Chemical stocks staged a powerful rally on Friday, August 28th, bucking the broader market's downward trend. By the close of trading, Haohua Technology hit its daily limit up, while Hangyang Co, Tongkun Group, and Do-Fluoride New Materials all gained over 5%. Hualu Hengsheng, Dongcai Technology, and Hengli Petrochemical were also among the top gainers.
On the news front, the super El Nino event continues to intensify, with some institutions forecasting a greater than 90% probability of a strong El Nino occurring this autumn and winter. A strong El Nino typically disrupts food supply through droughts in Southeast Asia, India, and Australia, as well as abnormal rainfall patterns in South America.
CSC Financial noted that while global grain prices remain at relatively low levels overall and inventories still provide some buffer, weather risks are accumulating rapidly. If production shortfalls in major producing regions gradually materialize in the coming months, supply-demand dynamics could shift from a "loose inventory" phase to a "production cut and destocking" phase, making the upward elasticity of grain prices a key focus. Rising grain prices are also expected to improve global planting profitability and farmers' willingness to invest, which, through replanting, area expansion, and increased per-unit input, could further boost demand for pesticides, fertilizers, and other agricultural inputs, benefiting the agrochemical sector.
From a valuation perspective, data shows that as of Thursday's close (August 27th), the price-to-book ratio of the sub-chemical index tracked by Chemical ETF Huabao (516020) stood at 2.54 times, sitting at a relatively reasonable 49.02 percentile position over the past decade (source: Wind), offering solid medium-to-long-term cost-performance for allocation.
Looking ahead, CSC Financial stated that in the long term, the earnings trough of chemical industry leaders at the cycle bottom is already quite strong and holds sufficient value. However, in the short term, there are risks of sequential earnings declines due to the high base in Q2 and weak restocking in Q3. The firm recommends focusing on industries and stocks expected to show further earnings improvements in Q3, including: high-prosperity overseas refined oil products, fluorochemical refrigerants with both volume and price increases, potash fertilizers with continued new capacity release, and tires benefiting from significantly lower input costs.
For investors looking to seize the chemical sector rebound opportunity, the Chemical ETF Huabao (516020) offers an efficient route. Public data shows the ETF tracks the CSI Sub-Chemical Industry Theme Index, with constituent stocks covering popular themes such as AI computing power, anti-involution, robotics, and new energy. Off-market investors can also participate through the Chemical ETF Feeder Fund (A-class 012537, C-class 012538).
Source: Shanghai and Shenzhen stock exchanges, etc., as of August 28, 2026. Institutional views sourced from CSC Financial's August 23 report, "Super El Nino Strengthens Grain Price Rise Potential and Agrochemical Demand."
Fee explanation: When subscribing or redeeming fund shares, the agent broker may charge a commission of no more than 0.5%, which includes fees charged by securities exchanges and registration institutions. Chemical ETF Huabao does not charge a sales service fee. The subscription fee rates for Chemical ETF Feeder A are: 1% for amounts below 1 million yuan; 0.6% for amounts from 1 million yuan (inclusive) to 2 million yuan; and 1,000 yuan per transaction for amounts of 2 million yuan (inclusive) or more. The redemption fee rates are: 1.5% for holdings within 7 days; 0.5% for holdings from 7 days (inclusive) to 180 days; and 0% for holdings of 180 days (inclusive) or more. For Chemical ETF Feeder C, the redemption fee rate is 1.5% for holdings within 7 days and 0% for holdings of 7 days (inclusive) or more. The sales service fee rate is 0.2%.
Risk disclosure: Chemical ETF Huabao passively tracks the CSI Sub-Chemical Industry Theme Index, with a base date of December 31, 2004, and published on April 11, 2012. The index's constituent stock composition is adjusted as needed according to its compilation rules. Backtested historical performance does not indicate future index performance. The individual stocks mentioned are solely for objective display as index constituents and do not constitute any stock recommendation, nor do they represent the fund manager's or the fund's investment direction. Any information appearing in this article (including but not limited to individual stocks, comments, forecasts, charts, indicators, theories, and any form of expression) is for reference only. Investors must be responsible for their own independent investment decisions. Furthermore, any views, analyses, or forecasts herein do not constitute investment advice to readers and shall not bear any liability for direct or indirect losses arising from the use of this content. Investors should carefully read fund legal documents such as the "Fund Contract," "Prospectus," and "Fund Product Information Summary" to understand the fund's risk-return characteristics and choose products that match their own risk tolerance. Past fund performance does not indicate future performance, and the performance of other funds managed by the fund manager does not constitute a guarantee of fund performance.
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