Yesterday, the market experienced a surge followed by a pullback. The ChiNext Index once rose over 2% during the session, with the total trading volume in the Shanghai and Shenzhen stock exchanges reaching 2.2 trillion yuan. More than 4,000 stocks advanced across the market, including 109 that hit the daily upside limit. By sector, oil and gas stocks, chemicals, lab-grown diamonds, and fiberglass were among the active performers. On the downside, film and cinema chains and AI application sectors led the declines. At the close, the Shanghai Composite Index was up 0.87%, the Shenzhen Component Index gained 1.36%, and the ChiNext Index advanced 0.99%.
In today's broker morning briefings, Huatai Securities noted that the U.S. designation of phosphorus-based agricultural inputs as strategic resources carries profound implications. Guotai Haitong Securities observed significant divergence in U.S. stocks, suggesting a potential return for the growth style. China International Capital Corporation (CICC) highlighted that Shanghai's relaxation of home purchase restrictions could help stabilize local housing prices.
Huatai Securities pointed out that on February 18, 2026, the Trump administration issued an executive order citing the Defense Production Act, formally classifying phosphorus and glyphosate herbicide as U.S. strategic resources to secure domestic supply chains. Globally, about 80% of phosphorus resources have been used for phosphate fertilizers in recent years, while glyphosate has become the world's largest herbicide due to demand from genetically modified resistant seeds; both are core components of global agricultural inputs. According to the USGS, the U.S. import dependency for phosphate rock was 16% in 2025, primarily sourced from Peru and Morocco. While the U.S. has sufficient domestic glyphosate production capacity, considering manufacturers' supplies to Europe and South America, it still requires imports of Chinese-made glyphosate. In contrast, China has a high self-sufficiency rate in phosphate rock and is a net exporter of glyphosate with slightly surplus capacity. The strategic resource designation emphasizes U.S. concerns over supply stability for these items. In the short term, against a backdrop of low grain prices and weak demand, this is unlikely to quickly impact market prices. However, if stockpiling demand increases in the U.S. and elsewhere, it could improve the market outlook for international phosphate fertilizers and glyphosate.
Guotai Haitong Securities highlighted two prominent features in major asset performances from the start of 2026 to date: 1) Non-U.S. stock markets have shown sustained strength, primarily because U.S. market valuations are relatively expensive, leaning more towards growth attributes, and traditionally have lower leverage to cyclical recovery compared to other global markets like Japan, Europe, or emerging markets. 2) Significant sector divergence has occurred: commodities and industrial sectors performed excellently, with cyclical industries like materials, industrials, and real estate continuing their upward trend, and consumer staples also showing strength. Coupled with slightly better-than-expected U.S. macroeconomic data recently, this has refocused market attention on value stocks with solid fundamentals, creating a seesaw effect. Currently, the valuation gap between leading tech growth stocks and traditional value leaders has narrowed, for instance, valuations for Microsoft and Exxon Mobil have converged. Looking ahead, as short-term AI anxiety is largely priced in and expectations for U.S. monetary easing heat up again, the market style pendulum is expected to swing back towards tech growth.
CICC suggested focusing on investment opportunities in the real estate sector. If the trend towards stabilization in local housing prices gains more certainty, the real estate sector might gradually shift from the policy-driven speculative activity seen since early January to a beta-driven rally supported by fundamentals. Depending on risk appetite, investors could consider three approaches: 1) Allocate to stable stocks with pronounced beta characteristics. 2) Invest in property developers with structural growth potential. 3) Some private enterprises are returning to the "game," potentially achieving significant revaluation from oversold levels.
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