Today (October 17), the chemical sector experienced a significant downturn in line with market trends. The Chemical ETF (516020), which reflects the overall performance of the chemical industry, saw a nearly uninterrupted decline throughout the day, with in-market prices dropping 2.01% at the time of reporting.
In terms of constituent stocks, segments such as potash fertilizer, other chemical raw materials, synthetic resins, and fluorine chemicals saw significant declines. As of the time of reporting, Zangge Mining plummeted over 4%, while Hangyang Co., Ltd., Saint Quan Group, Juhua Co., Ltd., and Kingfa Sci & Tech all fell more than 3%, negatively impacting the sector's performance.
On the news front, the Fuzhou Municipal Ecological Environment Bureau recently approved the 1.5 million tons/year MDI technical upgrade and capacity expansion project for Wanhua Chemical (Fujian) Isocyanate Co., Ltd. This project aims to upgrade the existing 800,000 tons/year MDI facility to match a capacity of 1.5 million tons/year. The project will encompass comprehensive upgrades across core production processes, including MDI refrigerants, condensation, photochemistry, and separation, as well as the renovation and expansion of supporting utilities and facilities.
Analysts believe this significant move will further strengthen Wanhua Chemical's leadership position in the global MDI market. It is noteworthy that Wanhua Chemical is the largest holding in the Chemical ETF (516020), with a positional share of 10.28% as of the end of the second quarter of 2025, according to the fund’s periodic report.
Institutions have pointed out that the current chemical cycle has been lingering at the bottom for an extended period. To optimize the industry's supply-demand structure and promote the transition toward high-quality development, the elimination of backward production capacity has become imperative. Meanwhile, the chemical industry is facing profit pressures, prompting many companies to eagerly seek improvements in the competitive landscape, leading to calls for “anti-involution” in sub-sectors like polyester filament, glyphosate, BOPET, organic silicon, and bottle chips. With a combination of policy guidance and proactive industry improvements, the chemical sector is expected to have ample upward elasticity.
In terms of valuation, data revealed that as of the market close yesterday (October 16), the price-to-book ratio of the Chemical ETF (516020) underlying index was 2.27 times, which is at a low of the 37.65 percentile over the past decade, highlighting the cost-effectiveness of long-term allocations.
Looking ahead, Guohai Securities believes that the anti-involution trend is expected to re-evaluate the Chinese chemical industry, and subsequent measures may substantially slow down the global chemical capacity expansion. The Chinese chemical sector boasts abundant net cash flow from operational activities, and as expansion slows, potential dividend yields are likely to increase significantly, marking a transition from a cash-draining entity to a cash-generating asset. Additionally, changes on the supply side could bring about a rebound in industry prosperity, allowing chemical stocks to feature both high elasticity and high dividend advantages.
Zhongyuan Securities indicated that with the implementation of growth stabilization plans in the chemical industry, the overall supply-demand dynamics are expected to improve, driving further quality upgrades in the sector. In October 2025, it is recommended to focus on two dimensions: the pesticide, polyester filament, coal chemical, phosphate fertilizer, and potash fertilizer industries.
For investors looking to capitalize on opportunities for rebounds in the chemical sector, using the Chemical ETF (516020) may provide higher efficiency for positioning. Public data indicates that the Chemical ETF (516020) tracks the CSI Sub-industry Chemical Theme Index, covering various sub-segments of the chemical industry comprehensively. Nearly 50% of the fund's allocation is concentrated in large-cap leading stocks, including Wanhua Chemical and Yilong Co., Ltd., allowing for participation in the potential of top-performing investments; the other 50% balances investments among leading stocks in sectors such as phosphate fertilizers and phosphorous chemicals, fluorine chemicals, and nitrogen fertilizers to seize investment opportunities across the chemical sector. Off-market investors can also consider the Chemical ETF-linked funds (Class A 012537/Class C 012538) to position in the chemical sector.
Data and images sourced from the Shanghai and Shenzhen Stock Exchanges, as of October 17, 2025. Risk Warning: The Chemical ETF passively tracks the CSI Sub-industry Chemical Theme Index, established on December 31, 2004, and published on April 11, 2012. The constituents of the index are adjusted according to the index compilation rules as required. Data shows that the sub-industry chemical index has had respective annual returns of 51.68% in 2020, 15.72% in 2021, -26.89% in 2022, -23.17% in 2023, and -3.83% in 2024. The composition of the underlying index constituents is adjusted in line with the rules for index compilation, and past performance does not imply future results. The stocks mentioned in this article are for illustrative purposes only and their descriptions do not constitute any form of investment advice, nor do they represent the holdings or trading intentions of any fund managed by the fund's management team. The risk level assessed by the fund manager is rated R3—medium risk, suitable for investors rated C3 (balanced) and above. The information contained in this article (including but not limited to individual stocks, commentary, forecasts, charts, indicators, theories, and any form of expression) is for reference only, and investors must take responsibility for any investment decisions made independently. Furthermore, any opinions, analyses, and predictions in this article do not constitute investment advice of any form and the author holds no liability for any direct or indirect loss caused by using the content of this article. Fund investments involve risks; past performance does not guarantee future results, and the performance of other funds managed by the manager does not guarantee the performance of this fund; investors should proceed with caution when investing.
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