Recent reviews of periodic reports from CITIC-Prudential Fund's products reveal that fund manager Sun Huicheng has increased allocations to the chemical industry in his managed portfolios. For instance: CITIC-Prudential New Selection Mixed Fund A achieved a total return of 59.27% in 2025. Holdings disclosed in periodic reports throughout 2025 show the following sector allocation for the top ten holdings.
Note: Past fund performance does not predict future results, and fund net asset values are volatile. Fund performance and top ten holdings are sourced from periodic reports. CITIC-Prudential New Selection Mixed is not a thematic product focused on sectors like chemicals. Top holdings shown in reports are point-in-time data and do not represent current or future holdings. Fund investment proportions and targets will be adjusted within contractual limits based on market conditions; please refer to legal fund documents for specifics.
CITIC-Prudential Cycle Preferred Fund A (022269) achieved a total return of 53.29% in 2025. Holdings disclosed in periodic reports throughout 2025 show the following sector allocation for the top ten holdings.
Note: Past fund performance does not predict future results, and fund net asset values are volatile. Fund performance and top ten holdings are sourced from periodic reports. Top holdings shown are point-in-time data and do not represent current or future holdings. Fund investment proportions and targets will be adjusted within contractual limits based on market conditions; please refer to legal fund documents for specifics.
This prompts a re-examination of the sector—are significant changes occurring in the investment logic for the chemical industry at the current juncture?
I. Emerging from the Trough: The Chemical Sector's Four-Year Journey Chemicals are integral to daily life, essential for clothing, consumer goods, housing, automobiles, and even aerospace. The industry is closely tied to the global economy, offering substantial opportunities during booms but often enduring prolonged downturns.
Over the past four years, China's chemical sector has faced challenges. As a major global producer, it encountered a typical issue: demand lagging behind capacity. Domestic demand, particularly from sectors like real estate, remained weak, while capacity from earlier investments came online simultaneously. To absorb excess output, companies increased exports, triggering global price wars that drove down product prices and industry profits. The sector became trapped in a cycle of high production without profitability, leading to increased losses and significant operational pressure.
The declining gross margin curve of the A-share chemical sector clearly illustrates this trend. The core issue is straightforward: oversupply and chaotic competition have eroded industry value through intense internal competition.
II. A Turning Point: Fundamental Changes from Supply-Side Reforms A turning point emerged from clear policy direction. In July 2025, the Central Financial and Economic Affairs Commission signaled a focus on curbing low-price,无序 competition, guiding enterprises to enhance quality, and facilitating the exit of outdated capacity. Subsequently, in August, five departments including the Ministry of Industry and Information Technology jointly issued a document calling for a comprehensive assessment of aging chemical installations—those past their service life or operational for over 20 years—to promote "elimination, replacement, or upgrading." More importantly, approvals for new capacity were tightened. This combination of "eliminating outdated capacity + strictly controlling new additions" targets the core of long-term healthy industry development, aiming to fundamentally curb无序 capacity expansion.
This will have several profound effects:
Substantial supply reduction: A portion of outdated capacity with backward technology, high energy consumption, and poor safety standards will permanently exit. Optimized industry structure: Remaining advanced capacity will become scarcer and more valuable, potentially shifting competition from "competing on price" to "competing on value." Return of pricing power: As supply and demand rebalance, leading enterprises will gradually regain pricing control over their products.
Globally, supply is also contracting. For example, Europe's chemical sector faces severe oversupply, with expectations of significant capacity closures. Worldwide supply-side adjustments are forming a synergistic effect.
III. Double Opportunity: Potential for Simultaneous Profit and Valuation Improvement Based on these fundamental changes, the chemical sector may experience a typical "Davis Double Play" opportunity—where bottoming profits recover alongside valuation repairs.
Valuation repair: From "floor prices" to potential premiums. Valuations for chemical leaders remain depressed, reflecting cyclical lows. For instance, some leading private refining and chemical enterprises trade at price-to-book ratios near historical lows. These prices fail to reflect their substantial asset scales, market positions, or the potential premium for advanced capacity稀缺ity post-supply-side reforms.
This process can be compared to the valuation reassessment during semiconductor localization. When the market recognizes strategic稀缺ity in certain assets, their valuation systems may shift upward entirely. High-quality chemical capacity may face a similar opportunity.
Profit recovery: Resonance of price increases and cost improvements. As excess capacity is cleared, chemical product prices are expected to enter a gradual upward trend. For leading enterprises that have completed capacity expansions, controlled costs, and repaired balance sheets, price increases typically translate significantly into profits. Trends of recovering gross and net profit margins may have already begun.
Market consensus: Taking shape. Investment requires consensus. Recently, institutional investors have shown increased attention and recognition toward the chemical sector. Confidence in the enforcement of "anti-internal competition" policies, confirmation of profit bottoms, and acknowledgment of low valuations are converging, potentially attracting more capital.
Recent adjustments: Short-term fluctuations do not alter medium-to-long-term trends. Recently, the chemical sector experienced some volatility and pullbacks, with share prices of certain segment leaders declining. This may stem from several factors: fluctuations in global commodity prices affecting market sentiment, and short-term earnings below market expectations due to factors like impairment provisions in some company forecasts.
However, the current adjustments in the chemical sector are primarily short-term disturbances; the medium-to-long-term positive trend and core logic remain fundamentally unchanged. Chemical fundamentals have not shifted significantly. Against the backdrop of the chemical capacity release cycle nearing its end, ongoing "anti-internal competition" policy implementation, potential overseas interest rate cut cycles, and the macro environment of China's "16th Five-Year Plan" inception, future supply-side constraints are expected to strengthen further, potentially driving positive shifts in chemical price expectations.
Looking ahead, fluctuating liquidity expectations may increase volatility in non-ferrous metals. However, competition for resources amid deglobalization and rising demand for industrial goods from AI capital expenditures could sustain focus on cyclical products like non-ferrous metals and chemicals. Specifically for chemicals, trends may evolve along two main lines: collective strategic shifts in the supply side from volume-oriented to profit-oriented approaches; and demand-side opportunities from high-end export substitution due to decline in European, Japanese, and Korean chemical sectors, alongside growth in basic material exports from emerging economies.
V. How to Participate: Capturing Opportunities with Professional Frameworks Facing an industry-level inflection point, individual investors may find it challenging due to numerous sub-sectors, varying rhythms, and stock differentiation. Relying on professional expertise with deep industry research capabilities and clear investment frameworks becomes valuable here.
CITIC-Prudential Fund's manager Sun Huicheng is a specialist深耕ed in cyclical sectors. With a strong background including a bachelor's in chemistry from Peking University and a Ph.D. from the Institute of Physics, Chinese Academy of Sciences, he has over a decade of focused research on industries like chemicals, developing a practical and traceable investment methodology.
His core framework is straightforward: focus on identifying investment opportunities where "changes in price and volume lead to upward revisions in corporate profit expectations." This is primarily achieved through three approaches: Path one: Embrace "good businesses." Invest in sub-sectors with clear industry structures and sustained, moderate pricing power (e.g., refrigerants) as stable cornerstones of the portfolio. Path two: Capture "price rebounds." Position in sectors with extreme pessimism and bottomed product prices (e.g., spandex, large-scale refining) awaiting high elasticity returns from supply-demand reversals. Path three: Seize "perception gaps." Through in-depth research, identify "advanced capacity" poised for commissioning and significant profit release earlier than the market, capturing value discovery gains from skepticism to conviction.
Based on this framework, he outlines a roadmap for the current cycle: Main line one: Non-ferrous metals, following the "macro rhythm." In the first half, if Federal Reserve policy remains tight, focus on aluminum (with supply rigidity) with favorable supply-demand dynamics, followed by copper. In the second half, if global inflation expectations rise and interest rate cut cycles begin, increase gold allocations to hedge macro volatility. Main line two: Chemical industry,紧扣 the "supply-side reform" theme. This represents a relatively smooth logic within domestic cyclical sectors with potential for significant elasticity. The focus is not on betting on surging demand but on opportunities from structural optimization driven by specific "anti-internal competition" policy implementation. Key segments include spandex, large-scale refining, and coal chemical leaders.
Note: The fund manager does not endorse any mentioned sectors/industries; this does not constitute investment advice or recommendations, nor represent fund holdings or trading direction.
In summary, after a prolonged adjustment, the chemical sector stands at an inflection point driven by policy, supply-demand, and valuation forces. The investment logic is shifting from speculating on short-term price fluctuations to sharing medium-to-long-term benefits from industry structure optimization and leading enterprise value reassessment. For individual investors, participating through fund managers with deep industry insights and mature frameworks may be a more stable approach to capturing this round of opportunities.
Note: The above content is solely for demonstrating the fund manager's investment perspective and current market analysis, not as an investment commitment, and does not endorse any mentioned sectors/industries. Fund investment strategies, sector allocations, specific targets, and proportions will be adjusted within contractual limits based on market conditions.
CITIC-Prudential Cycle Preferred Mixed Fund was established on 2024-11-05. Its performance benchmark is CSI 300 Index Return * 60% + Hang Seng Index Return * 20% + ChinaBond Composite Wealth (Total Value) Index Return * 20%. Historical performance/benchmark performance, 2025: Class A 53.29%/16.45%, Class C 52.34%/16.45%. Sun Huicheng has served as fund manager since inception. The fund manager rates this fund's risk level as R3.
CITIC-Prudential New Selection Return Flexible Allocation Mixed Fund was established on 2015-06-05. Its performance benchmark is One-Year Bank Time Deposit Rate (post-tax) + 3%. Historical performance/benchmark performance for 2021-2025, Class A: 11.47%/4.50%, -7.59%/4.50%, -2.38%/4.50%, -4.72%/4.51%, 59.27%/4.50%. Class B: 11.41%/4.50%, -7.65%/4.50%, -2.50%/4.50%, -4.81%/4.51%, 59.40%/4.50. Past and present fund managers: Yang Xu (20151116 to 20161123), Ti Yuntao (20161123 to 20230519), Wang Ying (20200324 to 20230922), Sun Huicheng (20230911 to present). The fund manager rates this fund's risk level as R3.
Sun Huicheng manages similar funds including: CITIC-Prudential Sheng Yu One-Year Holding Period Fund. CITIC-Prudential Sheng Yu One-Year Holding Period Mixed Fund was established on 2021-06-22. Its performance benchmark is ChinaBond Composite Wealth (Total Value) Index Return * 85% + CSI 300 Index Return * 10% + Hang Seng Index Return * 5%. Historical performance/benchmark performance for 2021-2025, Class A: 0.57%/1.43%, -2.98%/-0.13%, -3.66%/2.21%, -0.54%/9.12%, 6.26%/3.71%. Class C: 0.36%/1.43%, -3.38%/-0.13%, -4.03%/2.21%, -0.95%/9.12%, 5.84%/3.71%. Past and present fund managers: Han Haiping (2021-06-22 to 2024-07-08) Sun Huicheng (2024-07-08 to present) Wu Qiujun (2024-07-08 to present). The fund manager rates this fund's risk level as R3.
Risk提示: This material is for reference only and does not constitute any investment advice, commitment, or legal document. Past fund performance does not predict future results; other funds' performance does not guarantee this fund's performance. Funds differ from financial instruments like bank savings that offer fixed income expectations. When purchasing funds, you may share in investment gains based on held shares but also bear potential losses. The fund manager manages fund assets with honesty,信用, and diligence but does not guarantee profitability, minimum returns, or principal safety. Funds face various risks包括 market risk, management risk, technical risk, and compliance risk. Large redemption risk is specific to open-end funds, where net redemption requests exceeding a certain percentage of total shares may delay full redemption or payment. Fund strategies, sector allocations, investment proportions, and targets will be adjusted within contractual limits based on market conditions. Refer to legal documents like the fund contract and prospectus for specifics. Views expressed reflect current perspectives, not future predictions, and are not必然 basis for future investment decisions by CITIC-Prudential funds. CITIC-Prudential assumes no obligation to update if information becomes inaccurate later. The fund manager rates this fund's risk level as R3. Sales institutions' risk assessments may differ from legal documents or the manager's rating; investors must complete risk匹配 tests and make independent decisions based on their risk tolerance, investment horizon, and goals. This product is issued and managed by CITIC-Prudential Fund; sales agencies bear no investment, repayment, or risk management liability. The manager reminds investors of the "buyer beware" principle; investment risks from fund operations and NAV changes are borne by investors. Funds carry risks; invest cautiously.
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