Global markets faced pressure as oil prices surged past the $100 per barrel mark, with concerns over energy supply disruptions stemming from the Iran conflict continuing to intensify. Fears of inflation have spread across equity, bond, and currency markets. On March 13, the market opened higher but subsequently retreated, with the three major indices turning negative by the midday break. At the close of the morning session, the Shanghai Composite Index was down 0.22%, the Shenzhen Component Index fell 0.17%, and the ChiNext Index declined 0.03%. The combined turnover for the Shanghai and Shenzhen markets during the morning session reached 1.51 trillion yuan, a decrease of 88.4 billion yuan compared to the previous trading day. Notably, despite significant declines in overseas markets, the three major A-share indices managed to briefly turn positive during the session, once again demonstrating the resilience of the A-share market. What advantages underpin this performance? According to a report by Wang Zonghao, Head of China Equity Strategy Research at UBS, the A-share market has shown a degree of downside protection against recent geopolitical events, primarily due to China's relatively lower dependence on oil. UBS expresses a preference for A-shares over H-shares and American Depositary Receipts (ADRs), citing factors such as high trading volumes as supportive for the A-share market. The report also notes that holding Chinese stocks, particularly A-shares, can offer diversification benefits that are not yet fully reflected in valuations. It anticipates that unique factors, including robust trading activity, supportive policies announced during the Two Sessions, and a continued slowdown in the growth rate of household deposits, will bolster the A-share market. Returning to market performance, resource sectors such as chemicals, coal, steel, and cement continued to show strength. Stocks including Chitianhua, Zhengzhou Coal Electricity, and Jiugang Hongxing surged by the daily limit. Wind power and offshore wind power concepts also saw sustained gains, with Tongyu Heavy Industry and Tianshun Wind Energy hitting the upper limit. Lithium battery material concepts, encompassing lithium resources, lithium hexafluorophosphate, and electrolytes, collectively performed strongly, with stocks like Tibet Urban Development and Putailai rising by the limit. The real estate and infrastructure concepts strengthened, with Jingtou Development hitting the limit-up. Banking and central state-owned enterprise (CSOE) sectors continued to rise, providing market support, with PowerChina surging by the limit. Broader consumption, pharmaceuticals, and the automotive industry chain sectors experienced a collective rebound. On the downside, lobster concept stocks, cloud services, and computing power rental concepts faced significant declines. Meili Cloud dropped by the limit, while UCloud and others fell over 8%. Minor metals, gold, and silver concepts continued their downward trend, with Jiangwu Equipment approaching the limit-down. The stablecoin concept saw a brief surge before retreating. Satellite internet, commercial aerospace, and space computing concepts continued to trend lower. Gas turbine, transformer, and power grid equipment concepts underwent corrections. Computing hardware concepts, including optical fibers, optical modules, and PCBs, saw continued pullbacks, with Accelink falling by the limit. Concepts related to Sora, multimodal AI, AI agents, and AI applications remained weak. Defense sectors such as military informatization, military electronics, and aero engines continued to underperform. Concepts including AI power, humanoid robots, consumer electronics, photovoltaics, and semiconductors declined across the board. In terms of popular sectors, the lithium battery material concept showed notable activity against the market trend. Concepts related to lithium resources, lithium hexafluorophosphate, and electrolytes collectively strengthened, with stocks like Tibet Urban Development and Putailai hitting the limit-up. Analysis suggests that lithium battery production schedules for March show a significant recovery, with month-on-month growth of 11% to 22% and year-on-year growth of 37% to 56%. For March 2026, pre-scheduled production for batteries, cathodes, anodes, separators, and electrolytes is projected to see cumulative year-on-year increases of 36% to 57%, with electrolytes and separators exceeding 50%. The chemical sector continued its strong performance. Luhua Technology and Jinmei Technology both achieved two consecutive limit-up boards, while Kingenta, Hongbaoli, and Lutianhua also surged by the limit. The ongoing conflict in the Middle East has disrupted a significant portion of global supplies of ammonia, urea, sulfur, and phosphates. Additionally, approximately 20% of global liquefied natural gas (LNG) supply is affected, with European and other fertilizer producers heavily reliant on these gas resources. Since the US and Israel began airstrikes on Iran, European benchmark gas prices have risen by about 60%. The wind power sector remained active. Tongyu Heavy Industry surged by the 20% limit, while Tianshun Wind Energy and YuanCheng Shares hit the limit-up. This year's government work report proposed the implementation of new infrastructure projects, including ultra-large-scale intelligent computing clusters and computing-power coordination. Furthermore, the "Data Center Green and Low-Carbon Development Action Plan" explicitly requires that new data centers in national hub nodes source over 80% of their electricity from green sources. The computing power rental concept saw a collective pullback. Meili Cloud fell by the limit, while UCloud and others experienced significant declines. Institutional perspectives indicate that a prolonged conflict in the Middle East could lead to turmoil in global financial markets. Such conflicts represent a typical supply shock, directly impacting crude oil supplies and driving up prices. For the US, which already faces supply constraints, slow inflation moderation, and rising government debt, the Middle East conflict exacerbates "stagflation" risks, creating a policy dilemma. If the conflict is short-lived, the impact may be relatively mild. However, if it escalates and prolongs, pressure on US fundamentals could increase alongside heightened financial instability and spillover effects, significantly impacting the global economy and markets. Analysts suggest that in traditional pricing logic, US Treasuries, the US dollar, and core US equities are considered "safe assets." But if the conflict becomes protracted, rising energy costs, weaker US fiscal discipline, and diminished strategic credibility could undermine this framework. Gold, energy assets, non-US dollar currencies, and markets with supply chain resilience and geopolitical stability, such as China, may garner new premiums. Research reports posit that the green fuel industry, crucial for national energy security and positioned as an alternative to oil and gas, is transitioning from an optional decarbonization pathway to a rigid national strategy with clear growth potential. The valuation premium logic centered on oil substitution and national energy security is expected to fundamentally reshape the underlying rationale for the wind power industry's development. The sector is poised for a triple revaluation: a systematic upward shift in valuation benchmarks, a comprehensive overhaul of its valuation system, and the complete removal of long-term growth ceilings. Looking ahead, the structural focus for 2026 may gradually shift from technology to inflation-driven chains. Key areas to watch include: 1) Imported inflation, where energy chains (oil & gas, coal chemicals, upstream chemical raw materials, shipping) have high price increase certainty due to geopolitical catalysts; among non-ferrous metals, minor metals and aluminum show relatively high certainty, while gold and copper present mixed signals; in agriculture, focus on feed ingredients, fertilizers, and pesticides. 2) Endogenous inflation, centering on the recovery of traditional industries driven by "anti-involution" measures, including chemicals, steel, coal, building materials, and live hogs. 3) Technology-related inflation, concentrating on the upstream AI computing power产业链, including computing infrastructure (servers, computing chips), memory chips, optical communication and PCB upstream materials (optical fibers, fiberglass), and power energy.
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