Brokerage Firm Morning Meeting Highlights: Exploring Undervalued Sectors

Ask AI · What is the underlying capital logic behind the continued outperformance of low-valuation sectors?

Cailian Press, April 2nd: Yesterday, the market opened high and fluctuated, with the three major indices all rising over 1%, and the Sci-Tech Innovation 50 Index up over 3%. The combined turnover of the Shanghai and Shenzhen markets was 2.01 trillion yuan. In terms of sectors, pharmaceuticals, computing hardware, and computing leasing concepts performed actively. On the downside, power and high-speed rail subway sectors declined. By the close, the Shanghai Composite rose 1.46%, the Shenzhen Component Index up 1.7%, and the ChiNext Index up 1.96%.

At today’s broker morning meeting, Huatai Securities believed that the Strait control lasting over a month has deepened supply disruptions in the Asian petrochemical chain; Huaxi Securities suggested continuing to explore low-valuation sectors; Guojin Securities predicted that recession trades are gradually approaching.

Huatai Securities: Strait control lasting over a month has deepened supply disruptions in the Asian petrochemical chain

The Hormuz Strait has been under control for over a month, causing widespread supply disruptions in Asia’s petrochemical industry chain. Rising costs and tightening supply have driven product prices higher. International diesel and jet fuel price spreads have widened significantly, while ethylene/propylene chains face demand shortages, causing price resistance; aromatic chains show differentiated performance based on product demand resilience. Different countries in Asia face varying risks due to their oil strategic reserves and alternative energy levels, with China’s supply chain rupture risk relatively lower. Meanwhile, industry capital expenditure contraction and dual carbon controls will promote supply structure optimization. This supply disruption is expected to accelerate the reshaping of Asia’s petrochemical industry landscape. As uncertainties decrease and downstream inventory replenishment demands emerge, chemical profits are likely to improve. In the long term, this event will accelerate China’s strategic move toward energy independence and control, with the development of modern coal chemical, green hydrogen, and new energy replacing oil demand expected to speed up, gradually reducing reliance on imported oil and gas.

Huaxi Securities: Continue to explore low-valuation sectors

The low-valuation style has continued to outperform in the first quarter. The reasons are that the overall market valuation is high and risk appetite is under pressure, with capital showing a fear of high prices, but the logic of market stabilization remains—abandoning positions might miss rebound gains. Under these circumstances, capital tends to seek low-valuation rebound opportunities. In Q2, continue to explore low-valuation sectors. From PE and PEG perspectives, power equipment and media are worth further attention, with their PE (TTM) percentiles since 2016 at 67% and 68%, respectively, and PEG both at 0.91. From PB perspective, focus on agriculture and finance, with PB percentiles generally below 20%, and ROE above 8%. Conversely, non-ferrous metals and coal have higher PB percentiles, and their market performance depends on whether inflation can continue to exceed expectations.

Guojin Securities: Recession trades are gradually approaching

Recession trading means equities and commodities still face the possibility of fundamental damage, but bonds might be the first to bottom out. If oil prices break above key levels (115-120 USD), it could trigger a full-scale recession trade; additionally, worsening situations such as halted negotiations, strait disruptions, escalated bombings, or Gulf countries stepping in could all serve as triggers for recession trades. In short, the end of the war will be marked by when and at what cost the strait is “semi-opened” to whom, but any form of “semi-opening” cannot prevent the global economy from slowing down (compared to pre-war levels). Recession trading is not just “the wolf is coming,” but the market is gradually pricing in the probability of recession, with many (one-sided) uncontrollable factors still accumulating.

(Cailian Press)