Institutional Views on Market Outlook | Chemical Sector Welcomes Configuration Window; Pay Attention to Three Major Themes in A-Shares

Shanghai Composite Index declined 0.70% this week, Shenzhen Component Index rose 0.76%, ChiNext Index increased 2.51%, and the Sci-Tech Innovation Board Index fell 1.87%. What is the outlook for the A-shares market? Let’s see what institutions say:

① Galaxy Securities: Earnings will become the core anchor for the next phase of the market, focusing on three main themes

Galaxy Securities points out that recently, the escalation and repeated disturbances of the US-Iran conflict have unsettled market sentiment. Sharp fluctuations in oil prices have driven inflation expectations higher. The Federal Reserve’s rate cut expectations have been frustrated, and risk assets have been under pressure. Compared to this, in the context of a general adjustment in global equity markets, the A-share market has shown strong resilience. Going forward, the market will gradually shift from being “emotion-driven” to “fundamentals-driven,” with earnings becoming the core anchor for the next phase of the market.

Investment opportunities focus on three main themes: first, sectors related to price increases and safe-haven assets. The ongoing US-Iran conflict and tensions in the Strait of Hormuz directly drive energy and alternative demand, leading to repeated activity in related sectors, though with increased range volatility. Focus on chemicals, non-ferrous metals, coal, shipping ports, and oil and gas sectors. Second, sectors benefiting from improved supply-demand patterns and industry profit recovery, as well as value assets with valuation safety margins, such as basic chemicals, non-ferrous metals, steel, building materials, and finance. Third, technological innovation remains a long-term certainty.

② Bank of China Securities: Chemical sector enters a window for allocation

BOC Securities states that the cyclical rotation of commodities, supported by rising crude oil prices and ongoing improvement in industry supply-demand patterns, forms the core logic for the upward trend of the A-share chemical industry. In the short term, the Middle East situation pushes up oil prices, which transmits costs to chemical products, acting as a catalyst for the market; in the medium term, the logic of commodity rotation from industrial products to energy and chemicals to agricultural products is being played out and strengthened, with domestic demand peak season supporting prices; in the long term, policies to “counteract internal competition” improve supply-demand balance, leading to increased market share for leading companies and profit recovery. The cyclical resource sector is expected to gradually expand from non-ferrous metals to chemicals within this year.

③ China Post Securities: Vitamin prices enter a rising channel, with potential for significant future gains

China Post Securities notes that vitamin raw material prices, previously at historic lows, are rising due to upstream chemical raw material price increases and higher shipping costs, which strongly stimulate industry-controlled price hikes. Vitamins are mainly used as feed additives, accounting for a very low proportion of costs, and downstream demand is not sensitive to price changes, making price increases smooth and with large room for further hikes. Under multiple catalysts, vitamins have just entered a price-increasing channel, and historical experience suggests significant elasticity for future gains.

(This article is from First Financial)