Huaxi Securities: Three Major Price Increase Trends Support the A-Share Market

Western Securities points out that by 2026, the main structural trend will shift from technology to the inflation chain. Looking at the SW primary industries, oil refining, coal, chemicals, and non-ferrous metals are expected to lead in gains by 2026. Under the catalyst of geopolitical tensions, the upward price chain market may continue to unfold. Regarding imported inflation, focus on energy, non-ferrous metals, and agricultural products. Among these, the energy chain has a higher certainty of price increases influenced by geopolitical factors, including oil and gas, coal chemical industry, upstream chemical raw materials, and shipping. For non-ferrous metals, small metals and aluminum have a relatively high certainty of price increases, while gold and copper show a mixed pattern of gains and declines. In agricultural products, pay attention to feed raw materials, fertilizers, and pesticides.

For endogenous inflation, focus on traditional industries resisting internal competition, including chemicals, steel, coal, building materials, and hogs. The chemical sector, driven by rising crude oil prices, has already entered a price increase zone; coal, steel, building materials, and hog prices remain low but may recover.

In terms of technology-driven price increases, focus on the upstream segments of the AI computing power industry chain, including infrastructure such as servers and computing chips, storage chips, optical communication, upstream PCB materials (fiber optics, glass fiber), and power energy.

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【West China Macro】The True Gold Is Not Afraid of Fire — The Main Inflation Trend

(1) The Middle East conflict has impacted A-shares, but not fundamentally

The Middle East conflict has pushed oil prices above $90 per barrel. The Strait of Hormuz is effectively blocked, with shipping capacity dropping near zero, affecting about 20% of global oil transport, with roughly 80% heading to Asia. The duration of the conflict remains highly uncertain, with freight rate expectations lasting 1-2 months.

The impact of the oil shock on China is relatively manageable. China’s dependence on foreign oil is about 70%, with diversified imports. As shipping capacity through the Strait of Hormuz declines, China may increase imports from outside the Middle East. In extreme cases, such as supply shortages, the strategic oil reserves accumulated earlier can meet short-term needs, making the overall economic impact relatively controllable.

In the equity markets, “true gold is not afraid of fire.” Global risk appetite has declined, dragging down A-shares, mostly driven by sentiment rather than fundamentals, making a V-shaped recovery more likely. If the war persists, Chinese assets are better positioned to withstand risks and may become a “safe haven” in this conflict.

(2) Three major inflation chains support A-shares

By 2026, the main structural trend will shift from technology to the inflation chain. Looking at the SW primary industries, oil refining, coal, chemicals, and non-ferrous metals are expected to lead gains by 2026. Under the influence of geopolitical tensions, the upward price chain market may continue to unfold.

Regarding imported inflation, focus on energy, non-ferrous metals, and agricultural products. The energy chain has a high certainty of price increases influenced by geopolitical factors, including oil and gas, coal chemical industry, upstream chemical raw materials, and shipping. For non-ferrous metals, small metals and aluminum have a relatively high certainty of price increases, while gold and copper show a mixed pattern. For agricultural products, pay attention to feed raw materials, fertilizers, and pesticides.

For endogenous inflation, focus on traditional industries resisting internal competition, including chemicals, steel, coal, building materials, and hogs. The chemical sector, driven by rising crude oil prices, has already entered a price increase zone; coal, steel, building materials, and hog prices remain low but may recover.

In technology-driven price increases, focus on the upstream segments of the AI computing power industry chain, including infrastructure such as servers and chips, storage chips, optical communication, upstream PCB materials (fiber optics, glass fiber), and power energy.

(3) Seize the rebound opportunities within the three major inflation chains

In imported inflation, oilfield services lead the gains, with chemical-related sectors performing well, such as coal chemicals, chemical raw materials, and agrochemicals. The anti-inflation trend is mainly policy-driven, with modest gains; policy escalation could trigger significant rallies. In technology, the momentum for hardware price increases is weak, so capital continues to explore upstream sectors, including fiber optics, electronic substrates, superhard materials, and power-related stocks.

Risk Warning: Escalation of geopolitical risks in the Middle East. Unexpected developments in the US economy, employment, and inflation. Unexpected adjustments in monetary policy. Unexpected changes in fiscal policy.

(Source: First Financial)