Core Insights - The report presents two industry rotation models: one based on similar expected return differentials and another based on changes in analyst expectations, both aimed at identifying investment opportunities in various sectors [11][22]. Group 1: Similar Expected Return Differential Model - The latest configuration suggests focusing on sectors such as coal, communication, basic chemicals, automotive, real estate, and machinery [21]. - In September 2025, the model achieved a monthly return of +4.56%, outperforming the equal-weighted industry index by +3.66% [21]. - The historical backtest from December 2016 to September 2025 shows that the model has a mean Information Coefficient (IC) of 0.09, indicating strong selection ability [14][15]. Group 2: Analyst Expectation Change Model - The latest configuration highlights sectors including non-bank financials, non-ferrous metals, agriculture, communication, steel, and computers [33]. - In September 2025, the model recorded a monthly return of +1.03%, with an excess return of +0.13% over the equal-weighted industry index [33]. - The historical backtest from December 2016 to September 2025 indicates a mean IC of 0.06, demonstrating significant industry selection capability [23][24]. Group 3: ETF Portfolio Construction - The recommended ETF portfolio for October 2025 includes sectors such as non-bank financials, non-ferrous metals, communication, basic chemicals, and automotive [35]. - Specific ETFs listed include the Huabao CSI All-Share Securities Company ETF and the Southern CSI Non-Ferrous Metals ETF, among others, with significant fund shares [35].

Group 1 - The basic chemical industry is showing a clear rebound trend, with fundamental risks largely cleared [1] - By the first half of 2025, the basic chemical industry has entered a phase of negative capital expenditure, with construction projects down 15% year-on-year, alleviating supply-side pressure [1] - Benefiting from fiscal and monetary policies, as well as the steady advancement of "two new" policies and "anti-involution" policies, demand is expected to increase, optimizing the supply-demand structure and continuously opening up profit margins in the chemical industry [1] Group 2 - The valuation of multiple varieties in the bulk commodity sector is at historical lows, providing a high safety margin and potential for high elasticity [1] - New materials and technologies are key development directions, with room for improvement in product penetration rates and domestic substitution, supported by industry demand and policies, leading to improved profitability and further valuation enhancement [1] - Green and environmentally friendly new technologies, such as chemical recycling of waste plastics, are supported by policies and are set to be a development direction for the coming years, with multiple catalysts including carbon taxes, legislation on recycled plastics, and the maturation of industrial technologies [1] Group 3 - The chemical leader ETF (516220) tracks a sub-sector chemical index (000813), which selects listed company securities from chemical raw materials, fertilizers, agricultural chemicals, and specialty chemicals to reflect the overall performance of high-growth and technologically advanced chemical enterprises [1]

Core Viewpoint - The chemical industry is currently experiencing heightened interest due to its cyclical nature and strong correlation with economic cycles, having entered a downward cycle since 2021 [1][3]. Group 1: Industry Cycle and Price Trends - The chemical industry has shown a consistent cyclical pattern, with alternating periods of upward and downward trends, indicating a relatively even distribution of cycles over time [1]. - From 2021 to the present, the chemical sector has gradually shifted into a state of oversupply, leading to a continuous decline in chemical prices [3]. - Recent asset price movements suggest a rapid rotation in investment focus, with the chemical sector attracting attention due to its relatively low price levels and potential for rebound [3]. Group 2: Catalysts and Market Sentiment - The concept of "anti-involution" has gained traction, particularly following high-level discussions by the Central Financial Committee, which has influenced market perceptions and expectations regarding demand [4][5]. - Despite initial skepticism about the effectiveness of anti-involution measures, subsequent announcements, such as the 1.2 trillion yuan Yajiang project, have bolstered market confidence [4]. - The recognition of anti-involution's necessity from a macroeconomic perspective suggests a sustained impact on the chemical sector, with early signs of improvement in inflation data [5][6]. Group 3: Fundamental Logic and Growth Potential - The chemical industry's fundamentals are characterized by a potential cycle reversal, with expectations of supply-demand balance gradually being achieved, indicating a bottoming process [8]. - The sector also possesses growth attributes, driven by increasing demand from emerging technologies such as batteries and robotics, which rely on chemical products [8]. - The Chemical Leaders ETF (516220) is highlighted as a means to capture investment opportunities within the sector, covering both traditional cyclical segments and new growth areas [8].

Group 1 - The core viewpoint of the article highlights the increasing net inflow of funds into the Chemical Leaders ETF (516220) for five consecutive days, indicating growing investor interest in the sector [1] - According to the Ministry of Industry and Information Technology, China heavily relies on foreign countries for high-end chemical new materials and advanced chemical equipment, with 32% of over 130 key basic chemical materials still lacking domestic production and 52% dependent on imports [1] - The article emphasizes the urgency for domestic substitution of chemical new materials due to the escalating international tensions and the importance of supply chain security [1] Group 2 - The Chemical Leaders ETF (516220) tracks a specialized chemical index (000813) that selects listed companies involved in fine chemicals and new materials from the Shanghai and Shenzhen markets, reflecting the overall performance of high-growth and high-tech sectors within the chemical industry [1] - The index constituents focus on technological innovation and environmental characteristics, showcasing the development trends in specific areas of China's chemical industry [1]

Group 1 - The core viewpoint is that the chemical industry is expected to gradually recover from its current bottoming-out phase, supported by improving supply and stable demand conditions [1] - On the supply side, domestic capital expenditure has entered the second half, and the trend of "anti-involution" is progressing, indicating a positive outlook for supply support [1] - On the demand side, domestic demand is stabilizing, and the rising expectations of interest rate cuts by the Federal Reserve may bolster future demand expectations and the actual economic fundamentals [1] Group 2 - The Chemical Leader ETF (516220) tracks a specific chemical index (000813), which selects listed companies from various sub-industries such as fertilizers, pesticides, and coatings to reflect the overall performance of the chemical sector [1] - The sub-industry chemical index focuses on the chemical industry and includes several important sub-industries, with constituent stocks primarily chosen for their industry representation [1] - The index aims to showcase the market value and growth potential of the chemical industry [1]

Group 1 - The core viewpoint emphasizes the short-term focus on mid-year report trends, the impact of "anti-involution" on supply, the self-sufficiency in electronic materials, and the dividend policies of energy companies [1] - In the medium to long term, there is significant development potential in the new materials sector, including domestic material production, increased penetration of OLED technology, and the expansion of applications for new energy materials [1] - Under supportive policies, sub-industries such as fluorochemicals and vitamins are expected to see improved market conditions, while tire companies still have room for global expansion [1] Group 2 - The chemical leader ETF (516220) tracks a segmented chemical index (000813), which selects listed companies from various chemical sub-industries like fertilizers, pesticides, and coatings to reflect the overall performance of the chemical sector [1] - The segmented chemical index focuses on the chemical industry, covering multiple important sub-industries, with constituent stocks primarily selected from representative companies to showcase the market value and growth potential of the chemical industry [1] - Investors without stock accounts can consider the Guotai Zhongzheng segmented chemical industry theme ETF Connect C (012731) and Guotai Zhongzheng segmented chemical industry theme ETF Connect A (012730) [1]

Market Overview - The market experienced fluctuations with mixed performance across the three major indices, where digital currency stocks surged collectively, oil and gas stocks showed active performance, and bank stocks strengthened against the trend [1] - High-priced stocks underwent collective adjustments, while ETFs related to chemicals and agriculture rose nearly 2% [1] ETF Performance - Chemical industry ETF rose by 1.99% to 0.82 [2] - Agricultural 50 ETF increased by 1.78% to 0.799 [2] - Other notable ETFs include the Petrochemical ETF at 1.74% and the Agricultural ETF at 1.69% [2] Livestock Industry Insights - Most listed livestock companies are currently at historical low market values per head, with significant potential for growth towards historical averages, indicating long-term investment value [3] - The demand for high-end magnetic materials is rapidly increasing due to policies promoting "carbon neutrality," alongside a recovery in traditional manufacturing and the acceleration of humanoid robots, which injects growth momentum into rare earth demand [5] Declining Sectors - New energy and rare earth-related ETFs experienced a decline of approximately 2% [3] - Specific ETFs such as the New Energy ETF and Rare Earth ETFs saw decreases of 2.08% and 1.97% respectively [4]

Group 1: ETF Performance - The chemical industry ETFs have shown positive performance with daily increases ranging from 1.14% to 1.62% and monthly increases between 8.18% and 14.75% [2] - The top ETFs include the Chemical Industry ETF, Chemical Leader ETF, and Petrochemical ETF, managed by various companies such as E Fund and Guotai Junan [2] Group 2: Industry Insights - The petrochemical ETF tracks the CSI Petrochemical Industry Index, with top-weighted stocks including Wanhua Chemical, China Petroleum, and China National Petroleum [4] - The chemical ETF follows the CSI Sub-segment Chemical Industry Theme Index, with nearly 50% of its holdings in large-cap leading stocks, indicating a focus on strong performers [4] Group 3: Market Trends and Projections - The chemical sector is experiencing pressure from weak product prices and declining capacity utilization, with nearly 25% of companies projected to incur losses in 2024 [5] - The Producer Price Index (PPI) has been in negative growth, and a recovery in energy and chemical prices is seen as crucial for boosting inflation levels [5] - The current price-to-book (PB) ratio for the chemical industry is at 2.0, indicating potential for upward price movement as the sector approaches a cyclical bottom [5] Group 4: Future Opportunities - The chemical industry is expected to see structural opportunities and valuation recovery in the second half of the year, driven by domestic demand and policy support [6] - Investment strategies should focus on domestic demand growth, supply-side constraints, and the acceleration of new material production capabilities [6]

Market Performance - As of July 30, 2025, the three major A-share indices showed mixed results, with the Shanghai Composite Index rising by 0.17% to 3615.72 points, while the Shenzhen Component Index and the ChiNext Index fell by 0.77% to 11203.03 points and 1.62% to 2367.68 points respectively [1] - The total trading volume of the two markets reached 1.84 trillion yuan [1] Industry Highlights - The fishery sector performed notably well, surging by 4.06%, followed by the steel and film industries, which rose by 3.30% and 2.76% respectively [1] - A total of 356 non-currency ETFs increased in value, representing 29% of the market [1] - The China Steel Index rose by 1.58%, and the Steel ETF increased by 1.53% [1] - The China Petrochemical Industry Index saw a rise of 1.57%, with the Petrochemical ETF and Chemical Industry ETF increasing by 2.07% and 1.66% respectively [1] - The China Film Theme Index rose by 1.26%, with the Film ETF increasing by 1.64% and another Film ETF by 1.40% [1] ETF Performance - The top-performing ETFs included the Oil and Gas Resources ETF, which rose by 3.25%, and the Petrochemical ETF, which increased by 2.07% [3] - The Steel ETF had a total share size of 23.50 billion units, closely tracking the China Steel Index [5] - The Oil and Gas ETF had a share size of 1.13 billion units, tracking the National Oil and Gas Index [4] Valuation Metrics - The latest price-to-earnings ratio (PE-TTM) for the China National New Hong Kong Stock Connect Central State-Owned Enterprise Dividend Index is 8.74, which is below 99.80% of the time over the past three years [4] - The National Oil and Gas Index has a PE-TTM of 11.34, below 66.36% of the time over the past three years [5] Declining Sectors - A total of 809 non-currency ETFs declined, accounting for 67% of the market [5] - The China Hong Kong Stock Connect Automotive Industry Theme Index and the China Financial Technology Theme Index experienced the largest declines, falling by 4.50% and 2.94% respectively [5]

Group 1 - The core viewpoint is that the implementation of ultra-long-term special government bonds will accelerate equipment upgrades in the petrochemical industry, optimizing the supply side and clearing out outdated capacity, benefiting leading enterprises with financial and technological advantages [1] - Domestic policies frequently emphasize supply-side requirements, while overseas, rising raw material costs and capacity shocks in Asia have led to shutdowns and capacity exits among European and American chemical companies [1] - In the short term, geopolitical tensions increase uncertainty in overseas chemical supply; however, in the long term, China's chemical industry has a clear competitive advantage, rapidly filling gaps in the international supply chain and potentially reshaping the global chemical industry landscape [1] Group 2 - The leading companies in the chemical sector are expected to benefit from a virtuous cycle in the domestic supply chain, driven by enhanced R&D and innovation capabilities of leading enterprises in the consumer electronics field, stimulating high-end development in materials [1] - The overall self-sufficiency rate of new chemical materials is approximately 56%, indicating that the industry is entering a period of accelerated development opportunities [1] - The chemical leader ETF tracks a segmented chemical index compiled by China Securities Index Co., which reflects the overall performance of listed companies in the chemical raw materials and products sectors, focusing on various segments of the chemical industry chain [1]