Last week, market sentiment was influenced by renewed geopolitical tensions, leading the Hang Seng Index to rebound after touching a low, climbing back above the 25,000-point level. This week, the situation in the Middle East has deteriorated. The U.S. President posted on social media, issuing a stark warning to Iran. It was reported that the U.S. conducted strikes on over 50 military targets on an island, specifically excluding oil infrastructure. International crude oil prices rose again, with WTI crude gaining 2.22% and Brent crude increasing by 0.84%. Iran warned of potential retaliatory strikes on infrastructure belonging to the U.S. and its allies. There are concerns that the Strait of Mandeb could be closed if the situation escalates out of control.
Subsequently, the situation reversed again. The U.S. President announced on social media that, following discussions with Pakistani leadership, the U.S. decided to postpone planned military strikes against Iran for two weeks, contingent upon Iran agreeing to fully, immediately, and safely reopen the Strait of Hormuz. Iran has also agreed to a temporary ceasefire, albeit with conditions that differ significantly from those of the U.S. Regardless, the short-term ceasefire is expected to provide a significant positive boost to the market. Other factors, such as the release of the March FOMC meeting minutes, are likely to have a more limited impact. The minutes will be scrutinized for any concerns about stagflation; a hawkish tone could further dampen market expectations for interest rate cuts. Comparatively, the U.S. March CPI data, due this Thursday, is more critical. This data will be the first comprehensive reflection of the impact of the conflict with Iran on energy prices and will directly influence the Federal Reserve's subsequent policy decisions.
Regarding market themes, with improving sentiment, the technology sector may regain activity. Sectors like post-conflict reconstruction and shipping are also expected to see a recovery. In corporate news, Eli Lilly announced a $78 billion acquisition of Centessa, and Biogen acquired Apellis for $56 billion, which is expected to refocus market attention on valuations within the innovative drug pipeline. Recently, Mitsubishi Gas Chemical and Kingboard Laminates announced price increases for related CCL products.
This Week's Top Pick: CHINA RISUN GP (01907) The ongoing Middle East situation continues to disrupt global energy and chemical supply chains. Debon Securities believes that by 2026, sustained geopolitical crises in the Middle East will drive a significant rise in international crude oil prices, leading to synchronous substantial price increases for the company's chemical products. For instance, market prices for methanol and caprolactam at the end of March had risen over 60% and 30%, respectively, since the start of the year. Years of strategic positioning may be about to yield substantial returns. CHINA RISUN GP is China's largest producer of methanol from coke oven gas, with an annual operating capacity of 600,000 tonnes, representing a core part of its "alcohol-ammonia" industrial chain. Additionally, the company is the world's largest independent coke producer and a leading global producer of caprolactam. Furthermore, on April 2, the company announced via its official WeChat account that its self-developed caprolactam-to-hexamethylenediamine unit completed catalyst loading on March 30, 2026, laying the groundwork for production commencement in April. Full-year 2026 production is estimated to be approximately 30,000 tonnes.
Industry Observation: Rare Earth Prices Continue to Rise Prices for praseodymium-neodymium oxide have been rebounding since late March, with a cumulative increase of 10.4%. Rare earth ore prices are also being adjusted further. Early April is the typical window for rare earth concentrate price adjustments, and a price hike is anticipated this week. Given the high average price of praseodymium-neodymium oxide in the first quarter, which was 33.7% higher than the Q4 average, this quarter's rare earth concentrate price is expected to rise significantly, pushing oxide prices even higher. Tight supply and demand dynamics continue to support the upward trend in rare earth prices. On the supply side, rare earth supply remains constrained. Operating rates at primary ore separation plants may decline, and regulatory controls on production quotas and environmental assessments are unlikely to ease in the short term, suggesting further supply contraction. While there is some incremental supply from scrap materials, downstream inventories are at low levels. As trading activity picks up, the tightness in spot supply will become more apparent. On the demand side, as the peak consumption season gradually materializes, procurement activity along the industrial chain is strengthening. A national conference on promoting the replacement of old consumer goods was held, outlining key tasks to expand consumption, which should solidify the demand base for rare earth magnetic materials. The scenario of tight supply and strong demand for rare earth magnets is expected to intensify, highlighting investment opportunities in this sector. Policy continues to tighten. The "Interim Measures for the Total Amount Control of Rare Earth Mining and Smelting Separation" officially took effect in 2025, bringing domestic rare earth mining, imports of rare earth ores, and smelting separation under quota management. 2026 will be the first full year of implementation under the new rules. With expectations of dual tightening in mining and smelting quotas, domestic supply elasticity is very limited. The supply elasticity of overseas mines will also be constrained by China's import and smelting quotas. In Hong Kong stocks, attention is on CHINA RAREEARTH (00769), JLMAG (06680), and MMG (01208).
Market Data Perspective Data from the Hong Kong Exchange shows that the total open interest for the Hang Seng Index Futures (April) was 102,596 contracts, with a net open interest of 40,584 contracts. The settlement date for the April futures is April 29, 2026. With the Hang Seng Index at 25,117 points, the concentrations of bull and bear certificates are偏离 the central axis, indicating market hesitation. The data suggests a bearish outlook for the Hang Seng Index this week.
Market Sentiment Overview Recent views from major institutions generally strike a tone of "not pessimistic medium-term, but still volatile short-term." Some suggest Chinese assets remain in a 'slow bull' phase, while others maintain that the core theme for Hong Kong stocks in this cycle remains Chinese AI and tech assets, with capital seeking purer exposure to Chinese technology. Some also express the view that leading Chinese internet companies retain resilience within the AI revaluation narrative. On the more cautious side, market commentary highlights that the Middle East situation, oil prices, and global risk appetite will continue to weigh on short-term sentiment, inevitably leading to fluctuations in the Hong Kong market. It is also noted that strong activity in Hong Kong IPOs and AI concepts indicates that risk capital has not withdrawn but has become more selective. For the remaining trading days this week, the Hong Kong market is likely to experience "volatility with a slightly stronger bias, but not a smooth ascent." The fundamental narrative remains intact, with the themes of Chinese technology, platform companies, and consumption recovery still in play. Southbound and long-term capital are not averse to Hong Kong stock valuations. However, external disturbances are numerous, and any significant index gains are prone to profit-taking. Therefore, the recent trading resembles a battle of sentiment and positioning rather than the start of a major trend. If heavyweight tech stocks can stabilize, the Hang Seng Index has room to advance further. However, if external risk events re-emerge, the market could quickly revert to a defensive mode.
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