On April 2, former U.S. President Donald Trump signaled a "severe crackdown" on Iran in the coming weeks, triggering significant volatility across global assets. South Korea’s KOSPI extended its intraday losses, U.S. stock futures fluctuated lower, and spot gold and silver continued their decline, with gold falling below the $4,700 mark. Influenced by external developments, China’s three major A-share indices opened lower collectively, though the Shanghai Composite Index demonstrated resilience by turning positive during the session. As of 9:44 a.m., the Shanghai Composite was up 0.11%, while the Shenzhen Component Index fell 0.59% and the ChiNext Index dropped 1.07%.
In terms of sector performance, oil and gas stocks staged a broad rebound, with Beken Energy hitting the daily limit-up. Green power concepts regained momentum, as Xinzhong Port notched its third consecutive limit-up and Leshan Electric Power also surged to the limit. The innovative drug sector saw selective activity, with Peking University Pharmaceutical securing its second straight limit-up, Chongqing Pharmaceutical Holding and Tianjin Pharmaceutical also rallying to the upper limit, the latter marking its fifth consecutive surge. On the downside, precious metals, computing hardware, AI applications, and photovoltaic equipment led declines.
Looking ahead, Yang Chao, chief strategist at China Galaxy Securities, suggested that with the initiation of U.S.-Iran ceasefire talks and the gradual dissipation of uncertainties from the earnings season, the market is poised to enter a phase of consolidation and rotational movements. He emphasized that the three core drivers—policy support, capital inflows, and the revaluation of Chinese assets—remain intact, limiting the downside potential for A-shares. Investors are advised to focus on earnings performance and adopt a strategy of opportunistic positioning.
**Hot Sectors** 1. **Oil and Gas Stocks Rebound Broadly** Oil and gas shares rallied significantly in early trading, led by Beken Energy’s limit-up. Tongyuan Petroleum, Shandong Molong, Blue Flame Holding, Zhongman Petroleum, and ENN Group followed with gains. *Commentary: WTI and Brent crude futures both rose over 4% during the session.*
2. **Green Power Concepts Regain Momentum** The green power sector saw renewed interest, with Xinzhong Port rising for the third consecutive session and Leshan Electric Power hitting the limit-up. Mingxing Electric Power, Xichang Electric Power, Huayin Electric Power, and Huitian Thermal Energy also advanced. *Commentary: Huatai Securities noted that potential blockades in the Strait of Hormuz reinforce expectations of firm fossil fuel prices, benefiting green power segments such as hydropower, nuclear, wind, solar, and biomass.*
3. **Innovative Drug Sector Sees Selective Activity** Innovative drug concepts displayed localized volatility, with Peking University Pharmaceutical rising for two straight sessions, Chongqing Pharmaceutical Holding and Tianjin Pharmaceutical also rallying—the latter for five consecutive limit-ups. Lianhuan Pharmaceutical, Jincheng Pharmaceutical, and Guang Sheng Tang followed suit. *Commentary: Eli Lilly announced on Wednesday that the U.S. FDA has approved its oral GLP-1 drug for market release. Additionally, the 37th International Conference on Alzheimer’s Disease is scheduled for April 14–16, 2026, in Lyon, France.*
**Institutional Views** **China Galaxy Securities: Market Expected to Enter Phase of Consolidation and Rotation** Chief Strategist Yang Chao anticipates that as U.S.-Iran ceasefire negotiations begin and earnings season uncertainties fade, the market will likely stabilize with rotational trends. The three foundational pillars—policy backing, capital participation, and Chinese asset revaluation—remain supportive, suggesting limited downside for A-shares. A strategy centered on earnings and tactical positioning is recommended. Specific allocations should focus on: strategic resource revaluation sectors (e.g., gold, copper, rare earths, key materials) amid rising inflation and geopolitical concerns; technology self-reliance and new productive forces (AI computing, optical modules, semiconductors, advanced manufacturing, humanoid robotics, low-altitude economy) ahead of key tech summits in April; and defensive sectors with high dividends and stable cash flows (utilities, environmental protection, CXO) during market fluctuations.
**CITIC Securities: Overseas Rate Cuts and Improved Domestic Funding Support Broad Recovery in Pharma Sector** A CITIC report highlighted that a surge in business development activities for innovative drugs in China is driving downstream demand recovery. Equity financing’s share in corporate funding has declined significantly, while BD transactions now account for nearly 40% of the total, with overseas deals exceeding $60 billion in Q1 2026—nearly half of the full-year 2025 figure. Small-molecule CDMOs are gaining global market share due to China’s supply chain advantages and stable output amid Middle East tensions, potentially attracting more orders. Preclinical and clinical CROs may see volume and price increases as funding conditions improve and early-stage research demand transmits upward. Although the research services and upstream sectors faced short-term FX headwinds in Q4 2025, persistent early-stage demand in 2026 could drive over 20% revenue growth for leading firms, with current valuations appearing reasonable. Recommendations include CXO leaders, key preclinical and clinical CRO players, and reasonably valued upstream and research service companies.
**Huaxi Securities: Continue Exploring Undervalued Sectors** Low-valuation styles outperformed in the first quarter, as elevated overall market valuations and risk aversion prompted capital to seek undervalued opportunities rather than exit entirely, given ongoing market stabilization efforts. In the second quarter, further exploration of undervalued sectors is advised. From PE and PEG perspectives, power equipment and media remain attractive, with their TTM PE ratios since 2016 at the 67th and 68th percentiles, respectively, and PEG ratios both at 0.91. From a PB standpoint, agriculture and large financials are noteworthy, with PB percentiles largely below 20% and ROE above 8%. For sectors like nonferrous metals and coal, whose PB percentiles are relatively high, performance will depend on whether inflation continues to exceed expectations.
Comments