The chemical sector hits the daily limit, and the Sci-Tech Innovation board defies the trend with strength. Today, there are two details in the A-shares market worth paying attention to!

Ask AI · How does the Middle East situation drive a surge in gains in the chemical sector?

Key takeaways in full text: On April 7, nearly 4,000 A-shares rose; the Shanghai Composite rose 0.26%, while the STAR Market 50 led with a gain of 1.42%. Geopolitical conflict spurred a broad rally in resource sectors such as chemicals and coal. Nitrogen fertilizers and chemical raw materials sparked a wave of daily limit-up moves. In the short term, external risks have not been fully eliminated, so chasing higher prices is not advisable; in the long term, focus on the main line of STAR Market growth and certainty in earnings.

At the close on April 7, all three major A-share index benchmarks finished higher in the red. The SSE Composite Index rose 0.26% to 3,890 points, while the SZSE Component Index and the ChiNext Index both rose 0.36%; the STAR Market 50 led among the major indices, with its gain reaching 1.42%. Total market turnover was 1.62 trillion yuan, down 45.3 billion yuan versus the prior trading day, and nearly 4,000 individual stocks advanced. Index gains were not large, but the “making money” effect was still pretty good.

On the trading board, resource-sector stocks surged across the board. Basic chemical materials posted the top sector performance with a 3.66% gain, petroleum and petrochemicals rose 2.85%, and coal rose 2.44%. Nitrogen fertilizers, compound fertilizers, and agrochemicals sectors moved higher; multiple stocks such as Chitianhua and Xinan Shares hit limit-up. In the chemical raw materials sector, there was a breakout—ten stocks including Liuguo Chemical locked in limit-ups. The organosilicon sector also strengthened, with Sinomers Silicon hitting the daily limit-up. On the other side, banks, insurance, automobiles, and food and beverage sectors closed lower; all four state-owned major banks turned green, with Industrial and Commercial Bank of China down 1.33%, Kweichow Moutai down 1.37%, and defensive-weighted names that had rallied earlier showing pressure for profit-taking.

What is the core logic behind today’s leading performance? The Middle East situation is the direct catalyst. According to a report by Xinhua News Agency, in the afternoon of April 7, the Israeli military issued a warning to train passengers inside Iran, saying: “By staying on the train and along the railway lines, you will endanger your lives.” This suggests that railways inside Iran are likely to become strike targets. Earlier, on March 25, an attack by the U.S. and Israel hit a railway employees’ dormitory in the city of Tabriz in Iran—well, in Tabriz?—causing 7 deaths. At the same time, Iran’s Islamic Revolutionary Guard Corps said that over the past 24 hours, it conducted “comprehensive strikes” on the northern Israeli city of Haifa, with no missiles intercepted. The mediator expressed pessimism that Iran would “yield” before the last deadline set by Trump, with hope for a U.S.-Iran ceasefire agreement “fading.”

Specifically in terms of industrial impact: the Strait of Hormuz disruption to nitrogen fertilizer supply directly pushed up prices of chemical products such as nitrogen fertilizers and compound fertilizers. The attack on the Malford Dasht petrochemical integrated facilities in Iran further disrupted the supply of chemical raw materials. The fundamental support behind these events is clear—OPEC+ continues production cuts, international oil prices remain elevated, domestic economic repair in the first quarter improves the margin of chemical demand, and on top of that the arrival of the spring peak season for production further boosts expectations; profit expectations in the basic chemicals industry continue to recover. From a stock perspective, PetroChina rose 1.87%, Wanhua Chemical rose 4.72%, China Coal Energy surged 5.44%, and broad gains among leading stocks validate the overall nature of the sector rally.

The coal sector’s rise also benefits from both fundamentals and valuation logic. With the arrival of the summer coal-stocking peak season, power plant inventories are gradually drawn down, and spot prices bottomed out and rebounded. Meanwhile, many coal-related stocks have dividend yields that remain at 5% or higher; under the current market environment, they offer strong defensive allocation value and attract inflows of long-term capital.

The 科创成长 (STAR Market growth) direction also showed strong performance today. The semiconductor sector strengthened overall; SMIC rose 4.18%, Cambricon jumped 9.10%, and Hygon Information rose 1.76%. Sentiment in the AI computing power industrial chain remains robust. Overseas large-model iterations continue to be rolled out, domestic AI investment keeps increasing, and demand for core upstream segments such as chips and optical communications remains at a high growth rate—this is also the underlying support for the STAR Market 50 to produce a standalone rally.

How should we look at the short-term market? The market is gradually shifting from emotion-driven shocks toward pricing based on fundamentals. Although the cloud of geopolitical conflict has not dispersed, compared with overseas equity assets, A-shares exhibit stronger resilience. Current A-share sentiment indicators are still in the “panic” range. During the selloff, there is not obviously increased volume, so we expect it will still take some time to complete sentiment digestion and turnover. In the short term, the most likely scenario is that the market continues to trade sideways while grinding down to a bottom. The odds for left-side positioning may be gradually improving, but with the geopolitical situation not fully clear, it is not advisable to place a one-way bet. It is recommended to continue waiting for right-side signals.

We also need to be alert to the possibility that rising oil prices could push up inflation, thereby affecting liquidity expectations. Late April may become a key time window for marginal improvement in conditions both domestically and abroad. If external shocks gradually fade, market focus will shift to areas with strong year-on-year growth in first-quarter earnings.

For long-term strategy, external conflicts have not shaken the underlying foundation for A-shares’ long-term upward trend. The core logic of policy support, capital entering the market, and the re-rating of Chinese assets remains unchanged, and the slow bull market pattern will not change either. Allocation directions can be built around two main themes by buying dips.

First, resource and energy substitution directions. The Middle East situation highlights the importance of energy security. In the long run, sectors such as oil and gas production, coal, chemicals, power equipment, and new energy have strategic allocation value. China’s advantaged manufacturing industry, leveraging cost and efficiency advantages, has already entered a phase of long-cycle growth upward in certain fields.

Second, the technology growth direction. Industrial trends in sub-sectors such as AI computing power, semiconductors, storage, and innovative drugs are clear. The growth direction remains the strongest main line of this round of the rally. Domestic model deployments are accelerating their push for breakthroughs; API call volumes continue to climb; the slope of demand for computing power is clearly visible to the naked eye; and it may even trigger the entire domestic computing-power value chain. Short-term volatility instead brings opportunities for positioning—focus especially on directions that truly have a moat.

In addition, April is the dense disclosure period for annual reports and first-quarter reports. Sectors with high earnings certainty and ongoing improvement in business conditions will become the core focus for funds.

In short, the current market is in a structural phase after trading sideways to grind down its base; there is no systemic risk. Investors can make balanced allocations according to their own risk tolerance and gradually adjust their holdings toward areas with visible earnings as the sideways window plays out.

Note: The market involves risk; investing requires caution. This article is compiled based on publicly available information and does not constitute any investment advice.

Author statement: Personal views are for reference only.