Huajin Securities: A-share short-term resilience may still be relatively strong. What are the main industries this year?

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Source: Huajin Securities

Investment Highlights

After the Two Sessions, the main industry themes may be those that performed well from the start of the year until the Two Sessions, primarily driven by industry trends, policies, and macro environment. (1) The main industry themes after the Two Sessions are likely to be those that outperformed from the beginning of the year until the Two Sessions: among the top 5 industries by gain/loss in the CITIC first-level industry rankings before and after the Two Sessions over the past 16 years, 13 years saw industries that outperformed before the Two Sessions continue to outperform afterward, with 8 years having more than two industries that continued to outperform. (2) The formation of main industry themes after the Two Sessions is mainly driven by industry trends, policies, and macro environment. First, industry themes are driven by major internal and external industry trends. Second, the tone set at the Two Sessions strongly promotes the formation of these themes. Third, large shocks internally and externally also significantly impact the formation of main industry themes. Fourth, industries with low gains or valuations at the end of the previous year tend to be pushed into the main themes by policies and industry trends.

Some technology growth and cyclical industries may be this year’s main themes. (1) Coal, petrochemical, and chemical industries have gained significantly since the start of the year until the Two Sessions, potentially becoming main themes. (2) Certain tech and cyclical industries may continue their upward trend this year. First, AI demand may drive increased demand for related hardware, computing power, and electricity by 2026, supporting the growth of electronics, communications, and power equipment industries. Second, conflicts involving the US and Iran, AI demand, and strategic reserves may jointly push the prices of non-ferrous metals and chemicals to oscillate upward in 2026, sustaining the upward trend of related cyclical industries. Third, these industries may receive policy support in 2026. Fourth, rising geopolitical risks could benefit some cyclical industries. For example, in 2022, the Ukraine-Russia conflict led to global energy supply tensions, boosting the coal industry. If the US-Iran conflict persists, the Strait of Hormuz blockade could impact global energy supply, benefiting petrochemical, power, and coal industries. (3) Industries such as pharmaceuticals, power equipment, construction, non-ferrous metals, and others may have relatively low gains or valuations in 2025.

The A-share market may remain resilient in the short term, with the spring rally continuing. (1) Short-term economic recovery and profit growth may still be underway. First, the economy is still recovering: February exports surged 39.6% YoY, with exports of ships, furniture, and integrated circuits growing strongly, indicating robust external demand and sustained export advantages, with lower-than-expected export slowdown pressure. Second, seasonal effects may support gradual economic recovery. Second, profit growth may continue to rebound: first, A-share earnings may remain in a recovery cycle in the short term. (2) Liquidity may stay loose in the short term. First, macro liquidity may remain ample: the RMB exchange rate has been relatively strong due to economic recovery and energy advantages, and even if the Federal Reserve does not cut interest rates, domestic liquidity may not be significantly constrained. Second, the central bank may increase liquidity injection or further cut RRR and interest rates. (3) Risk appetite may be neutral in the short term, with some support. First, positive policies may support risk appetite. Second, geopolitical risks remain but their impact may weaken marginally.

Industry allocation: continue focusing on the dual themes of technology growth and cyclical industries in the short term. (1) Leading tech and cyclical industries may still outperform. Historically, oil price increases have gradually lessened their impact on tech stocks. Currently, the pressure from rising oil prices on tech growth industries is diminishing: first, recent oil price increases are near historical averages; second, the impact of US-Iran conflicts on oil prices is waning; third, with earnings season underway, some tech and cyclical industries may perform relatively well in the short term. (2) Continue low-buying on dips: sectors such as policy-driven and industry trend-up electric power (including computing and energy storage), non-ferrous metals, chemicals, electronics (semiconductors, AI hardware), communications (AI hardware), military (commercial space), machinery (robots), media (AI applications, gaming), computers (AI applications), pharmaceuticals (innovative drugs), and others; also, sectors with potential for catch-up and marginally improving fundamentals like non-bank financials and consumer sectors.

Risk warnings: Past experience may not apply in the future; policy surprises or changes; economic recovery may fall short of expectations.

Main Content

1. Weekly Focus: What are this year’s main industry themes?

(1) Reviewing history, main industry themes after the Two Sessions are mainly driven by industry trends and policies.

1. Industries that outperform from the start of the year until the Two Sessions are likely to continue outperforming afterward. Comparing the top 5 industries by gain/loss in the CITIC first-level industry rankings before and after the Two Sessions over the past 16 years shows that industries outperforming before the Two Sessions often continue to outperform afterward: in 13 of these years, industries that outperformed before the Two Sessions kept doing so after, with 8 years having more than two industries that continued to outperform. Industries that ranked lower before the Two Sessions tend to improve their ranking afterward, e.g., electronics (2010), real estate and non-bank financials (2012), media and computers (2013), telecom (2015), food & beverage (2016), banking (2018), home appliances (2019), basic chemicals (2021), transportation (2022), media again (2023).

2. The formation of main industry themes after the Two Sessions is mainly driven by industry trends, policies, and macro environment. For example: the 2013-2015 mobile internet wave benefited media, computers, and telecom; from 2016-2020, domestic consumption upgrade benefited food, retail, etc.; the 2021-2022 new energy revolution, with 136 countries pledging carbon neutrality by 2021, boosted new energy industries; the 2023 AI trend marked by ChatGPT solidified the dominance of media, telecom, and electronics. Policies such as the 2010 “Three-network integration,” 2013 “new infrastructure,” 2015 “Internet Plus,” 2016 supply-side reforms, 2019 “new momentum,” 2020 “expand domestic demand,” 2021 “carbon neutrality,” 2023 “modern industry and digital economy,” and subsequent policies on AI, data, green economy, etc., all influence industry themes.

3. Major shocks internally and externally also impact industry themes. For example: the 2011 European debt crisis boosted consumer and banking sectors; 2014’s monetary easing favored non-bank financials and banks; 2017’s MSCI inclusion accelerated foreign inflows, favoring large-cap stocks; 2018’s US-China trade friction shifted focus to heavyweight stocks, finance, and consumer sectors; 2022’s Ukraine conflict tightened energy supply, boosting coal.

4. Industries with low gains or valuations at the end of the previous year tend to be driven into the main themes by policies and trends. For example: in 2013, TMT (technology, media, telecom) was top gain, despite low previous valuations; in 2014, financials performed well with low PE; in 2015, consumer services and textiles had low prior gains; in 2016, cyclicals like home appliances and food performed strongly; in 2019, electronics had low valuation levels; in 2020, new energy; in 2021, coal; in 2023, media, telecom, home appliances; in 2024, retail; in 2025, basic chemicals.

(2) Some tech growth and cyclical industries may be this year’s main themes.

Coal, petrochemicals, and basic chemicals have gained significantly from the start of the year to the Two Sessions, likely becoming main themes. Tech and cyclical industries may continue upward: AI demand could drive hardware, computing, and power needs by 2026, supporting electronics, communications, and power equipment industries; geopolitical conflicts, AI demand, and strategic reserves may push commodity prices higher in 2026, supporting related cyclical industries; policies supporting tech independence and future industries are expected to continue, with emphasis on energy and computing synergy, benefiting related sectors; rising geopolitical risks, such as prolonged conflicts, could benefit industries like coal, petrochemicals, and power; industries like pharmaceuticals, power equipment, construction, non-ferrous metals, and others may have low valuations in 2025, with some sectors still underperforming.

2. Short-term strategy: buy on dips in sectors with potential for catch-up and marginal improvement, such as non-bank financials and consumer sectors, and sectors aligned with policy and industry trends like electric power (including energy storage), non-ferrous metals, chemicals, electronics, communications, military, machinery, media, computers, pharmaceuticals, etc. For example, the 2026 energy storage and renewable energy conferences, metal price rallies, chemical price increases, electronics industry events, and major expos are all opportunities.

3. Risks: past experience may not predict future; policy surprises or changes; economic recovery may be weaker than expected.

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Chief Editor: Guo Xutong