rare earth Photo:VCG

China's rare-earth stocks rallied on Thursday morning in response to news that China has set up a new rare-earth conglomerate by merging the minerals' assets in several state-owned enterprises, as investors voted for the sector's promising development prospects. 

According to a report by China Central Television (CCTV) on Thursday morning, China has formally set up the China Rare Earth Group. China's state assets watchdog, the State-owned Assets Supervision and Administration Commission (SASAC) will take a controlling 31.21 percent stake in the new company, while China Minmetals Corp, the Aluminum Corporation of China (CHALCO) and the Ganzhou Rare Earth Group Co each hold 20.33 percent of the new entity. 

China Minmetals Rare Earth Co on Wednesday also revealed in a stock filing that the company had received notice from its parent company that the SASAC has approved to set up the new company based on the strategic merger of assets from several state-owned enterprises. 

On Thursday morning, rare-earth permanent magnet stocks edged up by 0.28 percent at the opening of trade. Shares of CHALCO rose 3.8 percent, while the China Minmetals Rare Earth Co saw its shares rise by 2.27 percent. Jiaozuo Wanfang, a subsidiary of the CHALCO, saw its shares rise to the trading ceiling of 10 percent on Thursday morning. 

By the end of the morning trading session, the rare-earth shares rose by 0.65 percent. The shares of CHALCO surged by 8.25 percent. 

Surging rare-earth stocks reflected investors' optimistic outlook on the development prospects of China's rare-earth industry after the establishment of the mega state-controlled group. Industry insiders have estimated that the new company will control around 70 percent of China's heavy rare-earth minerals, an indispensable material in the manufacturing of high-tech consumer electronics and military equipment.

Analysts also told the Global Times in recent days that merging of the state firms' assets could further boost the industry in terms of areas including product quality and resource distribution by allowing China's rare-earth resources to be managed in a more standardized, concentrated manner. 

China provides more than 85 percent of the world's rare earths and is home to about two-thirds of the global supply of these scarce metals and minerals, according to a report by the US think tank the Center for Strategic and International Studies.

Global Times