CITIC Securities: Oil Price and Demand Resonance, Chemical Industry Boom Fast Upward

Under the background of upward oil price and macroeconomic recovery, the prosperity of chemical industry is expected to rise in 2021. Recently, four chemical industry themed ETFs have been listed on the market, filling the gap of chemical industry index investment tools in A-share market. The four ETFs all follow the CSI sub index of chemical industry theme, which has the widest coverage of chemical industry chain, and has led in the performance of similar indexes since 2017, with strong industry representativeness. Using Brinson decomposition model, compared with other chemical related indexes, the industry allocation and individual stock selection contribution of excess return of CSI sub index are better, and the daily average excess return and the stability of excess return of CSI sub index are significantly higher.

▍ oil price and demand resonate, and the prosperity of chemical industry rises rapidly.

1) Both sides of supply and demand jointly promote the upward trend of international oil price, and the oil price may exceed US $80 / barrel within this year;

2) Under the stimulus policies of various governments, the world's major economies are expected to usher in economic recovery after the epidemic.

3) The prosperity of the chemical industry is on the rise. The prices of more than 90% of the chemical products have risen in the past year, of which about 1 / 3 has risen by more than 20%. Recently, the prices of chemical fiber products, polyester industry chain, coal chemical products and the price gap have risen rapidly. At the same time, the high prices of agricultural products have pushed the prices of agricultural chemical products up.

4) China's leading chemical enterprises have preliminary global competitiveness, and they are growing rapidly.

▍ chemical industry theme ETFs are densely distributed, and the underlying index is highly representative.

1) As of March 10, 2021, a total of 5 chemical theme ETF products have been listed in the A-share market, with a total scale of 6.331 billion yuan. Among them, 4 ETF products tracking the CSI sub index have been listed in the near future, filling the blank of chemical industry index investment tools in the A-share market.

2) The subject index of chemical industry has different emphases. CSI subdivision chemical industry has the widest coverage of chemical industry chain, and its performance has been leading since 2017;

3) By using Brinson decomposition model, the industry allocation and individual stock selection of CSI sub index contribute better to the return, and the daily average excess return of CSI sub index is significantly higher than the other three indexes, with high stability.

▍ investment value analysis of China Securities subdivision chemical industry theme index.

1) CSI subdivides the chemical industry index with a wide position and focuses on leading enterprises. The CSI sub index selects the securities of listed companies involved in chemical raw material production, chemical products production, chemical products application and other businesses in Shanghai and Shenzhen markets as the index sample. According to the daily average total market value of the past year, it ranks from high to low, and through market value weighting, it selects the top 50 companies to be included in the constituent stocks.

2) The weight concentration of the CSI sub index is high, and most of the component stock market values are below 30 billion yuan. The distribution of industries is diversified, facing the downstream sectors of manufacturing, agriculture and other industrial chains.

3) Compared with the mainstream broad-based index, the CSI sub index has higher elasticity and can record more profits in the pro cyclical market. Compared with similar chemical industry related indexes, CSI subdivides the chemical industry index with a wider range of positions, which can fully enjoy the dividend of chemical industry.

4) The CSI sub index is characterized by high valuation and high growth, and its future performance is expected.

▍ risk factors:

The risk of large fluctuations in international oil prices, global epidemic prevention and control less than expected risk, macroeconomic recovery less than expected risk.