Core Viewpoint - The traditional chemical industry in China is facing a significant transformation due to government policies aimed at curbing blind investments and promoting the orderly exit of outdated capacities, which is expected to lead to a recovery in the industry's profitability and a new growth cycle starting in 2026 [1][2]. Group 1: Industry Overview - The China Chemical Industry Index has seen a decline of 2.55% as of January 30, 2026, with mixed performance among constituent stocks [1]. - The government has introduced the "Stabilizing Growth Work Plan for the Petrochemical and Chemical Industry (2025-2026)" to address severe overcapacity issues caused by disorderly expansion [1]. - Companies are proactively engaging in maintenance and reducing inefficient capacities as part of a self-initiated "anti-involution" strategy [1]. Group 2: Investment Opportunities - Guohai Securities anticipates that the anti-involution measures will lead to a recovery in the chemical industry, potentially slowing down global capacity expansion [1]. - In Q4 2025, public funds have increased their holdings in chemical sector blue-chip stocks, indicating a shift towards bottom-fishing opportunities [1]. - The top ten weighted stocks in the China Chemical Industry Index account for 45.31% of the index, with companies like Wanhua Chemical and Yalake Holdings leading the list [2]. Group 3: Investment Products - Investors can explore opportunities in the chemical sector through the Chemical ETF (159129), which closely tracks the China Chemical Industry Index [2]. - There is also an option for investors to consider the Chemical ETF linked fund (013527) to gain exposure to the chemical sector [3].

Investment Rating - The industry maintains a "positive" rating [2] Core Insights - In Q4 2025, the overall allocation of public funds in the chemical sector increased significantly, indicating a focus on bottom-fishing opportunities as the sector approaches a turning point [2][5] - The top ten heavy-holding stocks in the chemical sector saw a recovery in their market value share, with an emphasis on blue-chip stocks and cyclical products with price elasticity [2][10] - The total market value of the top 30 heavy-holding chemical stocks reached approximately 79.89 billion, reflecting a significant increase of about 45.23% quarter-on-quarter [21] Summary by Sections 1. Changes in Chemical Public Fund Holdings in Q4 2025 - The proportion of heavy-holding chemical stocks in public funds increased by 0.70 percentage points to 2.37%, marking a new high for 2025 [5] - Regional allocations showed increases, with East China rising by 0.63 percentage points to 2.33%, South China by 0.96 percentage points to 3.02%, and North China by 0.44 percentage points to 1.44% [5] 2. Total Market Value and Concentration of Chemical Holdings in Q4 2025 - The total market value of the top 30 heavy-holding chemical stocks increased significantly, with these stocks accounting for 84.68% of the total market value of all heavy-holding chemical stocks, up by 3.34 percentage points [21] - The top three heavy-holding stocks were Wanhua Chemical, China National Offshore Oil Corporation, and Juhua Co., with respective holdings of approximately 0.10%, 0.07%, and 0.07% [10][21]