Coal sector stocks advanced against the broader market trend. At the time of writing, CHINA COAL (01898) rose 6.25% to HKD 14.46, while YANCOAL AUS (03668) increased by 4.59% to HKD 41.44. YANKUANG ENERGY (01171) gained 2.47%, trading at HKD 15.35, and CHINA SHENHUA (01088) was up 1.86% at HKD 48.14.

The upward movement is supported by several factors. Geopolitical conflicts have driven up international coal prices, compounded by production cuts in Indonesia and adjustments to export quotas. In March, China's thermal coal imports fell 11.5% year-on-year to 26.635 million tons. Reduced imports, coupled with recovering demand from the coal chemical industry and sustained high daily consumption at coastal power plants, have led to generally low inventory levels across the sector during the off-season.

Furthermore, market attention has recently shifted towards the El Niño phenomenon. According to forecasts from the National Climate Center, an El Niño state is expected to emerge in May and develop into a moderate or stronger event during the summer and autumn. Shanxi Securities suggests that while the high uncertainty surrounding the U.S.-Iran conflict implies increased volatility, oil prices are unlikely to see a significant near-term decline. With signs of economic recovery becoming clearer and coal PPI poised to turn positive, coal prices are expected to rise, potentially leading to a Davis Double Play for coal stocks. The current situation is seen as particularly favorable for YANKUANG ENERGY, which has overseas production capacity, and CHINA COAL, which is closely linked to the coal chemical sector.

CITIC Securities adds that the increased probability of an El Niño event could result in more high-temperature days during the summer, boosting domestic demand for thermal coal. This phenomenon may also stimulate higher demand for thermal coal in India, supporting a positive outlook for global coal prices.