He Xun Investment Advisor Huang Ruchem: March 18, Market Response Strategies Under Two Expected Trends

There are two expected trends in today’s market: one is a temporary rebound after an inertial decline; the other is a further breakdown after a continued drop, with trading volume shrinking and a lack of buying support. If the former occurs, it may be better to hold off on making moves today; thus, aside from the late trading on Friday, there may be few suitable entry points this week. If the latter occurs, there could be an opportunity for a short-term oversold rebound by betting on the index’s direction in the late session.

Yesterday, the rally in banking, insurance, securities, and real estate sectors still failed to turn the index positive, indicating that liquidity in the current market is extremely scarce. Under this background, choosing to participate is based on the logic that, in a low-volume decline environment, funds are forced to concentrate on core stocks. The recent core stocks that have maintained leadership are still the popular rotation themes that have withstood divergence since March 4.

The chemical sector warrants ongoing attention, based on two points: first, from late March to April, the market is betting on annual report earnings growth, focusing on stable main businesses in specific sub-sectors, mainly phosphorus chemicals and epoxy propane domestically; second, geopolitical conflicts in the Middle East have caused oil and gas prices to fluctuate. Although the market has gradually become desensitized to oil and gas itself, downstream sectors such as methanol, fertilizers, urea, and coal chemicals still have room for price increases and are worth tracking.

New energy sectors like wind power, photovoltaics, and energy storage are mainly extensions of power generation. Power also has two logical points: first, similar to chemicals, there is a basis for betting on annual report earnings growth; second, the monthly error rate is relatively high. Whether it’s policy-supported specific segments like power calculation coordination or the formation of North American power grid alliances and global energy security issues (mainly involving G7 countries), recent hot core stocks are centered around these two directions with resilient capacity stocks.

In the technology sector, yesterday saw a broad adjustment, with many of the top decliners being AI hardware. As a clear offensive direction in the market, the tech sector mainly divides into two: one is NVIDIA-related overseas supply chains, and the other is internal computing power-related segments. Despite policy support for model applications internally, overseas supply chains outperform internal computing power in terms of fault tolerance. Major stocks are concentrated in AI hardware overseas, while pure computing power stocks are more related to AI software applications. From the perspective of betting on earnings growth, the repair potential of existing funds is greater in hardware.

For sub-sectors, it’s advisable to adopt a left-side trading approach rather than chasing high on the right side. Storage chips, PCBs, CPO, copper cables, and the “big three” (the main traditional sectors) have short-term repair expectations, but these are likely to be rebounds followed by declines. Those who can endure patience and focus on stable main businesses within popular themes can continue to monitor the market; short-term speculators, if always driven by quantitative signals, might consider taking a break and staying away from this frustrating market for a while.

For a more cautious approach, it’s recommended to wait until the double bottom points appear today, then observe whether the core themes resonating with the index are suitable for action. Otherwise, it’s best to stay in cash and watch.

(Edited by: Zhang Yan)

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