The chemical sector staged a reversal rally today (September 17th), with the Chemical ETF (516020), which reflects the overall performance of the chemical sector, initially fluctuating at low levels after market open before suddenly surging into positive territory. By market close, the ETF gained 0.4%.
Among constituent stocks, modified plastics, civilian explosives, and synthetic resin sectors led gains. By market close, Kingfa Sci. & Tech hit the daily limit, Guangdong Hongda soared over 9%, Hangyang Co. rose over 3%, while Shengquan Group, Tongcheng New Materials, and Sunresin New Materials all gained over 2%.
From a capital flow perspective, the Chemical ETF (516020), a popular on-exchange tool for chemical sector allocation, has continued attracting funds recently. Data shows that as of yesterday, over the past 10 trading days, the Chemical ETF (516020) received net inflows exceeding 810 million yuan from institutional investors; over the past 20 trading days, cumulative inflows reached as high as 1.78 billion yuan.
Institutions point out that current macro conditions are favorable, the chemical cycle is bottoming out, and the sector offers sufficient safety margins. Following the Federal Reserve's rate cut, China's domestic environment may also provide some room for interest rate reductions, with both domestic and overseas markets potentially experiencing synchronized demand recovery. Combined with subsequent domestic anti-involution policy catalysts, the chemical industry's characteristics of low positioning, low valuation, and low profitability provide ample safety margins.
Orient Securities states that we are currently in the bottoming phase of continuous PPI decline, with industry profitability and PPI at a low-level recovery inflection point. Under the "anti-involution" backdrop, focus should be on companies with supply-side clearing and high profit elasticity, particularly enterprises with enhanced dividend attractiveness. The chemical industry's supply-side structure is improving with high profit elasticity, potential capital expenditure declines, and cash flows directed toward dividends, enhancing dividend appeal.
TF Securities believes that the basic chemical industry's fixed asset growth rate reached an inflection point in Q4 2023, with fixed asset scale increasing year-over-year by Q2 2025. By the end of Q2 2025, total fixed assets of the basic chemical industry for all/sample listed companies reached 1,422.2/1,126.8 billion yuan respectively, up 14.5%/13.8% year-over-year, with growth rates accelerating by 2.6/2.1 percentage points compared to Q1 2025. The chemical sector's cyclical bottom may have arrived, suggesting attention to industries with marginal supply-demand changes.
From a valuation perspective, data shows that as of yesterday's close, the Chemical ETF (516020)'s underlying segmented chemical index had a price-to-book ratio of 2.29x, positioned at the 37.38% percentile over the past 10 years - a relatively low level highlighting attractive medium to long-term allocation value.
Looking ahead, Central China Securities indicates that as anti-involution rectification in the chemical industry deepens further, the situation of redundant capacity construction and disorderly excessive competition in some sub-sectors is expected to ease, ushering in a phase of cyclical improvement. For September 2025, focus is recommended on pesticides, organic silicon, polyester filament, coal chemicals, and light hydrocarbon chemicals industries.
Huaxin Securities notes that based on chemical industry interim report performance, the industry overall remains weak with mixed performance across various sub-sectors. This is mainly due to capacity expansion over the past two years entering a new capacity cycle combined with weak demand, though some sub-sectors performed better than expected. Additionally, investment opportunities in glyphosate, fertilizers, import substitution, pure domestic demand, and high-dividend assets warrant attention.
How to capitalize on chemical sector rebound opportunities? Investing through the Chemical ETF (516020) may offer higher efficiency. Public information shows that the Chemical ETF (516020) tracks the CSI Segmented Chemical Industry Theme Index, comprehensively covering various chemical sub-sectors. Nearly 50% of positions concentrate on large-cap leading stocks including Wanhua Chemical and Salt Lake Co., sharing in "strong-get-stronger" investment opportunities; the remaining 50% positions strategically allocate to leading stocks in phosphate fertilizers and phosphochemicals, fluorochemicals, nitrogen fertilizers and other segments, comprehensively capturing chemical sector investment opportunities. Off-exchange investors can also access the chemical sector through Chemical ETF Feeder Funds (Class A 012537/Class C 012538).
Data sources: Shanghai and Shenzhen Stock Exchanges, as of September 17, 2025. Risk Warning: The Chemical ETF passively tracks the CSI Segmented Chemical Industry Theme Index, with base date of December 31, 2004, and release date of April 11, 2012. Index constituent composition adjusts timely according to index compilation rules. Data shows the segmented chemical index's returns over the past 5 complete years were: 2020: 51.68%; 2021: 15.72%; 2022: -26.89%; 2023: -23.17%; 2024: -3.83%. The underlying index constituent composition adjusts timely according to index compilation rules, and backtested historical performance does not predict future index performance. Index constituents mentioned are for illustration only; individual stock descriptions do not constitute investment advice in any form, nor represent holding information or trading activities of any funds under management. The fund manager assesses this fund's risk level as R3-Medium Risk, suitable for investors with appropriateness rating C3 (Balanced) and above. Any information appearing in this text (including but not limited to individual stocks, commentary, predictions, charts, indicators, theories, any form of expression) serves reference purposes only, and investors must take responsibility for any independent investment decisions. Furthermore, any views, analyses, and predictions in this text do not constitute investment advice in any form to readers, nor bear any liability for direct or indirect losses arising from use of this content. Fund investment carries risks, past fund performance does not represent future performance, and performance of other funds managed by the fund manager does not guarantee this fund's performance. Fund investment requires caution.
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