With the valuation of Baijiu, new energy and other early hot sectors entering a historical high, some main funds are eager to find new main directions. With the stock prices of leading companies in Wanhua Chemical and private refining reaching new highs, other sub sectors of the chemical industry have also been experiencing continuous fluctuations in recent times. Behind the bullish trend of multiple chemical stocks, institutional seats also frequently appear on the buying side.

According to Choice data, as of the close on February 3rd, the cumulative increase of Shenwan Chemical Industry this year has reached 12.76%, ranking second among all first tier industries. The chemical fiber sector under the subdivision has surged 36.82% this year, ranking first among all secondary industries in terms of growth rate.

In this round of chemical stock market, funds are clearly inclined to buy top companies in the industry. Ranked by the latest total market value, among the top ten companies in the chemical industry, only Sinopec and Enjie Corporation have experienced a decline in stock prices since the beginning of this year, while the other eight stocks have all risen, with an average increase of 33.51%, significantly outperforming the overall growth of the chemical industry.

As a global leading chemical enterprise, Wanhua Chemical continued the long bull trend of the previous two years at the beginning of this year. Since the beginning of the year, Wanhua Chemical's stock price has continuously hit new historical highs, with a cumulative increase of 35.31%, and the company's latest market value has risen to 386.8 billion yuan.

The performance forecast recently released by Wanhua Chemical has further boosted the stock price and reflects the high trend of the chemical industry since the fourth quarter of last year. The company announced that it is expected to achieve a net profit of 9.6 billion yuan to 10.1 billion yuan in 2020, a decrease of 5% compared to the same period last year and basically unchanged. In the fourth quarter of 2020, the net profit reached 4.25 billion yuan to 4.75 billion yuan, a year-on-year increase of 91% to 113%.

Wanhua Chemical stated that since the end of the third quarter of last year, with the rapid improvement of downstream demand in the global chemical industry and the rapid growth of demand in some regions, the company's main product sales have increased and sales prices have risen. It is expected that the net profit attributable to the parent company will increase significantly in the fourth quarter.

Flipping through the Dragon and Tiger List released by the exchange, institutional figures have appeared on the buying side of multiple chemical stocks since the beginning of this year.

Dongfang Shenghong's business covers printing and dyeing, chemical fiber, and integrated refining. Since the beginning of this year, it has achieved multiple daily limit ups, with a cumulative increase of 54.01%. Due to significant short-term gains, Dongfang Shenghong has released 11 Dragon and Tiger lists by the exchange since the beginning of the year, with no institutional seats absent from these 11 lists. For example, on January 6th, Dongfang Shenghong achieved its first daily limit up of the year. On that day, the Dragon and Tiger List showed that three institutional seats appeared among the top five buyers, with a total purchase amount exceeding 48 million yuan.

After Rongsheng Petrochemical disclosed its performance forecast at the end of January, its stock price achieved three consecutive gains in the first three trading days of this month, and the increase since the beginning of this year has expanded to 43.25%. On February 1st, Rongsheng Petrochemical's stock price hit the daily limit up, and the after hours dragon and tiger list showed that three institutional seats appeared in the top five buying positions, with a total buying amount of 235 million yuan, accounting for 11% of the total trading volume of individual stocks on that day.

In addition, institutional seats have also appeared on the buying side of this year's Dragon and Tiger List for chemical stocks such as Sailun Tire, Satellite Petrochemical, and Zhongtai Chemical.

Guangfa Securities believes that the core reason for the significant price increase of chemical products is the domestic supply to make up for the overseas supply and demand gap, and whether the price increase can be sustained depends on the recovery of overseas demand. Looking forward to 2021, after the COVID-19 vaccination is gradually spreading, the demand for textile and clothing is expected to recover, and there is a high probability of inventory replenishment at all links of the trade end. The inventory of polyester filament, spandex, viscose staple fiber and other raw materials is at a low level, and there is great room for price increase.

Fan Jituo, Chief Strategy Officer of New Era Securities, believes that at this moment, the rise in cyclical sectors has not fully reflected the pricing of economic fundamentals recovery. The return on equity of the cyclical sector has reached an upward turning point in the third quarter of 2020. In the next six months, as the economic recovery continues and incremental funds continue to be injected, the cyclical sector may usher in a Davis double click market with both valuation and performance rising.