Essence of Securities Morning Meeting | Exploring Undervalued Sectors

Yesterday, the market opened high and fluctuated, with all three major indexes rising more than 1%, and the ChiNext 50 index rising more than 3%. The trading volume of the Shanghai and Shenzhen markets was 2.01 trillion. In terms of sectors, the pharmaceutical, computing hardware, and computing leasing concepts were active. On the downside, the power and high-speed rail sectors declined. As of the close, the Shanghai Composite Index rose 1.46%, the Shenzhen Component Index rose 1.7%, and the ChiNext Index rose 1.96%. At today's brokerage morning meeting, Huatai believes that the control of the Strait of Hormuz for over a month has deepened the supply chain disruption in the Asian petrochemical industry; Huaxi believes in continuing to explore undervalued sectors; Sinolink believes that recession trading is approaching. Huatai: Control of the Strait of Hormuz for over a month has deepened the supply chain disruption in the Asian petrochemical industry With control of the Strait of Hormuz for over a month, the disruption of oil supply has caused a widespread decline in the Asian petrochemical industry chain, driving up costs and tightening supply, leading to a general rise in product prices. The price difference between international diesel and aviation coal has increased significantly, the ethylene/propylene chain has been hindered due to insufficient demand, and the aromatic hydrocarbon chain has shown differentiation based on product demand resilience. Different countries in Asia face different risks due to differences in oil strategic reserves and alternative energy sources, with China having relatively low risk of supply chain disruption. Meanwhile, the contraction of industry capital expenditure and dual control of carbon emissions will promote the optimization of the supply pattern, and this disruption is expected to accelerate the optimization of the Asian petrochemical industry. As uncertainty in the subsequent situation decreases and downstream inventory replenishment demand is released, it is expected to drive improvement in the profitability of chemical products. In the long term, this event will accelerate China's strategic pace towards energy independence and controllability, and it is expected that the development process of alternative routes for oil demand such as modern coal chemical industry, green hydrogen, and new energy will accelerate, gradually reducing reliance on imported oil and gas. Huaxi: Continue to explore undervalued sectors The undervalued style continued to dominate in the first quarter. The reason is that the overall market valuation is relatively high and risk preference is under pressure, with funds having a fear of highs, but the logic of stabilizing the market still exists, exiting directly may miss out on rebound profits. In this situation, funds tend to explore undervalued opportunities for replenishing rises. In the second quarter, continue to explore undervalued sectors. From the perspectives of PE and PEG, power equipment and media are worth continuing to focus on, with their PE (TTM) percentile since 2016 at 67% and 68% respectively, and their PEG ratio is 0.91. From a PB perspective, focus on agriculture and animal husbandry and large finance, whose PB percentile is basically below 20%, while their ROE is above 8%. However, the PB percentiles of non-ferrous metals and coal are relatively high, and the market depends on whether inflation can continue to exceed expectations. Sinolink: Recession trading is gradually approaching Recession trading means that equities and commodities are facing the possibility of fundamental kill, but bonds may be the first asset to hit bottom. The oil price rising above the integer level (115-120 USD) may become the trigger for comprehensive recession trading; in addition, the worsening of any dimension of the situation such as negotiations being suspended, the strait being interrupted, escalation of bombing, or the consequences for Gulf countries could potentially trigger comprehensive recession trading. In short, the sign of the end of the war is when the strait will be "partially opened" at what cost to whom, but no form of "partial opening" can prevent a slowdown in the global economy (compared to before the war). Recession trading is not just "wolf is coming", stock and bond merchants are gradually pricing in the probability of a recession, and too many (uncontrollable) factors are steadily accumulating. This article was reprinted from "Cai Liangshe". GMTEight editor: Chen Xiaoyi.