged the MSCI China Index, which is up around 8%. Sentiment has been weighed down by Fed uncertainty, de-risking, and concerns over weakening supply-demand dynamics in 2027.

JPMorgan expects the sector outlook to receive more support from persistent supply constraints or disruptions, easing rate hike concerns, and continued policy focus on capacity discipline.

The bank prefers copper, given clearer earnings visibility and tighter supply conditions compared with other sub-sectors. Zijin Mining (02899) is the top pick in the copper and gold mining space, currently trading at about 8 times its 2027 forecast P/E, versus a five-year average of approximately 11 times.

On gold, the bank downgraded Shandong Gold (01787) due to a significant cut in production guidance caused by regional safety inspections, with the impact expected to extend into 2027.

Coal remains a tactical opportunity amid sustained high coal prices. JPMorgan expects third-quarter earnings growth to be led by coal, followed by copper, while aluminum profits may slightly deteriorate and lithium profits are expected to decline on falling lithium carbonate/spodumene prices. Steel is expected to be at the bottom of its coverage.

The bank's sector preference ranking is copper > gold > coal (tactical) > lithium > aluminum > steel.