Folk Wisdom | Structural Market Trends Deepen Further

Host | Yin Xing

Focusing on Three Key Areas

Host: This week’s rising chain continues to fluctuate upward, and the performance of electric power equipment has also been exceptionally bright. Do you still remain optimistic about these two sectors?

Fan Zhou: Absolutely! Both electric power equipment and the rising chain benefit from the trending increase in oil prices. Currently, the Middle East situation is at a stalemate, and it won’t settle anytime soon.

Host: Although it won’t settle in the short term, oil prices have indeed experienced wide fluctuations this week.

Fan Zhou: I believe this wide fluctuation is due to a short-term correction of extreme overbought conditions. From last Friday to this Monday—just two trading days—crude oil prices rose from $78 to $119. That’s over a 50% increase in two days, a rare surge in history. This has caused severe short- to medium-term overbought conditions in crude oil, and a correction is needed before it can go further.

Host: Understood! Anyway, you still see an overall bullish trend for crude oil. Tech stocks performed moderately this week.

Fan Zhou: Compared to the two sectors above, it’s indeed average. But there are still some bright spots. The optical communication index hit a new high again this week. The stage gains may not be large, but the overall trend remains oscillating upward. Also, electric power equipment was part of the tech sector in the last bull market. Now, it’s no longer considered tech domestically, but for other countries, electric power equipment is an insurmountable technology—or the mother of technology. Without electricity, how can technology be used? That’s the core!

Host: Got it! Anyway, your highly focused sectors are still the three mentioned. How do you view the index?

Fan Zhou: The index has no clear short-term direction. Don’t think it’s weak! Under the current circumstances—big surge in oil prices and the dollar’s simultaneous rebound—other markets like Korea, Japan, and even the US stock market are quite volatile. We are just opening low and rebounding, with narrow-range consolidation at high levels, which is already very strong! The current bull market isn’t over; only the timing and space might be slightly adjusted due to the oil price rise. This surge in oil is a sudden systemic risk. I’ll spend some time in Beijing in late March to discuss this topic with everyone. After all, it will have a profound impact on major global asset classes and stock markets.

Resilience Still Present, Courage Lacking

Host: The spring rally has lasted three months. Do you think it’s nearing its end?

Haifeng Ruoyu Xiao Xiao: The timing of the spring rally also depends on whether it’s a bull or bear market, and there’s a very clear “long bull, short bear” characteristic. Based on data from the past 20 years, the average duration of spring rallies in bull markets is about 52 trading days. The longest was in the 2007 bull market, which lasted until May 30 to adjust the stamp duty, totaling 72 trading days. As of this Thursday, the spring rally has lasted 55 trading days (counting from December 16 last year). Clearly, it has reached the average duration for spring rallies in bull markets. In recent years, the market has continued its upward momentum after the rally, such as in 2023 until late April, and in 2025 until late March.

Host: What about this year?

Haifeng Ruoyu Xiao Xiao: This year is somewhat special. Regional conflicts are a problem, and there’s no sign of easing in the short term. The high oil prices have almost hit the “dead end” of overseas markets, with the S&P 500 clearly testing the annual moving average. The big tariff shock from late February to early April 2025 also dragged us down, which everyone remembers. Currently, the resilience is still relatively strong because heavyweight stocks like CATL and PetroChina are holding firm. Last week, we discussed the impact of regional conflicts on our market. The main beneficiaries are power grids, new energy, and chemicals. The sectors most affected are those closely tied to overseas markets, like chips and computing power. This week, structural trends deepened further, with two directions diverging sharply, forming a “K-shaped” structure. Since the tech growth sector has always been a market leader, although the index remains resilient, the “courage” is waning, making it difficult to generate upward momentum.

Insights from the Power Grid Boom

Host: This week has been quite challenging, with war-related concept stocks and tech stocks fluctuating back and forth. What’s your advice, Jia Yang?

Jia Yang: Strictly set stop-losses in your operations to ensure account safety. Short-term trading is difficult. I think, aside from short-term considerations, there are three logical points to note: 1. For domestic core AI computing power stocks, use the adjustment to find suitable entry points—AI localization is unstoppable. 2. In energy and chemical sectors, look for stocks benefiting from the war but unaffected by ceasefires, such as those benefiting from “anti-involution,” with self-controlled raw materials—these are likely to see high growth in the next 1-2 years. 3. If you really don’t know how to trade, rest well and patiently wait for the situation to stabilize.

Host: Last week, you talked in detail about power grids and energy independence. This week, the boom has spread to traditional power, even capital is digging into it. What does this tell us about the market?

Jia Yang: Traditional power mostly overlaps with future energy, so it has long-term logic. Most stocks haven’t risen in the past year, so the resistance to price increases is very low. Capital may continue to seek targets from the perspective of previous underperformance.

Host: Can you give some examples?

Jia Yang: State-owned infrastructure or key local infrastructure projects. They haven’t risen in the past year and have very low valuations.

(This article was published in Securities Market Weekly on March 14. The stocks mentioned are for analysis only and do not constitute investment advice.)