Market Review: Last week, the continuation of US-Iran tensions continued to significantly impact the A-share market. On Monday, influenced by a sharp spike in oil prices, the Shanghai Composite Index opened lower and declined, but subsequently strengthened, posting consecutive gains on Tuesday and Wednesday before experiencing marginal adjustments on Thursday and Friday. From a volume-price structure perspective, index declines were accompanied by increased trading volume, indicating stronger selling pressure and insufficient upward momentum from buyers, suggesting potential continued short-term volatility. Current geopolitical risks have substantially increased, with a notable rise in the correlation among global risk assets. Close attention must still be paid to potential shocks from overseas asset price movements. However, compared to overseas markets, the A-share market has demonstrated considerable resilience. On a daily chart view, the Shanghai Composite Index maintains its bullish alignment above the 60-day and 120-day moving averages, indicating the market is in an adjustment phase within a short-to-medium-term uptrend. From a medium-term perspective, the slow-bull market structure remains solid, with expectations for an overall震荡上行 (volatile upward) trend.
Market Outlook: The US-Iran conflict is currently the core variable influencing asset price trends. Global markets are exhibiting a risk-off sentiment, with US stocks continuing their correction and the US dollar index strengthening further, having broken above 100 last week. The duration of the US-Iran conflict and the trajectory of crude oil prices are the key variables at present. Based on the current situation, there are no clear signals indicating an imminent end to this conflict; therefore, we continue to recommend focusing on sectors that benefit from the conflict and those with defensive characteristics. However, judging from current performance, A-shares show strong resilience, and the likelihood of a significant pullback is considered low. On the margin, a new round of Sino-US trade consultations is taking place in France, and a meeting between the Chinese and US heads of state still appears possible, which could help boost risk appetite for A-shares in March. Looking ahead to next week, key focuses will be the evolution of the US-Iran conflict and the outcomes of the Sino-US trade talks. The market is expected to maintain its volatile trend. From a fundamental perspective, February's financial data performed well, with inflation and export figures exceeding expectations, indicating overall solid domestic fundamentals. US February CPI met expectations.
Key Sectors to Watch: Energy Storage: The energy storage sector has been volatile since last October but showed characteristics of a breakout on high volume last week. Short-term momentum effects are anticipated. Free Cash Flow: Assets with strong free cash flow can provide substantial dividend income during market volatility, effectively hedging against some downside risks. Chemicals: Strong resilience in overseas exports provides a floor. If the PPI turns positive, the industry could shift from "volume growth with price declines" to "stable volume with rising prices," allowing leading companies to release profit elasticity and drive valuation repair.
Last Week Recap: US-Iran tensions persisted, significantly impacting A-shares. Monday saw a lower open and decline for the Shanghai Composite Index due to soaring oil prices, but it strengthened afterwards, rising consecutively on Tuesday and Wednesday before marginal adjustments on Thursday and Friday. The volume-price structure suggested stronger selling pressure during declines, indicating potential continued short-term volatility. While geopolitical risks are elevated and global risk asset correlations have increased, requiring attention to overseas impacts, A-shares have demonstrated stronger resilience relative to other markets. Technically, the index's bullish alignment above key moving averages suggests an adjustment within an uptrend, with a medium-term expectation of volatile upward movement.
This Week's Outlook: Direction: Expect volatile upward movement. Technicals: The Shanghai Composite's medium-term uptrend remains intact. Policy: Two Sessions policy targets met expectations. Data: Inflation and export data exceeded expectations. The US-Iran conflict remains the core market driver globally, fostering a risk-off environment. Its duration and oil price movements are critical. We maintain a focus on conflict-benefiting and defensive sectors. A-share resilience suggests a low probability of a major downturn. The potential Sino-US leaders' meeting in March could boost risk appetite. Next week's focus remains on the conflict and trade talks, with expectations for continued volatility. Domestically, February financial data was positive, with strong M1 growth and corporate medium-to-long-term lending. The narrative of household deposit shifts continues. Inflation improved, with PPI potentially turning positive sooner due to oil price spikes. Exports surprised positively, with resilience expected to continue. US inflation met expectations, but rising oil prices have pushed back rate cut expectations. The duration of high oil prices due to the conflict is a key variable for Fed policy.
The US-Iran conflict continues beyond initial expectations, with no clear end signal. Iran's effective blockade of the Strait of Hormuz has reduced shipping and forced production cuts among Gulf producers, pushing Brent crude above $100/barrel. While this has impacted equity markets, particularly in oil-dependent regions like Korea, Europe, and Japan, A-shares have shown stronger resilience, with the Shanghai Composite down only 1.6%, potentially enhancing their appeal to foreign capital medium-term.
Given significant overseas扰动 (disturbances), a balanced allocation is recommended, focusing on beneficiary sectors. Key watch sectors (with upward technical trends and strong short-term catalysts or good value): Energy Storage, Free Cash Flow, Chemicals. Observation Pool (clear medium-term uptrend, bullish technical characteristics): Aquaculture, New Energy, Artificial Intelligence, Home Appliances, New Energy, Building Materials, Coal, Grid Equipment. This Month's Focus Pool (from monthly strategy): Nonferrous Metals, AI, Robotics, Defense Military, Securities Insurance, Aquaculture, Free Cash Flow, New Energy, Chemicals, Engineering Machinery, Building Materials, Coal, Home Appliances, Grid Equipment.
Sector Analysis: Energy Storage: Escalating geopolitical conflicts heighten energy security risks, boosting the strategic importance of energy storage. Blockades like the Strait of Hormuz and resulting energy price hikes could accelerate integrated wind-solar-storage deployments, improving returns for residential systems. Unstable grids in conflict zones make off-grid storage essential. Concurrently, AI's computing power explosion creates rigid electricity demand, requiring stable green power for data centers, where storage can replace UPS systems and participate in power markets. Global AI data center storage demand is projected to exceed 300GWh by 2030, supported by mandatory configuration policies in China, positioning storage as a core element of computing competition. Free Cash Flow: The Free Cash Flow ETF selects 50 companies with the highest free cash flow rates from large and mid-cap A-shares. These firms typically exhibit high earnings quality and stable operations, offering平稳 (stable) performance that helps balance portfolio volatility. High-dividend assets attract long-term institutional investors and provide reliable income during downturns, acting as portfolio stabilizers. Chemicals: Current "anti-involution" policies aim to curb disorderly low-price competition and phase out outdated capacity, optimizing supply-demand dynamics. Persistent US-Iran tensions further strengthen the涨价逻辑 (price increase logic), acting as a catalyst. The chemical industry is transitioning from a cycle bottom towards recovery, with peak supply expansion passed, easing pressure from new capacity, and showing improving prices and marginal supply-demand repair. Strong export resilience provides a base; a positive PPI shift could transition the industry towards stable volume and rising prices, enabling leaders to demonstrate profit elasticity and valuation repair. Recent increased divergence in the nonferrous metals sector may lead some capital towards the relatively lower-positioned chemical sector.
Disclaimer: The information presented in this column is for investor education purposes only and does not constitute any investment advice. Investors should not rely solely on this information for making decisions. While we strive for accuracy, we do not guarantee the completeness or accuracy of the information and assume no liability for any losses resulting from its use. Investing involves risks; caution is advised.
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