The construction of the downstream Yarlung Zangbo River hydropower project, with a total investment of 1.2 trillion yuan, has officially commenced. The project plans to build five cascade hydropower stations, with an annual power generation capacity three times that of the Three Gorges Dam, sparking bullish sentiment in related theme ETFs.
Building materials ETFs, Infrastructure 50 ETFs, chemicals ETFs, and steel ETFs all saw gains this week, with funds also flowing into these ETFs.
This week, 43 funds saw net inflows exceeding 100 million yuan. Specifically, the Iron and steel ETF, Chemicals ETF, Infrastructure 50 ETF, Guotai Building Materials ETF, and Fullgoal Building Materials ETF saw net inflows of 1.424 billion yuan, 1.39 billion yuan, 1.216 billion yuan, 1.105 billion yuan, and 1.003 billion yuan, respectively.
The Building Materials ETF tracks the CSI All Share Building Materials Index, covering sectors such as cement (44.8%), building materials for decoration (35.3%), and glass and fiberglass (10%). Key holdings include CONCH CEMENT, Beijing New Building Materials Public, Beijing Oriental Yuhong Waterproof Technology, SKSHU Paint, Tibet Tianlu, Zhuzhou Kibing Group, Huaxin Cement, Xinjiang Tianshan Cement, Zhejiang Weixing New Building Materials, and Guangdong Tapai Group, all of which are expected to benefit from the construction of the downstream Yarlung Zangbo River hydropower project.
The Infrastructure ETF tracks the CSI Infrastructure Index, encompassing the infrastructure and construction machinery industry chain.
The Iron and steel ETF tracks the CSI Steel Index, covering areas such as iron ore mining, steel smelting, and processing, aiming to comprehensively reflect the overall performance of A-share market steel industry-related companies.
The Chemicals ETF tracks the CSI Chemicals Sub-industry Index, covering various chemical sub-sectors such as fluorochemicals, coal chemicals, titanium dioxide, and fertilizers. Key holdings include Wanhua Chemical Group, Qinghai Salt Lake Industry, Zhejiang Juhua, and Ningxia Baofeng Energy Group, among other industry leaders.
Moreover, the anti-internal competition policies have optimized the structure of certain industries, and leading companies are expected to see a turning point in profitability.
According to a research report by Industrial Securities, in the key industries targeted by the anti-internal competition policies, including general steel, glass fiber, titanium dioxide, and the new energy chain (polysilicon, silicon wafers, photovoltaic battery components, and special equipment for lithium batteries), current corporate profitability and capital expenditures are at historical lows. Companies in these sectors have a strong willingness to participate in anti-internal competition, and positive changes in the industry are likely to be seen in the short term. Among them, the steel sector has a higher proportion of state-owned enterprises and faces less resistance in capacity reduction. If further policies are issued, it could be one of the smoother industries for implementing anti-internal competition measures.
Regarding the current market, Bohai Securities points out that, under the expectation of the advancement of the 'anti-internal competition' policies, the market is seeing significant deployment of major hydropower projects and infrastructure. The expectation of supply-side reductions, coupled with increased demand-side policies, is driving the index to rise further, led by heavyweight sectors. Market trading has also become notably active, with daily average trading volumes reaching nearly RMB 1.9 trillion. Looking ahead, in a market driven primarily by liquidity and policy deployments, optimistic expectations are being rapidly priced in. Whether the market can achieve further upward movement will depend on whether there are additional positive factors in international trade and domestic economic policies, as well as the effectiveness of the 'anti-internal competition' policies. In terms of sectors, the current market focus is mainly on 'anti-internal competition' and large-scale infrastructure. At the same time, the broader technology sector is also showing active rotation. As the cumulative gains in various sectors increase, they will also face the risk of greater intraday volatility. It is advisable to hold rather than chase, and investors may consider: (1) investment opportunities in power equipment, resource products, and construction materials, which benefit from supply optimization and stable demand in the context of 'anti-internal competition' and large-scale infrastructure; (2) investment opportunities in the TMT sector, pharmaceuticals and biotechnology, and defense industries, which are catalyzed by AI prospects and overseas expansion; (3) investment opportunities in the non-bank financial sector, given the sustained activity in the capital markets.
Debon Securities believes that the 'anti-internal competition' policies are bringing about positive changes in the industry chain: the competitive landscape of multiple industries may be reshaped, and some high-end manufacturing segments are seeing price recoveries. The RMB 1.2 trillion worth of infrastructure projects is expected to have a positive impact on expanding domestic demand. Additionally, the intense phase of food delivery subsidies in July is likely to stimulate a short-term recovery in domestic demand, although the sustainability of this effect is questionable under the 'anti-internal competition' backdrop. Since 2000, the SSE Composite Index has risen in the month following each of the three times it has surpassed 3600 points, indicating a solid foundation for a slow bull market.
