It's April 7th again, and the A-share market has experienced a sudden change in style! The chemical sector is leading a surge in limit-up hits.

Ask AI · How does the Middle East conflict affect the global chemical supply and demand pattern?

Everyday Economic Reporter: Xiao Ruidong Everyday Editorial: Zhao Yun

On April 7th, the market experienced wide fluctuations throughout the day, with the three major indices all closing in the green, and the Sci-Tech Innovation 50 Index rising over 1%. At the close, the Shanghai Composite rose 0.26%, the Shenzhen Component Index up 0.36%, and the ChiNext Index up 0.36%.

In terms of sectors, the chemical sector continued to strengthen, with more than twenty constituent stocks hitting the daily limit; PCB concept stocks fluctuated and surged, while sports concepts repeatedly gained activity. On the downside, the big financial sector declined, with insurance leading the fall. Many stocks in the innovative drug concept weakened.

Over 3,900 stocks in the entire market rose, including 101 stocks hitting the daily limit. The combined turnover of the Shanghai and Shenzhen markets was 1.61 trillion yuan, shrinking by 42.1 billion yuan compared to the previous trading day.

It is well known that the current A-share market trend began on “9.24” of 2024, and exactly one year ago, on April 7, 2025, was the deepest part of the trend, the “Golden Pit”.

Today before the opening, due to the slightly complex and chaotic news surrounding the Qingming Festival holiday, combined with concerns about the so-called “one-year anniversary,” many investors might have been quite nervous.

Looking back after the close, this year’s market “style change” compared to last year has surprised everyone a bit.

Wind data shows that, except for a few “core assets” like the SSE 50 and CSI 300 that surged and then retreated, most stock indices were more bullish during the trading session.

Generally speaking, the All A Index and the average stock price of the entire A-share market both surged early in the morning and then retreated, only to approach turning red in the afternoon and then rise again.

In other words, today’s market repaired some of last Friday’s decline, which is a good sign;

but the extent of the recovery is still within the “oscillation” range, and has not yet changed the short- to medium-term weakness.

However, as tomorrow’s northbound funds start “working,” market volume should increase, whether the market can “withstand pressure” and continue to recover remains to be seen.

The so-called pressure still points to the Middle East situation. According to reports from CCTV News and other media, U.S. President Trump issued a “final warning” again, stating that if Iran does not “surrender” before 8:00 pm Eastern Time on April 7 (Wednesday 8:00 am Beijing time), he will launch strikes on Iran’s civilian infrastructure.

CICC Research Report pointed out that this week, it is recommended to maintain a cautious stance, for three reasons:

(1) Under relatively optimistic conditions, following the “2025.4.7” rhythm, the market’s risk appetite needs to wait for significant events like the release of a “Joint Statement” to significantly warm up;

(2) Under neutral conditions, if the geopolitical conflict persists but is not prolonged, it will have a limited impact on global medium- and long-term growth, and confidence in the resilience of domestic equity assets remains. However, overall pace and allocation structure still require “timely decisions.” Specifically, in the short term, the overall index rhythm is likely still driven by geopolitical news, and the sustainability of domestic fundamentals recovery also needs observation. Meanwhile, the currently concentrated “certain growth” and “pure defensive” sectors (such as telecommunications and banking) are also facing the test of Q1 earnings quality;

(3) Under cautious conditions, if the geopolitical conflict lasts longer than expected, the market may revert to a global growth slowdown trade, and domestic equity assets will face an overall adjustment caused by a decline in risk appetite. Therefore, under these three scenarios, maintaining large positions in equities in the short term could still face significant volatility risks. It is recommended to closely monitor the sustainability of the March economic data recovery and the Q1 earnings of currently concentrated trading sectors. In other words, as long as the “domestic resilience” logic can be somewhat validated, unless the most worrying scenarios occur, the A-share market still offers investment value.

Zhongtai Securities believes that last week, major asset classes returned to a risk-averse mode, but there are four signals that marginally suggest a more positive outlook.

Signal 1: Trump begins “TACO,” and the market’s oscillation around him gradually dulls.

Signal 2: The distant oil prices’ bullish momentum weakens.

Signal 3: Stock markets in some economies become desensitized to high oil prices. After Trump started signaling “TACO” on March 23, stock markets in some economies less dependent on Middle Eastern oil showed desensitization to oil prices, which continued to hit new highs, with indices fluctuating upward.

Signal 4: Highly elastic sectors outperform significantly. Despite the overall decline of the A-shares on April 2 and 3, highly elastic sectors (such as strong optical modules and some cyclicals) showed obvious excess returns.

Compared to last week, today’s leading sectors can also be considered a “style shift,” which is the chemical sector’s full-line strength.

Referring to the chemical index in Wind’s secondary industry data, this sector peaked and retreated since mid-March, and last week, it continued to pull back with the market. Today, it suddenly surged.

On the news front, the Middle East conflict remains the direct trigger for the market. According to Xinhua News Agency, early on April 7, Iran’s Fars News Agency quoted unnamed sources reporting that an explosion occurred in the northeastern Jubail industrial zone of Saudi Arabia, involving a large-scale attack. It is known that Jubail industrial zone is one of the world’s important petrochemical production bases, with an annual output of about 60 million tons of petrochemical products, accounting for 6% to 8% of global total.

On the other hand, the Ministry of Industry and Information Technology and seven other departments recently jointly issued the “Action Plan for Accelerating the Upgrading and Renovation of Old Petrochemical and Chemical Industry Facilities (2026–2029),” proposing to complete the renovation of old facilities by 2029, promote safety, green, and intelligent upgrades, and establish a long-term mechanism for continuous renovation and improvement, fully promoting China’s petrochemical industry from “large scale” to “high quality.”

Some analysts believe that over the past ten years, the global chemical industry has not achieved significant scale capacity improvements but has instead been clearing supply. Post-2022 Europe, as well as Japan, South Korea, and Southeast Asia after this oil crisis, may be constrained by fragile supply chains, facing accelerated clearing of chemical supply. Effective chemical assets worldwide will become increasingly scarce. On the demand side, benefiting from demographic structures and the rapid rise of resource commodities, demand in African, Asian, and Latin American countries is growing rapidly, potentially creating supply-demand gaps in industrial products and driving industrial inflation. Against this background, the market will recognize the irreplaceability of Chinese chemical assets and will pay a premium for Chinese capacity with resilient supply chains.

Daily Economic News