CICC: The current point may be a relatively low point in the mid-term for A-shares. The release of risks and downward adjustments are expected to present good investment opportunities.

When trading stocks, look to the CICC Gold Kirin analyst reports—authoritative, professional, timely, and comprehensive—helping you uncover high-potential themes and opportunities!

CICC Point of View

Since the outbreak of the U.S.-Iran conflict and the blockade of the Strait of Hormuz, crude oil prices have swung sharply. Concerns about “stagflation” and even “recession” have driven global trading behavior. From February 28 to date, the U.S. Dollar Index has risen, and global risk assets have performed poorly. The A-share market has also been weak: after a selloff, sentiment has recently stabilized somewhat. At the industry level, performance shows a “multiple compression” characteristic. Sectors with defensive attributes—high-dividend stocks—and sectors driven by an energy substitution logic—coal, power, batteries, and others—have shown stronger resilience in their share prices.

In the short term, the situation in Iran is in an escalation phase of a game between both sides that has not yet reached an agreement. The uncertainty in how events unfold has fueled the spread of risk-off sentiment. In March, the volume of transportation through the Strait of Hormuz contracted significantly. The circulation and supply pressure caused by the current blockade of the strait has a greater negative impact on the market than the destruction of actual production capacity. According to CICC’s commodities team forecast [1], if a disruption in trade through the Strait of Hormuz lasts 3 months, the expected Brent oil price central tendency for each of the four quarters this year is 80, 120, 90, and 80 USD per barrel, respectively. If the trade disruption lasts 6 months or more, the expected Brent oil price central tendency by quarter is 85, 150, 110, and 90 USD per barrel, respectively. In other words, the direct supply shock, the negative suppression from high prices, and the negative feedback from the demand side make it difficult for oil prices to remain at elevated levels for a sustained period.

The impact of the situation in Iran on industry fundamentals is reflected in several aspects: First, the conflict causes transport routes to be disrupted, forcing suppliers to cut production or damaging capacity, leading to a contraction in supply of commodities such as oil, natural gas, and basic chemicals (such as urea and fertilizers). Demand for substitute energy from regions outside the Middle East rises. Second, increases in energy and basic materials prices transmit to downstream parts of the industrial chain. The magnitude of price increases and profit distribution at each link are influenced by factors such as business cycle conditions and bargaining power. On March 29, we released the report “Oil Prices Rising—What to Buy, What to Sell?” Based on the cost transmission effect of the GDP shock and the input-output table, we estimate that if oil prices rise, the coal and non-ferrous metals industries are expected to benefit and see profit improvements from higher prices. Industries such as banks, non-bank financials, pharmaceuticals and biotech, computer, communications, and others are affected less. Meanwhile, basic chemicals and transportation industries may face pressure simultaneously from demand declines and cost increases, and their profit growth rates may be dragged down. Third, large swings in oil prices have exposed the fragility of the traditional fossil energy system, making the energy transition even more urgent. In the long run, demand for offshore wind power, wind-storage, and power grids is expected to receive support.

April is the disclosure period for listed companies’ 2026 Q1 reports. After years of capacity contraction, supply-and-demand conditions have improved in some areas, especially in cyclical industries. Affected by factors such as listed companies’ reduced capital expenditures, the implementation of “anti-involution” policies, and imported effects from the global rise in commodity prices, as of February, the PPI year-on-year was -0.9%, with the decline narrowing; on a month-on-month basis, it has been continuously positive since October 2025. Since the beginning of this year, prices of lithium battery materials, chemical products, and AI industrial-chain hardware (such as fiber optic cables, storage, targets, and MLCC) have risen. We believe the performance of related listed companies may improve.

High-frequency data from the industries we track show that the real-estate chain remains weak, and the high-visibility sectors are mainly concentrated in the AI industrial chain. Scaling Law means that as computing volume, parameter scale, and training data volume expand, large language model performance exhibits steady power-law improvements. It can be observed that artificial intelligence is in a stage of new technology iteration and application rollout, and the demand for energy and costs from training new models is growing exponentially. Demand-driven innovation trends are favorable for a growth style, and the relevant sectors have been a trading focus over the past two years, with share prices already reflecting a significant portion of that reaction.

Looking ahead, although there is still uncertainty in the short term, this may be a relatively low point for the A-share market over the medium term. We believe that risk release and pullback adjustments will bring better opportunities for positioning. While short-term price action remains somewhat uncertain, after undergoing a correction, market risk in the A-share market has been released further. We believe valuations are at a relatively reasonable level. From a medium-term perspective, the macro environment the market is in has not undergone fundamental changes; the logic supporting “stability and progress” for the A-share market still holds, and risk release and pullback adjustments are expected to bring better positioning opportunities.

Taking into account industry development trends and the capacity cycle, our allocation recommendation is more balanced. Focus on: 1) Growth driven by strong fundamentals: industries benefiting from AI technology implementation, such as optical communications; and new-energy-related sectors such as batteries and energy storage. 2) Cyclical resource stocks: considering the position of the capacity cycle, focus on sub-segments where the supply-demand pattern supports price increases and earnings certainty, such as the power grid, chemicals, and so on. 3) High-dividend yield: this year it may still show phased and structural performance, focusing on areas that match dividends with cash flows.

April overweight sectors: basic chemicals, machinery, power and electrical equipment, electronic hardware, power generation and power grids.

April underweight sectors: construction and engineering, textiles and apparel, tourism, hotels and catering, education, light industrial home goods.

Figure 1: CICC’s A-share industry allocation views and sub-selections

Note: Data as of March 31, 2026. Sources: FactSet, Wind, Research Department of CICC

Figure 2: Fundamentals of various A-share sectors

Note: Data as of March 31, 2026. Using Wind’s consistent pre-announcement data as the source. Sources: FactSet, Wind, Research Department of CICC

Figure 3: Price performance of major energy and basic material products

Note: Data as of March 31, 2026. Sources: Wind, CICC Point of View, Research Department of CICC

[1]https：//www.research.cicc.com/zh_CN/report？id=386039&entrance_source=ReportList

		Sina Statement: This message is reposted from a Sina partner media outlet. Sina.com publishes this article for the purpose of disseminating more information, and does not mean agreement with its viewpoints or verification of the descriptions. The content is for reference only and does not constitute investment advice. Investors act at their own risk.

A wealth of information and precise analysis—right on the Sina Finance app

Responsible party: Lingchen