Huaxi Securities: Three Major Price Increase Trends Support the A-Share Market

Western Securities points out that by 2026, the main structural trend will shift from technology to the inflation chain. Looking at the SW primary industries, oil refining, coal, chemicals, and non-ferrous metals are expected to lead in gains by 2026. Under the catalyst of geopolitical tensions, the inflation chain market may continue to unfold. Regarding imported inflation, focus on energy, non-ferrous metals, and agricultural products. Among these, the energy chain has a higher certainty of price increases influenced by geopolitical factors, including sectors such as oil and gas, coal chemicals, upstream chemical raw materials, and shipping. For non-ferrous metals, small metals and aluminum have a relatively high certainty of price increases, while gold and copper show a mixed pattern of gains and declines. In agricultural products, pay attention to feed raw materials, fertilizers, and pesticides.

For endogenous inflation, focus on traditional industries resisting internal competition, including chemicals, steel, coal, building materials, and hogs. The chemical sector, driven by rising crude oil prices, has already entered a price increase zone; prices for coal, steel, building materials, and hogs remain low but may recover.

Regarding technology-driven price increases, focus on the upstream segments of the AI computing power industry chain, including infrastructure such as servers and computing chips, storage chips, optical communication, upstream PCB materials (fiber optics, glass fibers), and power energy.

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【Western Macro】The True Gold Is Not Afraid of Fire — The Main Inflation Trend

(1) The Middle East Conflict’s Impact on A-shares: Limited but Not Fundamental

The Middle East conflict has pushed oil prices above $90 per barrel. The Strait of Hormuz is effectively blocked, with shipping capacity dropping near zero, affecting about 20% of global oil transport, with roughly 80% heading to Asia. The conflict’s duration is highly uncertain, with freight rate expectations lasting 1-2 months.

The impact of the oil shock on China is relatively manageable. China’s dependence on foreign oil is about 70%, with diversified imports. As shipping capacity through the Strait of Hormuz declines, China may increase imports from outside the Middle East. In extreme cases, such as supply shortages, the strategic oil reserves accumulated earlier can meet short-term demand, making the overall economic impact relatively controllable.

In the equity markets, “true gold is not afraid of fire.” Global risk appetite has declined, dragging down A-shares, mainly driven by sentiment rather than fundamentals, making a V-shaped recovery more likely. If the war persists, Chinese assets may have a stronger risk-resistance capability and could become a “safe haven” during this conflict.

(2) Three Major Inflation Trends Supporting A-shares

By 2026, the main structural trend will shift from technology to the inflation chain. Looking at the SW primary industries, oil refining, coal, chemicals, and non-ferrous metals are expected to lead gains by 2026. Under the influence of geopolitical tensions, the inflation chain market may continue to unfold.

In terms of imported inflation, focus on energy, non-ferrous metals, and agricultural products. The energy chain has a high certainty of price increases due to geopolitical factors, including sectors such as oil and gas, coal chemicals, upstream chemical raw materials, and shipping. For non-ferrous metals, small metals and aluminum are more likely to see price increases, while gold and copper show a mixed pattern. For agricultural products, focus on feed raw materials, fertilizers, and pesticides.

In terms of endogenous inflation, focus on traditional industries resisting internal competition, including chemicals, steel, coal, building materials, and hogs. The chemical sector, driven by rising crude oil prices, has already entered a price increase zone; prices for coal, steel, building materials, and hogs remain low but may recover.

For technology-driven price increases, focus on the upstream segments of the AI computing power industry chain, including infrastructure such as servers and chips, storage chips, optical communication, upstream PCB materials (fiber optics, glass fibers), and power energy.

(3) Seizing the Rebound Opportunities in the Three Major Inflation Trends

In imported inflation, oilfield services lead the gains, with related chemical sectors performing well, such as coal chemicals, chemical raw materials, and agrochemicals. The anti-inflation trend is mainly policy-driven, with generally modest gains; policy escalation could trigger significant rises. In technology, the momentum for hardware price increases is weak, so capital continues to focus on upstream segments like fiber optics, electronics, superhard materials, and power-related stocks.

Risk Warning: Escalation of geopolitical risks in the Middle East. US economic, employment, and inflation trends exceeding expectations. Unexpected adjustments in monetary policy. Unexpected changes in fiscal policy.

(Source: First Financial)