Market Performance - The chemical fiber sector increased by 1.13% on January 22, with Hengshen New Materials leading the gains [1] - The Shanghai Composite Index closed at 4122.58, up 0.14%, while the Shenzhen Component Index closed at 14327.05, up 0.5% [1] Stock Highlights - Hengshen New Materials (000782) closed at 5.86, up 5.21% with a trading volume of 321,200 shares and a turnover of 187 million yuan [1] - Youcai Resources (002998) closed at 8.98, up 3.94% with a trading volume of 294,200 shares and a turnover of 263 million yuan [1] - Jilin Qigu (920077) closed at 18.60, up 3.05% with a trading volume of 144,100 shares and a turnover of 267 million yuan [1] Fund Flow Analysis - The chemical fiber sector experienced a net outflow of 2.64 million yuan from institutional investors, while retail investors saw a net inflow of 7.79 million yuan [2] - The main stocks with significant fund flows included Huafeng Chemical (002064) with a net inflow of 43.74 million yuan from institutional investors [3] - Jilin Chemical Fiber (000420) had a net inflow of 37.21 million yuan from institutional investors, indicating strong interest [3]

Group 1 - The chemical fiber sector experienced a rise of 2.34% on January 20, with Xinxiang Chemical Fiber leading the gains [1] - The Shanghai Composite Index closed at 4113.65, down 0.01%, while the Shenzhen Component Index closed at 14155.63, down 0.97% [1] - Key stocks in the chemical fiber sector showed significant price increases, with Xinxiang Chemical Fiber rising by 10.03% to a closing price of 7.46 [1] Group 2 - The chemical fiber sector saw a net inflow of 213 million yuan from main funds, while retail investors experienced a net outflow of 222 million yuan [2] - Major stocks like Huafeng Chemical and Xinxiang Chemical Fiber had notable net inflows from main funds, with Huafeng Chemical receiving 85.65 million yuan [3] - Retail investors showed a significant outflow from several stocks, including Xinxiang Chemical Fiber, which had a net outflow of 39.03 million yuan [3]

Core Viewpoint - The chemical ETF Tianhong (159133) is experiencing significant capital inflow and positive market performance, driven by macroeconomic factors and industry dynamics [1][2][3]. Group 1: Market Performance - As of January 20, 2026, the chemical ETF Tianhong (159133) recorded a transaction volume of 6.5777 million yuan, with the underlying index rising by 0.46% [1]. - The ETF has seen a net subscription of 20 million shares within the first half hour of trading, indicating strong investor interest [1]. - The ETF's latest scale and share count have reached new highs since its inception, with a total net inflow of 312 million yuan over the past 14 days [2]. Group 2: Industry Dynamics - The Tianhong ETF tracks the CSI Sub-Industry Chemical Theme Index, focusing on various sub-sectors within the Chinese chemical industry, including chemical raw materials and manufacturing [2]. - The chemical sector is experiencing a rebound, supported by macroeconomic factors such as an unexpected rise in PMI and a stronger yuan, which reduces import costs [2]. - The industry is witnessing a reduction in capital expenditure, with a shift towards "de-involution" strategies that help mitigate risks of oversupply [2][3]. Group 3: Price Trends and Future Outlook - Recent data shows that 44.1% of 170 tracked chemical products have seen price increases, with notable rises in lithium carbonate, ABS, and epoxy propane [3]. - The dual forces of supply-side contraction and demand-side growth, driven by national policies and external economic conditions, are expected to support a cyclical recovery in the chemical industry [3].

Group 1 - The market experienced a pullback after an initial rise, with the Shenzhen Component Index and the ChiNext Index turning negative, while the chemical sector showed strong performance, with Haohua Technology rising over 7%, Hengli Petrochemical and Luxi Chemical up over 6%, and several other companies increasing by more than 5% [1] - The Tianhong Chemical ETF (159133), which tracks the CSI sub-sector chemical industry theme index, opened low but surged by 2.8% by midday, reaching a nearly three-year high [1] - Analysts indicate that capital expenditure in the chemical industry is expected to decline in 2024, and with the "anti-involution" trend and accelerated elimination of outdated overseas capacity, supply is likely to contract [1] Group 2 - The Tianhong Chemical ETF (159133) closely tracks the CSI sub-sector chemical industry theme index, which has a core advantage of comprehensive coverage and balanced structure [2] - The index selects large-scale, liquid companies from sub-industries such as chemical products, including both traditional leading enterprises and representatives from high-growth areas like new energy materials and fine chemicals [2]

Group 1 - The chemical sector continues to show strength, with the Chemical ETF (516020) experiencing a price increase of 2.73% as of the latest update [1][2] - Key stocks in the sector include Haohua Technology, which reached the daily limit, and Junzheng Group, which surged over 9%, along with other notable gains from companies like Luxi Chemical and Huafeng Chemical [1][2] - Since 2025, the Chemical ETF has shown a cumulative increase of 47.53%, significantly outperforming major indices such as the Shanghai Composite Index (22.38%) and the CSI 300 Index (20.25%) [1][3] Group 2 - The chemical industry has seen negative growth in capital expenditure since 2024, but the "anti-involution" trend and the clearing of outdated overseas capacities are expected to lead to a contraction in supply [4] - The "14th Five-Year Plan" emphasizes expanding domestic demand, which is anticipated to drive growth in chemical product demand, especially with the onset of a U.S. interest rate cut cycle [4] - A potential turning point for the chemical industry is expected in 2026, with a shift from valuation recovery to earnings growth, referred to as the "Davis Double Play" [4] Group 3 - The Chemical ETF (516020) tracks the CSI Sub-Industry Chemical Theme Index, with nearly 50% of its holdings concentrated in large-cap leading stocks, including Wanhua Chemical and Salt Lake Co., allowing investors to capitalize on strong investment opportunities [5] - The ETF also includes exposure to various sub-sectors such as phosphate and nitrogen fertilizers, fluorochemicals, and others, providing a comprehensive investment approach within the chemical sector [5] - The fund does not charge a sales service fee, with specific subscription and redemption fee structures outlined for investors [5][6]

Core Viewpoint - The report from Dongfang Securities indicates that the spandex industry is currently at a historical low in terms of price and demand, but with industry restructuring, there is potential for price recovery and demand growth in the future [1] Supply Side - The spandex industry is in the late stage of capacity expansion, with domestic production capacity increasing from 593,900 tons in 2015 to an expected 1,420,000 tons by January 2026, led by Huafeng Chemical with 475,000 tons [2] - Currently, only the first phase of the Xinxiang Chemical Fiber's 100,000-ton project, which is 50,000 tons, is under construction and is expected to be operational by 2027 [2] - Since 2019, over 200,000 tons of capacity from small enterprises have been shut down, leading to a reduction in the share of capacity below 50,000 tons from 47% in 2015 to 16% in 2025, indicating a trend towards concentration of supply among leading companies [2] - The industry has faced negative gross margins since May 2023, making it difficult for unprofitable companies to sustain operations, which may lead to further exits from the market [2] Demand Side - Spandex is primarily used in clothing to provide elasticity, with applications in casual wear, jeans, underwear, fitness apparel, swimwear, and socks [3] - The demand for spandex is expected to continue growing due to trends in sports and tight-fitting clothing, with apparent consumption increasing from 510,000 tons in 2017 to an estimated 1,027,000 tons by 2024, reflecting a CAGR of 10.51% [3] - The combination of high elasticity and durability of spandex enhances the core performance of garments, contributing to its increasing penetration in downstream markets [3] Related Companies - Key companies in the spandex industry include Huafeng Chemical (002064.SZ), Taihe New Materials (002254.SZ), and Xinxiang Chemical Fiber (000949.SZ) [4]

Group 1 - The chemical sector continues to show strength, with the Chemical ETF (516020) experiencing a price increase of 2.73% as of the latest update [1][8] - Key stocks in the sector include Haohua Technology, which reached the daily limit, and Junzheng Group, which surged over 9%, along with other notable gains from companies like Luxi Chemical and Huafeng Chemical [1][8] - Since 2025, the Chemical ETF has shown a cumulative increase of 47.53%, significantly outperforming major indices such as the Shanghai Composite Index (22.38%) and the CSI 300 Index (20.25%) [10][11] Group 2 - The chemical industry has faced negative growth in capital expenditure since 2024, but the "anti-involution" trend and the accelerated elimination of outdated overseas capacity are expected to lead to a contraction in supply [12] - The "14th Five-Year Plan" emphasizes expanding domestic demand, which is anticipated to drive growth in chemical product demand, especially with the onset of a U.S. interest rate cut cycle [12] - The chemical industry may experience a cyclical turning point in 2026, transitioning from valuation recovery to earnings growth, referred to as the "Davis Double Play" [12] Group 3 - The Chemical ETF (516020) tracks the CSI Sub-Industry Chemical Theme Index, with nearly 50% of its holdings concentrated in large-cap leading stocks, including Wanhua Chemical and Salt Lake Co., allowing investors to capitalize on strong investment opportunities [13] - The ETF also diversifies its holdings across key sectors such as phosphate and nitrogen fertilizers, fluorine chemicals, and other leading stocks in the chemical sector [13] - Investors can also access the Chemical ETF through linked funds, which have specific subscription and redemption fee structures [5][14]

Investment Rating - The report maintains a "Positive" investment rating for the basic chemical industry, specifically for the spandex sector [5]. Core Insights - The spandex industry is expected to improve as supply and demand dynamics optimize due to accelerated capacity clearance. The report highlights the potential for recovery in spandex prices and profitability for leading companies with significant domestic capacity and cost advantages [3][43]. Supply Side Summary - The spandex industry is at the end of its expansion phase, with domestic capacity increasing from 593,900 tons in 2015 to 1,420,000 tons by January 2026, with major players like Huafeng Chemical leading the market [8][20]. - Since 2019, over 200,000 tons of capacity from small and medium enterprises have been shut down, leading to a concentration of supply among leading companies [26]. - The industry has faced prolonged negative gross margins since May 2023, indicating financial difficulties for many companies, which may lead to further exits from the market [29][41]. Demand Side Summary - Spandex demand is projected to grow significantly, driven by trends in activewear and tight-fitting clothing. The apparent consumption of spandex is expected to rise from 510,000 tons in 2017 to 1,027,000 tons by 2024, with a CAGR of 10.51% [33][35]. - The demand for spandex is primarily concentrated in the apparel sector, which accounts for 76% of total usage, with applications in leisurewear, jeans, underwear, and swimwear [33][34]. Supply-Demand Balance Summary - The supply-demand balance for the domestic spandex industry is improving, with limited new capacity expected and ongoing pressure on existing capacity. The anticipated demand growth from the activewear trend is expected to support this balance [40][41]. Investment Recommendations - The report recommends investing in leading companies with price and volume elasticity, specifically Huafeng Chemical (002064, Buy), Taihe New Materials (002254, Buy), and Xinxiang Chemical Fiber (000949, Not Rated). The potential profit increases from spandex price rises are highlighted, with significant earnings boosts projected for these companies [3][43][44].

Core Viewpoint - The expansion phase of the spandex industry is nearing its end, and the elimination of backward production capacity is expected to drive an upward trend in industry prosperity [1][2]. Supply Side - As of the end of 2025, China's spandex production capacity is projected to be 1.44 million tons per year, with an industry operating rate of 85%. The supply-demand situation from 2022 to 2025 is expected to remain loose, with an average annual operating rate between 70% and 80%, leading to many companies operating at a loss [2]. - The concentration of the spandex industry is high, with a CR5 of 84% as of the end of 2025. The leading companies by production capacity are Huafeng Chemical (400,000 tons/year), Xiaoxing Spandex (246,000 tons/year), Zhujing Huahai (225,000 tons/year), Xinxiang Chemical Fiber (220,000 tons/year), and Taihe New Materials (100,000 tons/year) [2]. - New production capacity additions by 2025 include Huafeng Chongqing (75,000 tons/year), Xiaoxing Ningxia (36,000 tons/year), and Lycra Yinchuan (10,000 tons/year). Huafeng Chongqing is expected to continue expanding in 2026, while Xinxiang Chemical Fiber plans to add 100,000 tons/year, with the first phase of 50,000 tons/year expected to start construction in Q1 2026 [2]. - A total of 58,000 tons/year of spandex production capacity is expected to be eliminated by 2025, including 30,000 tons/year from Lianyungang Du Zhong Spandex and 28,000 tons/year from Taiguang Chemical Fiber [2]. Demand Side - The performance of spandex is excellent, with a projected CAGR of 11% for apparent consumption in China from 2017 to 2024. Spandex is often referred to as the "MSG of textiles," significantly enhancing the performance and quality of fabrics even at low addition ratios [3]. - Spandex is primarily used in blends with other fabrics, commonly found in tight-fitting clothing, sportswear, swimwear, and hygiene products such as medical bandages and diapers. The demand for spandex is expected to grow rapidly as its application range and addition ratios expand [3]. Related Companies - Huafeng Chemical: By the end of 2025, spandex production capacity will be 400,000 tons/year, with an additional 75,000 tons/year expected to be gradually put into production by the end of 2026 [4]. - Xinxiang Chemical Fiber: By the end of 2025, spandex production capacity will be 220,000 tons/year, with a planned additional capacity of 100,000 tons/year, including a first phase of 50,000 tons/year expected to start construction in Q1 2026 [4]. - Taihe New Materials: By the end of 2025, spandex production capacity will be 100,000 tons/year [4].

Investment Rating - The industry investment rating is "Positive" and maintained [8] Core Insights - In the previous two cyclical bull markets, alpha leading stocks significantly outperformed the basic chemical sector. These leaders possess both supply-demand improvements and cost advantages, leading to price elasticity and sustainable low-cost expansion. In cyclical bull markets, they exhibit performance drivers of volume and price increases, providing excess returns for investors [2][6][38]. - The report emphasizes the importance of investing in high-quality leading companies such as Wanhua Chemical, Hualu Hengsheng, Longbai Group, Yangnong Chemical, Huafeng Chemical, and Boyuan Chemical [2][6][38]. Summary by Sections Introduction: Why Focus on Leading Stocks in Cyclical Bull Markets? - The PPI (Producer Price Index) has shown a continuous narrowing of decline and is expected to turn positive by October 2025. This indicates a potential recovery in industrial product pricing and an improvement in market demand and supply conditions. The chemical industry, as a key industrial raw material, is likely to reflect these changes first, suggesting a transition from demand stagnation to a new round of inventory replenishment or capacity adjustment [4][14]. Performance of Alpha Leaders in Previous Cyclical Bull Markets - The report analyzes the stock selection and performance of alpha leaders during the last two cyclical bull markets (2016-2018 and 2020-2021). The selected stocks include Wanhua Chemical, Hualu Hengsheng, Longbai Group, and Yangnong Chemical, with the addition of Huafeng Chemical and Boyuan Chemical in the second round. The performance data shows that these leaders significantly outperformed the basic chemical index [5][18]. - In the first cycle (2016-2018), the highest stock price increases for these leaders were 488.9% for Wanhua Chemical, 281.4% for Hualu Hengsheng, 147.7% for Longbai Group, and 247.5% for Yangnong Chemical, with an average increase of 291.4%. The basic chemical index saw a maximum increase of around 39% during the same period [18][19]. - In the second cycle (2020-2021), the highest increases were 311.0% for Wanhua Chemical, 276.5% for Hualu Hengsheng, 314.2% for Longbai Group, 188.0% for Yangnong Chemical, 290.1% for Huafeng Chemical, and 728.7% for Boyuan Chemical, with an average increase of 351.4% compared to a maximum of 136% for the basic chemical index [18][19]. Investment Recommendations - The report suggests focusing on high-quality leading companies for investment opportunities, as they are expected to benefit from supply-demand improvements and cost advantages. The overall chemical sector is currently at a low point, but with anticipated global economic growth, demand for chemical products is expected to increase. The report also highlights the potential for a recovery in PPI and chemical prices in 2026 [6][38][39].