Amid rising oil prices and risk-off sentiment from the Middle East war, analysts recommend sectors where firms have pricing power. Chinese companies in energy, petrochemicals, and agriculture stand to benefit from surging oil prices and easing deflation.
The outbreak of the Middle East war has driven oil prices sharply higher, fostering a risk-off mood in global markets. US-Israel military raids on Iran and the closure of the Strait of Hormuz propelled crude oil to around US$100 a barrel, spurring global stagflation concerns. Stocks and bonds fell, while the US dollar rose on haven demand.
Petrochemical companies on mainland China’s exchanges, including Satellite Chemical and Guangdong Redwall New Materials, raised product prices to reflect surging oil costs, sending their stock prices soaring. Satellite Chemical, a Shenzhen-listed maker of propylene and acrylic acid, surged about 5 per cent this week, extending a 15 per cent upsurge for the preceding five-day period. Shares of Guangdong Redwall jumped nearly 3 per cent for the week after it raised prices of concrete admixtures by between 50 and 80 per cent.
Price increases were broad-based in the petrochemical industry, with 195 of the 336 chemical products tracked by GF Securities rising in the first week of March, according to the brokerage.
“If the blockade of the Strait of Hormuz persists, it will spawn a repricing of costs across industry supply chains and an acceleration of energy replacement,” said Zhang Xia, an analyst at China Merchants Securities. “Stocks like oil, petrochemicals and coal are set to benefit.”
Brokerages including Industrial Securities and Sealand Securities suggest fertiliser makers, agricultural firms and green-energy companies as good bets due to their ability to pass on rising costs or increasing demand for alternatives.
Brent and West Texas Intermediate oil prices have surged more than 60 per cent this year, with most of the gains seen over the past two weeks after the war outbreak. Goldman Sachs said that crude this year could challenge its record high of US$146 set in 2008, implying a further 25 per cent gain from the current level.
