Seeing Rain and Wind, Also Seeing Rainbows | Guotai Hanover China Equity Strategy Weekly Report 20260315

(Source: Yiguan Trend)

Authors: Fang Yi / Zhang Yifei / Tao Qianchen / Huang Weichi

Core Viewpoint: China’s relatively stable geopolitics, stable economy and markets, and progress in emerging technologies are scarce globally. The expansion of new economic capital and government deployment of stable investments are key to breaking the “stagflation” risk.

Investment Highlights

▶Market Outlook: A strong wind reveals the hardy grass; stability is the foundation of China’s stock market. In early March, tensions between the US and Iran intensified, and Guotai Haitong emphasized that “stability is the foundation of China’s stock market.” Globally, China’s stock market has been among the least affected by recent declines. Due to ongoing US-Iran tensions and energy sanctions, some investors’ confidence has weakened during roadshows. The world is round; China’s market cannot be detached from energy price shocks, but it won’t be dragged by a single risk narrative. China’s market/asset logic has advantages and differentiation. Compared to consensus, we are more optimistic: 1) Stability is scarce; China’s market has a lower risk premium. Two global trends are emerging: increased productivity from new technologies and regional security upheavals. China’s relatively stable geopolitical landscape, higher energy self-sufficiency, technological progress that is catching up or leading, a complete industrial system, and stable economy, society, and capital markets are scarce and hard to ignore globally. 2) Growth logic is a breakthrough to the global stagflation narrative; China’s market is more diverse. In 2025, the first year of positive capital expenditure for Chinese listed tech companies, the significant US-China computing power gap and market space suggest that China’s tech capital spending may accelerate compared to the US. Additionally, the central government has deployed 800 billion yuan in new policy financial tools to stabilize investment and domestic demand, potentially unlocking 10-11 trillion yuan in investments. China’s market won’t fall into a single risk narrative. 3) The Russia-Ukraine conflict and US-China tariff disputes show that after emotional peaks (without cognitive correction), market direction depends on endogenous logic. The decline in risk-free yields, reform of capital markets, and economic restructuring are the fundamental drivers and pillars of China’s “transformation bull market.”

▶Impact of Rising Oil Prices on Mid-View Industries: Resource commodities benefit from price increases; manufacturing focuses on cost transmission. Geopolitical conflicts and reduced shipping convenience push oil prices higher. Based on historical experience and current conditions, potential impacts on mid-view industries include: 1) Product prices linked to oil prices: profit margins of oil, coal, rare metals, industrial metals, and chemical raw materials are highly correlated with crude oil prices. Rising oil prices may directly boost profitability expectations in related industries. 2) Price increase expectations drive inventory replenishment: historically, China’s PPI inflection points tend to precede inventory turning points by 1-2 quarters, and PPI recovery can shift industrial firms from destocking to restocking, especially in chemicals and construction materials with low capacity and inventory levels. 3) Strong cost transmission in midstream manufacturing: rising oil prices often hurt profits in midstream manufacturing, but industries with global competitive advantages and demand-side logic—such as wind power, energy storage, and machinery for global capacity rebuilding—benefit from stronger cost transmission. Focus on sectors with high overseas revenue share and higher gross margins than domestic counterparts.

▶Industry Comparison: Emerging tech is the main theme; patience will reveal the moonlight. Financial stocks are well-positioned for both offense and defense; value will also have its spring. 1) Large financials. After a collective correction, as key weights and stabilizers, they now have investment value: banks/non-banks. 2) Cyclical value. Benefiting from domestic “investment stabilization and recovery” policies, sectors like building materials and construction, as well as chemicals, coal, and non-ferrous metals related to rising international commodity prices. Consumer categories showing improvement include mass-market goods, agriculture and animal husbandry, and hotels. 3) Tech manufacturing. Domestic capital expenditure accelerates in 2026, focusing on independence and application ecosystems. Recommended: electronics, communications, power equipment, machinery, aerospace, and Hong Kong internet.

▶Theme Strategies: 1) Computing and power synergy: National strategies address the “energy-computing” dual challenge; optimistic on AIDC, power informatization, and green electricity. 2) Energy security: Focus on new energy systems and future energy sources; optimistic on power grids, new energy storage, and nuclear fusion. 3) AI applications: Policies emphasize building a new intelligent economy; optimistic on domestic large models and token exports. 4) Commercial space: Industry development accelerates; optimistic on medium-to-large rocket manufacturing and launch services.

▶Risk Warnings: Unexpected overseas economic recession; uncertainties in global geopolitics.

Contents

01

Market Outlook: A strong wind reveals the hardy grass; stability is the foundation of China’s stock market

In early March, tensions between the US and Iran intensified, and Guotai Haitong emphasized that “stability is the foundation of China’s stock market.” Globally, China’s stock market has been among the least affected by recent declines. Due to ongoing US-Iran tensions and energy sanctions, some investors’ confidence has weakened during roadshows. The world is round; China’s market cannot be detached from energy price shocks, but it won’t be dragged by a single risk narrative. China’s market/asset logic has advantages and differentiation. Compared to consensus, we are more optimistic: 1) Stability is scarce; China’s market has a lower risk premium. Two global trends are emerging: increased productivity from new technologies and regional security upheavals. China’s relatively stable geopolitical landscape, higher energy self-sufficiency, technological progress that is catching up or leading, a complete industrial system, and stable economy, society, and capital markets are scarce and hard to ignore globally. 2) Growth logic is a breakthrough to the global stagflation narrative; China’s market is more diverse. In 2025, the first year of positive capital expenditure for Chinese listed tech companies, the significant US-China computing power gap and market space suggest that China’s tech capital spending may accelerate compared to the US. Additionally, the central government has deployed 800 billion yuan in new policy financial tools to stabilize investment and domestic demand, potentially unlocking 10-11 trillion yuan in investments. China’s market won’t fall into a single risk narrative. 3) The Russia-Ukraine conflict and US-China tariff disputes show that after emotional peaks (without cognitive correction), market direction depends on endogenous logic. The decline in risk-free yields, reform of capital markets, and economic restructuring are the fundamental drivers and pillars of China’s “transformation bull market.”

02

Impact of Rising Oil Prices on Mid-View Industries: Resource commodities benefit from price increases; manufacturing focuses on cost transmission.

Rising oil prices impact mid-view industries: resource commodities benefit from price hikes, manufacturing focuses on cost pass-through. Geopolitical conflicts and decreased shipping convenience push oil prices higher. Based on historical experience and current conditions, potential impacts include: 1) Product prices linked to oil prices: profit margins of oil, coal, rare metals, industrial metals, and chemical raw materials are highly correlated with crude oil prices. Rising oil prices may directly boost profitability expectations in related sectors. 2) Price increase expectations drive inventory replenishment: historically, China’s PPI inflection points tend to precede inventory turning points by 1-2 quarters, and PPI recovery can shift industrial firms from destocking to restocking, especially in chemicals and construction materials with low capacity and inventory levels. 3) Strong cost transmission in midstream manufacturing: rising oil prices often hurt profits, but industries with global competitive advantages and demand-side logic—such as wind power, energy storage, and machinery for global capacity rebuilding—benefit from stronger cost pass-through. Focus on sectors with high overseas revenue share and higher gross margins than domestic counterparts.

03

Industry Comparison: Emerging tech is the main theme; patience will reveal the moonlight. Financial stocks are well-positioned for both offense and defense; value will also have its spring.

1. Large financials. After previous collective adjustments, they remain key weights and stabilizers with investment value: banks/non-banks. 2) Cyclical value. Benefiting from domestic “investment stabilization and recovery” policies, sectors like building materials, construction, chemicals, coal, and non-ferrous metals related to rising international commodity prices. Consumer categories showing improvement include mass-market goods, agriculture and animal husbandry, and hotels. 3) Tech manufacturing. Domestic capital expenditure accelerates in 2026, focusing on independence and application ecosystems. Recommended: electronics, communications, power equipment, machinery, aerospace, and Hong Kong internet.

Q1 2026 Earnings Preview: Cyclical resource prosperity expands; emerging tech growth center rises. Early 2026, influenced by geopolitical tensions and sustained global AI investment, signals of price improvement appear across mid-view industries. 1) Upstream resources: significant improvement in prices of non-ferrous mining and smelting, with continued growth; oil, gas, coal, and chemical prices also improve amid overseas oil price rises. 2) Midstream manufacturing: benefiting from global AI and power infrastructure investments, resilient price growth continues, especially in electrical/electronic sectors. 3) Downstream consumption and utilities: terminal consumption remains weak, but service consumption shows strong recovery, with February’s service CPI growth significantly improving, supporting CPI rebound. Looking ahead to 2026, geopolitical conflicts in the Middle East may cause supply disruptions in upstream resources, accelerating PPI recovery. Cyclical industries may shift from unilateral price increases in non-ferrous metals to broader price rises in oil, gas, coal, and even real estate chains. Meanwhile, AI investment and global power infrastructure will further strengthen in 2026, coupled with policy focus on domestic demand, likely improving mid- and downstream demand. Resource price increases could accelerate China’s re-inflation cycle, fostering a benign cycle of mild inflation and economic expansion.

Technological Growth: The profit center of emerging industries further rises. In 2026, global AI investment will push the tech hardware cycle higher; China’s semiconductor sales in January grew by 47.0% YoY, continuing strong recovery. Meanwhile, AI penetration in China reached 16.3% in 2025, still below the 25-40% in developed countries, indicating significant room for growth in computing power capital expenditure, injecting new momentum into TMT hardware. On the export front, increased demand for power infrastructure in Europe and the US, especially amid European fiscal expansion, will benefit Chinese manufacturing exports. In 2026, exports of capital goods are expected to grow strongly, with an upward shift in growth center.

Large Financials: Repeated geopolitical disturbances make large financials the ballast of market stability. During the Middle East oil crisis (2010-2012), financial stocks showed resilience after war outbreaks. Notably, after the August 2011 war ended, despite ongoing geopolitical uncertainties, financial stocks rose against the trend, highlighting their stability value in high-risk geopolitics.

04

Theme Recommendations: Computing-Power Synergy / Energy Security / AI Applications / Commercial Space

1. Computing-Power Synergy: Policy emphasizes large-scale intelligent computing clusters and computing-power-energy coordination; optimistic on AIDC, power informatization, and green electricity. Investment advice: The 2026 government work report first proposed implementing “large-scale intelligent computing clusters” and “computing-power-energy coordination,” elevating these to national strategic priorities. Major projects like AI super-large clusters will be promoted during the 14th Five-Year Plan. Advanced AI products with performance leaps will stimulate user demand, with active users and token calls surging, likely boosting domestic capital expenditure on related infrastructure. The essence of computing-power-energy coordination is deep coupling of power system dispatching, green assets, and computing load.

Direction one: Focus on “power dispatching with computing” and “power supply with computing demand,” including integrated source-grid-load-storage, direct green power supply, virtual power plants, etc.

Direction two: Benefit from increased domestic investment in intelligent computing infrastructure, such as AIDC and data centers.

2. Energy Security: Geopolitical conflicts threaten key energy supplies; policies focus on building new energy systems and cultivating future energy sources. Optimistic on power grids, oil & gas development, new energy storage, green hydrogen, and nuclear fusion. Investment advice: The US-Iran conflict and Strait of Hormuz incidents threaten energy supply chains, increasing transportation risks. The 2026 government work report emphasizes constructing a strong energy nation, accelerating smart grid development, expanding new energy storage, and green power applications, as well as cultivating future energy sources. The 14th Five-Year Plan will promote new energy systems and enhance security in key sectors. The NDRC head Zheng Shanjie stated ongoing projects include hydropower, solar, offshore wind, and other major energy infrastructure investments exceeding trillions yuan.

Direction one: Infrastructure investments in power grids, oil & gas, new energy storage, green hydrogen, and nuclear fusion.

Direction two: Under global turbulence, key energy metals like oil, copper, aluminum, rare earths, and uranium.

3. AI Applications: Cloud deployment of OpenClaw is booming; AI agent execution capabilities leap forward. Policies emphasize building a new intelligent economy; the "AI+” initiative is fully implemented. Optimistic on domestic large models, token exports, and accelerated application ecosystems. Investment advice: Tencent Cloud’s free OpenClaw deployment is highly active; the national supercomputing network provides 10 million tokens free to each user, boosting AI agent capabilities and application ecosystems. The 2026 government work report advocates creating a new intelligent economy, expanding “AI+” applications across industries. China’s large models benefit from talent, power, and other advantages, with leading scores and strong overseas competitiveness. Many top model companies are deploying globally, and China’s AI industry will gradually develop an integrated advantage of power, computing, models, and applications.

Direction one: Leading domestic large models benefiting from increased token calls.

Direction two: Platforms with strong traffic and user stickiness, continuing capital investment, and mature products.

4. Commercial Space: Policy emphasizes establishing a new pillar industry in aerospace; optimistic on Blue Arrow’s Zhuque-3 reentry test in Q2, and investments in new infrastructure, applications, and frontier technologies. Investment advice: The 2026 government work report highlights developing integrated circuits and aerospace as new pillar industries. The NDRC head Zheng Shanjie noted major projects in satellite internet and other fields, with investments reaching hundreds of billions or trillions yuan. Zhuque-3 plans to conduct reentry tests again in Q2 2026, aiming for reusable flight in Q4. Private rocket companies are accelerating commercialization. Yantai Oriental Aerospace is integrating into national commercial aerospace plans. Henan aims to strengthen advanced manufacturing, supporting companies like Tianbing Technology and Tianzhang Satellites. Hainan promotes major commercial launch site projects.

Direction one: Benefit from accelerated rocket launches and financing of large reusable liquid rockets and low-earth orbit satellites.

Direction two: Benefit from increased infrastructure investments in launch sites and special fuels.

05

Risk Warnings

Risks include: Unexpected overseas economic recession; uncertainties in global geopolitics.

Disclaimer

Guotai Haitong Strategy Team

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