The rare earth sector has recently become a focal point in the market, attracting significant attention. With the industry's supply-demand balance remaining tight, raw material prices supported, and the approaching peak season expected to boost demand, rare earth-related products are drawing substantial capital inflows.

As the first rare earth industry-themed ETF in the market (launched on 21/2/26), the Rare Earth ETF Huatai-PineBridge (516780) has seen net capital inflows on six of the seven trading days since August (from 3/8 to 11/8), accumulating a total of 201 million yuan during this period. As of 11/8/26, the fund's latest share count and scale reached 2.481 billion units and 2.164 billion yuan, respectively, with a share growth of 54.48% over the past three months, reflecting active trading sentiment.

The current pattern of declining volumes, rising prices, and a tight supply-demand balance in the rare earth industry continues to intensify. Data shows that rare earth export volumes fell further in July, while average prices increased. July exports totaled 4,223.5 tonnes, a 29.54% year-on-year decrease and a 17.26% month-on-month decline, marking the lowest monthly level since March. Cumulative exports from January to July amounted to 34,706.3 tonnes, down 10% year-on-year. However, the corresponding average export price rose to $12.34 per kilogram, a significant 103.14% year-on-year increase, indicating a shift in export structure toward higher-value medium and heavy rare earth products. The global rare earth supply shortage continues.

A recent research report from CITIC Securities suggests that, against the backdrop of quota constraints and declining imports, the rigidity of rare earth supply is strengthening. Stricter tax policies have led to persistently low operating rates at scrap recycling enterprises. The industry's rigid restocking demand, combined with the approaching peak season, is expected to drive a recovery in demand. Emerging sectors such as robotics, low-altitude economy, and industrial motors may unlock long-term demand growth potential. The supply-demand dynamics of the rare earth industry are likely to remain tight, and rising prices could lead to better-than-expected mid-year results for companies in the rare earth supply chain. The strategic allocation value of the rare earth industry chain warrants continued attention.

On the macroeconomic front, the U.S. Bureau of Labor Statistics released weaker-than-expected non-farm payroll data for July on 7/8, with a slowdown in labor force participation and further declines in wages, reinforcing signals of a cooling U.S. labor market. Market expectations for a rate cut by the Federal Reserve within the year have further diminished. Meanwhile, signs of easing geopolitical tensions between the U.S. and Iran may jointly suppress market inflation expectations. Additionally, the U.S. President convened a high-level meeting on critical minerals on 7/8, announcing a $3 billion investment in critical mineral mining to restore the country's position as a minerals superpower. Driven by multiple factors, rare earths, which possess dual attributes as both a strategic resource and a key material for AI, may benefit from policy countermeasures and supply chain security demands, potentially presenting a rebound opportunity.

It is noted that the Rare Earth ETF Huatai-PineBridge (516780) closely tracks the CSI Rare Earth Industry Index, which selects listed companies involved in rare earth mining, processing, trading, and application as samples to reflect the overall performance of rare earth industry listed companies. Its top five constituent stocks include Northern Rare Earth, Baotou Steel Union, Aluminum Corporation of China, China Rare Earth, and GEM Co., Ltd, all leading enterprises with strong competitiveness in the industry. Investors can leverage Rare Earth ETF Huatai-PineBridge (516780) to capitalize on the revaluation opportunity driven by the dual engines of upgrading the strategic attributes of rare earths in great power competition and a tightening supply-demand balance.

According to the 2025 annual report, as of 31/12/25, the number of holders of Rare Earth ETF Huatai-PineBridge (516780) reached 60,300, making it the only rare earth-themed ETF in the entire market with over 50,000 holders during the same period. The fund manager of Rare Earth ETF Huatai-PineBridge (516780) and its connected funds (Class A: 014331, Class C: 014332), Huatai-PineBridge Fund Management, is one of the first batch of ETF managers in China, with over 19 years of deep expertise in index investing. The company has provided investors with transparent, tradable, and low-cost index tools such as CSI 300 ETF Huatai-PineBridge (510300) and A500 ETF Huatai-PineBridge (563360). As of 30/6/26, the company's ETFs have generated cumulative profits of over 180.6 billion yuan for holders in the past two years, making it one of only three public fund companies in the A-share market with cumulative profits exceeding 160 billion yuan during the same period.

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