CITIC Securities: Mantenerse firme en la ventaja manufacturera de China, esperar con calma la decisión de abril. La recuperación del ánimo del mercado y de la liquidez podría tomar también varios meses.

来源：中信证券研究

文|裘翔 高玉森 陈泽平 张铭楷 陈峰

After Trump’s TACO this week, the situation in the Middle East may present a delicate balance in which both sides maintain deterrence while also preventing the situation from getting out of control. The fact of supply chain disruption has still not been able to reverse, but before a ceasefire agreement is reached, there may be intermittent passage. In an environment where global rules and order are gradually being lost, countries that have resources, geographic, and manufacturing advantages will fully leverage these comparative advantages to survive and develop. Placed in the context of the Middle East war, intermittent blockades of the Strait of Hormuz may be a tool used to balance actions by the U.S. and Iran. The probability of persistent and repeated energy supply disruptions is increasing. However, disruptions in energy and resource supply may have a different impact on industrial demand than in the 1970s and 1980s, when Europe and the U.S. had already been in the early stages of deindustrialization, outsourcing production, and pushing globalization. The two oil crises actually accelerated this process. Today, the largest background difference is that the world is in a process in which insecurity among countries is increasing and reindustrialization is being advanced. This also affects the analytical framework going forward. From the direct impact of events, three directions are worth watching next: the acceleration of global electrification, overseas shifting orders to domestic production, and more supply-chain diplomacy. In the short term, the capital market is still in a cooling-off phase of sentiment, and a loss-avoidance mindset may generate some de-risking and trimming demand. In terms of allocation, it is suggested to continue to hold firm in China’s advantaged manufacturing industries and wait for the April decision.

**　The Middle East trajectory after Trump TACO：**

**　　Maintaining deterrence, a delicate balance**

1）U.S. Treasury yields have reached a key choke point, and the probability that TACO will be carried out in time before the situation gets out of control still remains. This week, Trump repeatedly delayed so-called final ultimatums twice, and also used calls in the form of public statements multiple times to ease market concerns about the Middle East situation and the interruption of energy supply. Although the market has gradually become desensitized to these verbal statements, objectively they still show that the possibility of TACO remains. Since last year, whenever 10-year U.S. Treasury yields reached the 4.4%~4.5% range, financial market pressure has surged, and Trump seems to have taken TACO actions. On April 9 last year, Trump announced a 90-day suspension for “reciprocal tariffs” for most countries, and on that day the 10-year U.S. Treasury yield was 4.40%; on May 25, Trump announced agreement to postpone the threat of adding 50% tariffs to the European Union and extended trade negotiations to July 9, and on that day the 10-year U.S. Treasury yield was 4.51%; on July 7, Trump signed an executive order extending the suspension period for reciprocal tariffs originally scheduled to take effect on July 9 to August 1, and on that day the 10-year U.S. Treasury yield was 4.40%; on July 22, Trump announced a trade agreement with Japan, lowering the tariff rate on U.S. exports to Japan from the originally planned 25% to 15%, and on that day the 10-year U.S. Treasury yield was 4.40%. Currently, the 10-year U.S. Treasury yield is again at this key choke point.

2）The fact that the supply chain has been disrupted still has not reversed, and there is the possibility of intermittent passage before a ceasefire agreement is reached. According to Ship Vision Bao’s data, over the past four weeks the average number of tankers entering the strait was only 11 voyages per week, with average loadings of 4.05 million tons (the average for the first 10 weeks before the outbreak of war was 420 voyages and 36.391 million tons; currently they have recovered to 2.6% and 1.1% respectively). Over the past four weeks the average number of tankers exiting the strait was only 18 voyages per week, with average loadings of 11.1 million tons (the average for the first 10 weeks before the outbreak of war was 421 voyages and 35.919 million tons; currently they have recovered to 4.3% and 3.1% respectively). Supply-chain pressure has started to spill over into Asian and European countries: it has spread from upstream into the midstream manufacturing segment, and phenomena such as tight product availability and a pause in quoting have begun to appear frequently. Although both the U.S. and Iran have proposed ceasefire conditions, there are at least five major core differences between the two sides, making the probability of reaching agreement in the short term extremely low. The rapid rise in economic costs means that intermittent passage is still possible before negotiations are completed, but Iran may more frequently use the blockade as an economic weapon to balance the U.S. through actions.

**　The probability of persistent energy supply disruptions is increasing, but**

**　　The impact on demand is different from the 1970s and 1980s**

In the 1970s, Europe and the U.S. had already been at the beginning of the broader trend toward deindustrialization, outsourcing production, and pushing globalization. The oil crisis and rising costs accelerated this process. But this time, the backdrop is the reverse of globalization: Europe and the U.S. are seeking reindustrialization, and countries’ demands for autonomous, controllable, and secure supply chains are increasing day by day. According to World Bank data, the global trade share of GDP fell from its post-pandemic peak of over 62% to around 57% in 2024. However, total construction spending in U.S. manufacturing increased from $983.2 billion in 2021 to $2.8 trillion in 2024. AI infrastructure, energy resource infrastructure, broader categories of storage demand, and autonomous and controllable needs in key production links will all create strong industrial demand. This conflict will only push major countries to further raise their industrial level to cope with the consumption of modern war conflicts, further pursue supply-chain diversification and stability, and further enhance industrial capabilities. At the same time, it will also push smaller countries to do everything possible to leverage their own resources, energy, and geopolitical advantages in order to survive in competition between the U.S. and China. This backdrop means that even if energy costs rise, global industrial demand will not be weak, while supply disruptions may be sustained and supply-demand gaps will appear from time to time. When security considerations replace efficiency as the dominant factor, limited resources are directed toward industrial sectors, and the final effect of rising costs is to squeeze the consumption sector (AI replacement is another force). In an environment of strong industry and weak consumption, it is difficult to simply apply a “stagflation” framework, and it is also hard to judge whether money is tight or loose. Domestically, similar conditions were experienced in 2021.

**　Electrification accelerates, overseas shifts orders to domestic：**

**　　Supply-chain diplomacy is a direction worth watching**

Three directions need close attention in the future. First, the global electrification process is accelerating. This is a direction that the market already has consensus on and is starting to price. China’s supply capabilities and scale advantages across the entire electrification industrial chain—such as solar photovoltaics, wind power, lithium batteries, and power equipment—are expected to gradually become more evident after short-term oil price shocks fade, allowing it to capture a stronger dividend from external demand. Second, overseas shifting orders to domestic production. Some traditional advantaged industries in Europe (such as chemicals) have already moved from isolated cases to a trend, as they shut down production capacity due to high energy costs and carbon mechanisms. After this round of supply-chain disruptions, some of China’s competitors in the Asia-Pacific region have also begun shutting down production capacity, and recently there has been a noticeable increase in cases where downstream buyers request quotes from domestic producers. For China, cost buffers in the coal-chemical route across products such as methanol, urea, PVC, MDI, etc., and the structural substitution of oil demand driven by electrification, further highlight cost resilience for midstream manufacturing in an environment where the oil price policy center rises. Overseas shifting orders to domestic production will be an important observation line going forward. Third, supply-chain diplomacy. According to a report by Bloomberg on March 24, when Philippine President Marcos was interviewed, he said that given the energy crisis the Middle East conflict has brought to the Philippines, he is willing to restart negotiations with China on joint oil and gas development in the South China Sea. According to Bloomberg on March 12, as the Middle East conflict expands and disrupts liquefied natural gas supply, forcing some Indian fertilizer plants to halt production, and since India is the world’s largest importer of urea, Indian officials have requested the Chinese side to consider loosening restrictions on urea exports. China, leveraging its export control capabilities in fertilizers, rare earths, and key minerals, in effect constructs valuable diplomatic leverage. Companies that receive additional quotas through targeted supply are expected to benefit fully in this process.

In the short term, the market is still in a cooling-off phase of sentiment,

a loss-avoidance mindset may generate some de-risking demand

From derivatives indicators, the most panicked stage may already have passed, but sentiment is still cooling. On March 23, MO options (CICC1000 index options) showed extreme panic characteristics of “calendar spread narrowing combined with a big surge in implied volatility.” This was the first time since the recent decline in March that an emotion-release signal appeared. And in the following four days this week, MO options’ IV (implied volatility) dropped sharply, indicating that extreme panic sentiment may have been clearly alleviated. However, derivatives indicators show that sentiment is still continuously cooling. We construct an MO sentiment indicator based on MO options trading volume, open interest, IV, skewness, and other indicators. This indicator has stayed below the 30% percentile level of the past nearly 100 trading days for the past two weeks. Sample private placement positions and investor sentiment indicators also show cooling signals. As of March 20, the latest sample private fund position via the China CITIC Securities channel was 79.3%, the lowest level since February. Since March, tools-type ETFs favored by absolute return funds (industry-type and thematic-type ETFs) have shown significant net redemptions. As of March 26, net outflows from tools-type ETFs (MA5) were RMB 3.12 billion, at the 2.0% percentile level over the past one year, possibly reflecting trimming/de-risking needs from absolute return funds. Because conflicts in the Middle East are difficult to resolve quickly and funds lacking patience or with loss-avoidance tendencies often prefer to trim into rebounds to avoid volatility. Referring to the A-share market after the reciprocal tariff shock in April 2025: from the time the reciprocal tariffs were implemented in April 2025 and the escalation of the China-U.S. tariff war, to the China-U.S. Geneva talks in May and the London talks in June, it took more than two months in total; then the A-share market only started to break out of structural opportunities in July, and the rally accelerated in August. The restoration of market sentiment and fund flows in this round may also take several months.

In terms of allocation, it is suggested to continue to hold firm in China’s advantaged manufacturing industries,

and wait for the April decision

At present, the recommended bottom-position holdings are industries with China’s share advantages, with high difficulty and cost for overseas capacity resets, and where supply elasticity is easily affected by policies. The base includes chemicals, non-ferrous metals, power equipment, and new energy. Recent liquidity shocks have pushed many products’ valuations back into cheap areas again. The extreme negative narrative has some similarity to the overseas-listed products after April 7 last year, which once again brought a large expectation gap and low valuation. Based on the above bottom-position holdings, it is suggested to continue increasing exposure to low-valuation factors, with key focus on insurance, brokerage firms, and power. From the short-term business-cycle signals driven framework, raising prices is still the most “sharp spear.” The probability that the PPI trade becomes the main line for the whole year is rising, and April to May is the decision period. Several clues and structural opportunities can be prioritized: 1）In chemicals where, under an oil price shock, there exist second alternative raw material / process route products (these products’ “coal content” in China is typically higher than that of overseas competitors), the first raw material (crude oil) price rise will create a high price-spread advantage; 2）Products where Middle East / Western Europe capacity share was previously large—supply interruption is expected to bring additional supply-demand gaps, thereby triggering price-rise expectations; 3）Products where alternative products rise in price due to cost impacts, and demand improvement brings supply-demand gap expansion; 4）Products that are already in a price-increase channel, where cost increases provide an opportunity for a favorable supply-demand tight balance. In addition, innovative drugs have recently shown some de-sensitization characteristics of liquidity shock, while the industrial trend itself has not changed, so it is also worth paying attention.

**　Risk factors**

Escalation of friction in science and technology, trade, and finance between China and the U.S.; domestic policy intensity, implementation effectiveness, or economic recovery falling short of expectations; tightening of global and domestic macro liquidity beyond expectations; further escalation of conflicts in regions such as Russia-Ukraine and the Middle East; China’s real estate inventory digestion falling short of expectations.