After a sustained rally, the chemical sector experienced a significant correction on November 18, with stocks like Do-Fluoride New Materials Co.,Ltd. and Guangzhou Tinci Materials Technology Co.,Ltd. hitting limit-downs. The Wind Chemical Index dropped 3.45% in a single day.
Over the past month (October 17 to November 17), the Wind Chemical Index (882101.WI) had outperformed the Shanghai Composite Index's 1.43% gain, surging over 12%. The question now is whether this marks the end of the uptrend or presents a buying opportunity.
Investors suggest that short-term adjustments do not alter the medium- to long-term bullish outlook. With year-end risk aversion in play, sectors with clear pricing power are standing out. Lithium mining, phosphate chemicals, and other segments with strong price momentum remain attractive. For cautious investors, fluorochemicals and bio-jet fuel sectors may offer gradual price upside.
**ETF Inflows Reflect Market Confidence** Year-end risk aversion in A-shares has driven liquidity toward sectors with pricing advantages. Over the past month, the chemical sector—led by fluorochemicals, phosphate chemicals, and organic silicon—has rallied independently, with the Wind Chemical Index climbing over 12%.
Fund managers attribute the surge to tightening year-end risk appetite, where industries with confirmed or expected price hikes become rare high-conviction plays. Rising product prices have been the key driver. Data shows that lithium hexafluorophosphate, a key electrolyte material, soared to 130,000 yuan/ton, up 11.59% week-on-week, while organic silicon DMC prices rose to 12,500 yuan/ton amid tight supply.
Stock performances mirrored commodity trends. Do-Fluoride New Materials Co.,Ltd. surged 97% in a month, Yunnan Yuntianhua Co.,Ltd. gained 35%, and Hoshine Silicon Industry Co.,Ltd. rose 28%, with Shandong Dongyue Silicone Material Co.,Ltd. even posting a 20% single-day jump.
ETF flows further validated the trend. Penghua Chemical ETF (159870.OF) saw its AUM explode from 1.4 billion yuan to over 18.5 billion yuan in Q3, with net inflows exceeding 15.4 billion yuan. Similarly, the newly launched Harvest Chemical ETF (159129.OF) raised 926 million yuan, underscoring market confidence.
**Correction: Time to Buy?** The November 18 sell-off saw the Wind Chemical Index drop 3.45%, with multiple stocks hitting limit-downs. However, investors remain optimistic, citing product price hikes, strong downstream demand from new energy sectors, and policy tailwinds as sustained drivers.
The sector’s current low profitability and depressed valuations (2.2x PB, near historical lows) suggest room for re-rating if demand improves. For instance, tight supply in phosphate rock, coupled with rising demand for lithium battery materials like lithium iron phosphate and lithium hexafluorophosphate, has widened supply gaps, lifting prices for traditional phosphate fertilizer producers.
Looking ahead, lithium mining and phosphate chemicals remain top picks, while fluorochemicals and bio-jet fuel sectors offer potential upside for investors seeking less crowded opportunities.
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