Daily Market Review: The ChiNext Index opened lower and declined more than 2%, with over 4,300 stocks in the entire market closing in the red. Oil & gas and pharmaceutical sectors defied the trend and remained active.

Reprinted from: Caixin News

Caixin News, April 2 — The market experienced a day of oscillation and adjustment, with the ChiNext Index and the STAR 50 Index both falling over 2%, and the Shenzhen Component Index dropping more than 1%. The combined trading volume of the Shanghai and Shenzhen markets was 1.84 trillion yuan, shrinking by 169.5 billion yuan compared to the previous trading day. On the sector level, over 4,300 stocks declined across the market. From the sector perspective, the pharmaceutical sector bucked the trend and rose, with Tianjin Pharmaceutical five consecutive boards, Shuanglu Pharmaceutical four boards in seven days, Peking University Medicine and Yibai Pharmaceutical two consecutive boards. Oil and gas stocks performed actively, with China Oil Engineering, Heshun Petroleum, Bohui Shares, Beiken Energy, and Lanyan Holdings hitting the daily limit-up. The optical fiber concept repeatedly strengthened, with Neng Tai Shan hitting six boards in eight days, Zhongli Group six boards in ten days, and Longfei Fiber, Tefa Information, and Hengtong Optoelectronics all continuing to reach new historical highs. On the downside, the computing power leasing concept collectively adjusted, with stocks like Qunxing Toys, UCloud, Litong Electronics plunging sharply. By the close, the Shanghai Composite Index fell 0.74%, the Shenzhen Component Index dropped 1.6%, and the ChiNext Index declined 2.31%.

Sector Highlights

Oil and gas stocks bucked the trend and rose, with China Oil Engineering, Lanyan Holdings, and Beiken Energy hitting the daily limit-up, while stocks like Keli Shares, Tongyuan Petroleum, Shouhua Gas, and Zhongman Petroleum led the gains. On the news front, international oil prices surged again, with Brent crude futures rising over 8% intraday, re-approaching $108 per barrel; WTI crude oil also increased over 6% intraday, trading above $106 per barrel.

Analysts believe that currently, geopolitical conflicts are reshaping the supply and demand landscape, and the oil price center is expected to continue rising. The escalation of the situation further highlights the strategic security attribute of crude oil, far exceeding the value of ordinary commodities. Several countries have previously released oil reserves to stabilize the market, and subsequent replenishment demand is concentrated on release, providing strong support on the demand side. However, it should be noted that oil and gas stocks have experienced repeated fluctuations, with most stocks accumulating significant trapped selling pressure that needs to be resolved. Therefore, today’s rise is more of a recovery rebound driven by news, and it remains challenging for the sector to break out into a new upward trend.

The pharmaceutical sector continued its strong momentum, with Tianjin Pharmaceutical five consecutive boards, Shuanglu Pharmaceutical four boards in seven days, Peking University Medicine and Yibai Pharmaceutical two consecutive boards, with stocks like Kangzhi Pharma, Xin Ganjiang, Changshan Pharmaceutical, Guangsheng Tang, and Minohua leading the gains.

The recent rally in pharmaceuticals benefits partly from the continued explosion of Chinese innovative drug companies: from January to March, the total external licensing transaction amount exceeded $60 billion, nearly half of the projected total for 2025; additionally, the average upfront payment for BD licensing has increased to $172 million in January-February this year. On the other hand, China’s complete industrial system and mature supporting facilities allow supply chain premiums to be fully reflected.

Furthermore, amid ongoing market adjustments, risk-averse sentiment has increased, leading to significant allocation to the pharmaceutical sector and a phased group behavior. However, based on the current performance of leading stocks, the market remains primarily driven by short-term sentiment, with strong speculative attributes; future trends are expected to gradually return to fundamentals, focusing more on individual stocks’ scarcity and independent logic.

The pork sector also showed countertrend activity, with Juxing Agriculture hitting the daily limit, and Dayu Biological, Shennong Group, Hainan Group, and Tiankang Biological posting notable gains.

On the news front, according to the Ministry of Commerce website, to maintain stable pork market operation and better utilize central reserves for regulation, the Ministry of Commerce, the National Development and Reform Commission, and the Ministry of Finance are currently conducting central frozen pork reserve procurement. CICC noted that recently, nationwide pork prices have fallen to around 10 yuan/kg, approaching the lowest in ten years; rising grain prices have driven feed costs up, potentially enlarging industry losses and accelerating capacity clearance. Leading pig enterprises, with resilient balance sheets and excess profits, are expected to benefit from capacity reduction and subsequent pork price recovery, realizing both growth and value appreciation.

Individual Stocks

On the individual stock level, today’s market saw broad declines with over 4,300 stocks ending in the red amid reduced trading volume. The pharmaceutical sector remains the most sustained theme. Tianjin Pharmaceutical advanced five consecutive boards, Shuanglu Pharmaceutical hit seven boards in seven days, and Peking University Medicine and Yibai Pharmaceutical also successfully advanced. Wanjia De and Minohua continued their upward momentum. Additionally, optical fiber stocks remained a focused segment, with Neng Tai Shan hitting six boards in eight days, Zhongli Group six boards in ten days, and Longfei Fiber, Tefa Information, and Hengtong Optoelectronics all reaching new historical highs. It’s important to note that the concentration of funds in pharmaceuticals and optical fiber sectors is essentially a risk-averse and focus-driven behavior under stock market liquidity competition. If market sentiment shifts, group funds loosen, or leading stocks at high levels break down, these sectors and stocks with large short-term gains are likely to face profit-taking pressure and potential follow-up declines.

Market Outlook

Today’s market overall showed a pattern of oscillation and adjustment, with the ChiNext Index again falling over 2%. In the short term, the market has not yet escaped the weak pattern of oscillating downward along the 5-day moving average, with all cycle moving averages diverging downward. If the market cannot recover promptly, the medium-term trend may gradually turn bearish. The Shanghai Composite, supported by weightings like banks and oil, performed relatively resiliently, but by the close, there were no clear signs of a strong breakout with high volume, and the overall approach remains one of oscillating bottoming.

In the short term, under the background of continued decline in risk appetite, defensive sectors such as pharmaceuticals and banking have become the main focus of funds. Once short-term risks are sufficiently released, funds are expected to reflow into sectors with improving prosperity and strong earnings certainty, with annual and first-quarter earnings reports likely becoming the core focus of the market.

Market News Highlights

1. Ministry of Commerce responds to Meta’s acquisition of Manus and issues on multinational corporate operations

A reporter asked about China’s measures regarding Meta’s acquisition of Manus and issues related to multinational corporate operations. Spokesperson He Yadong responded that the Chinese government supports enterprises in conducting cross-border operations and technological cooperation as needed, provided they comply with Chinese laws and regulations and follow legal procedures.

2. Reports say Qualcomm and MediaTek jointly cut approximately 15-20 million 4nm mobile processors

Recent soaring memory chip prices have caused supply chain pressures, severely impacting smartphone demand. MediaTek and Qualcomm are significantly reducing shipments of 4nm mobile chips, estimated to decrease by about 15-20 million units, equivalent to 20k–30k wafers.

(Caixin News, Feng Lin)