The market dipped today before narrowing losses in the afternoon. Trading volume on the Shanghai and Shenzhen exchanges totaled 2.44 trillion yuan, down 66.5 billion yuan from the previous session. Sector-wise, coal, power, and chemicals showed relative strength, while defense and technology sectors were generally weak. At the close, the Shanghai Composite Index fell 0.1%, the Shenzhen Component Index dropped 0.63%, and the ChiNext Index declined 0.96%.
Ongoing U.S.-Iran tensions continue to unsettle markets, with trading activity centered on energy-related sectors like coal, chemicals, oil, and solar. Beyond rotation among energy subsectors, significant internal shifts between high and low valuations are evident within each sector. In contrast, the technology sector is broadly pressured by declining risk appetite, with global tech stocks experiencing sharp volatility and various subsectors facing varying degrees of pressure. Strategically, investors can pursue two approaches. First, opportunities lie hidden in the energy sector; beyond oil, focus on rotation in chemicals and solar. Second, the tech pullback may present buying opportunities; watch for rebounds in fundamentally strong products that have seen sharp short-term declines. However, overall caution is warranted as declining global risk appetite increases the difficulty of equity investments, necessitating controlled positions and risk management.
Today, the energy sector remained active, with the Coal ETF closing up 5.28%, the Oil ETF rising 0.48%, the Solar ETF gaining 0.26%, and the Chemicals ETF ending flat.
The Strait of Hormuz is the only sea passage from the Persian Gulf to the Indian Ocean. Stretching 150 kilometers east-west and 64-97 kilometers north-south, with its narrowest point only 48.3 kilometers wide, it connects the Persian Gulf, the Gulf of Oman, and the Arabian Sea, leading further to the Indian Ocean. Despite its narrowness, the strait handles nearly one-third of global seaborne crude oil and one-fifth of liquefied natural gas shipments.
The conflict, now in its second week, may continue to fluctuate in the short term. On the 11th local time, Iranian President Pezeshkian stated, "The only way to end this conflict is to recognize Iran's legitimate rights, provide compensation, and offer firm international guarantees to prevent Iran from being aggressed again." The same day, U.S. forces threatened to attack Iranian civilian ports in the Strait of Hormuz.
Due to the U.S.-Iran conflict, transport disruptions have led to crude output cuts in several countries. According to Bloomberg, as of March 10, Iraq may have cut production by 2.9 million barrels per day, representing a 67% loss in total output; Saudi Arabia reduced output by 2-2.5 million bpd, a 20-25% loss; the UAE cut 800,000 bpd, a 14-22% reduction; and Kuwait reduced output by 500,000 bpd, a 19% loss. Combined, these four countries have cut 6.7 million bpd, nearly 7% of global crude production.
With oil supply shrinking rapidly, crude prices have continued to rise recently. Looking ahead, oil prices may remain volatile. Despite hopes for peace, amid geopolitical instability, the Oil ETF (561360) could serve as a viable hedging option.
In the chemicals sector, stronger crude prices provide robust cost-side support for downstream chemical products. As the upstream source of the chemical industry, the trend-driven rise in crude prices has quickly lifted market quotes for olefins, aromatics, and various fine chemicals through supply chain transmission, creating a notable "cost-driven" rally. Concurrently, concerns over potential blockades of the Strait of Hormuz—a global choke point for fossil fuels—have heightened expectations of tightening global chemical supply chains. This potential supply reduction further fuels bullish sentiment toward the chemicals sector. Along these lines, the Chemicals ETF Guotai (516220) warrants attention.
Additionally, amid shifts in the global energy landscape, coal and solar may also benefit. For coal, the impact of crude on coking coal follows two paths. First, as petrochemical prices rise, coal-to-chemicals may demonstrate strong cost advantages, leading to broader adoption by producers. For example, ethylene and other products can be produced from either crude oil or coal. Second, energy substitution involves directly replacing crude oil with coal as an energy source.
The impact path for solar is similar. As an ideal clean energy source, solar gains more expectations as traditional energy prices rise globally. Furthermore, recent narratives around space-based solar and anti-internalization continue to gain traction, creating multiple catalysts for the solar sector.
In summary, the Oil ETF (561360), Chemicals ETF (516220), Coal ETF (515220), and Solar ETF (159864) are all potential beneficiaries of the U.S.-Iran conflict. With limited short-term upside momentum in the broader market, interested investors may consider rotation strategies involving these products, while maintaining position control.
Today, the semiconductor sector declined again, with the Semiconductor Equipment ETF down 1.61%, the Integrated Circuit ETF falling 1.43%, the STAR Chip ETF dropping 1.41%, and the Chip ETF losing 1.33%.
Since March, growth sectors have faced overall pressure due to geopolitical conflicts, with semiconductors particularly hard hit. Since March, the Semiconductor Equipment ETF (159516) has fallen 10.1%, the STAR AI ETF (589110) dropped 9.6%, the STAR Chip ETF (589100) declined 7.9%, the Chip ETF (512760) decreased 7.5%, and the Integrated Circuit ETF (159546) lost 7.1%. Among all growth sectors, semiconductors have experienced the sharpest declines.
In memory, demand remains robust. Samsung Electronics plans to set price increases for key NAND flash products in Q2 at levels similar to Q1, around 100%. Fundamentally, the elasticity of memory demand may exceed that of computing power. As Nvidia's chip products iterate, single-chip memory capacity is rising, chip shipment volumes are increasing, and external NAND and DDR5 products are being added to racks. Additionally, Agent development drives higher NAND demand for kvCache. Looking ahead, memory price increases may persist into the first half of 2027.
For semiconductor equipment, we have emphasized since late last year that domestic semiconductor equipment companies have become quality assets benefiting from global computing demand, primarily due to memory-driven expansion needs. Memory sector vitality is strong, and expectations for memory capacity expansion have room to rise. Furthermore, expectations around dual listings continue to strengthen, and related expansion activities may show near-term momentum.
In domestic computing, while short-term catalysts may require patience, it is important to recognize that China is the world's second-largest computing market with robust demand. Recent Agent popularity has rapidly increased token demand. Domestic model performance is also iterating rapidly, with ample growth space for domestic GPUs/ASICs.
In allocation, we believe the Semiconductor Equipment ETF (159516) offers the strongest certainty in terms of momentum and, having corrected significantly recently, may present a "golden buying opportunity" at low levels. Other semiconductor products like the STAR Chip ETF (589100) and Integrated Circuit ETF (159546) are also worth monitoring.
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