China Basic Materials — 3Q26 Earnings Preview: Coal and copper to lead earnings growth; downgrade SD Gold to UW

We are constructive on China materials into year-end, as resilient fundamentals are set against subdued expectations: 3Q26-to-date performance has remained positive at +4% but has underperformed MSCI China (+8%), with sentiment weighed down by Fed uncertainty, de-risking and concerns over softer 2027 S/D. We see a more supportive backdrop ahead, underpinned by continued supply constraints/disruptions, moderating rate-hike concerns and continued policy focus on capacity discipline. We prefer copper, where earnings visibility and supply tightness are clearer than other subsectors, and highlight Zijin Mining as our top pick given its inexpensive valuation at 8x FY27E P/E (vs. 5-year avg. PE of 11x). In gold, we remain OW on Zijin Gold but downgrade Shandong Gold from N to UW, as regional safety inspections drove a material production guidance cut and we expect the impact to extend into 2027. Coal remains a tactical opportunity on higher-for-longer prices. Coal should lead 3Q26 QoQ earning