CMSC: By the middle to late April, the market focus will shift to industries with high growth in first quarter performance.

CMSC released a research report stating that looking ahead to April, the external risks facing A-shares have not yet substantially eased. Currently, the United States is accelerating military deployment, and with the completion of the deployment of the "Bush" aircraft carrier battle group in mid-April, the likelihood of ground combat has significantly increased, with the risk of an unexpected escalation of the US-Iran conflict. Against this background, the further upward pressure on oil prices will exacerbate concerns about global economic stagnation. If the US military launches a ground attack in mid to late April, whether due to casualties exceeding expectations or oil prices surging causing a deep retreat in global stock markets, the Trump administration may be forced to shift to a more easing strategy, and the market may witness a typical dilemma reversal trend. On the domestic front, after the conclusion of the Two Sessions in March and the release of the "Fifteenth Five-Year Plan" outline, key investment projects will accelerate implementation, becoming the core DRIVER driving the rebound in domestic investment growth. If external shocks lead to a significant increase in economic uncertainty, there may be expectations of further intensifying growth-stabilizing policies at the end of April's Political Bureau meeting. In summary, late April will be a key time window for marginal improvement in the domestic and international environment. After the external shocks dissipate, the market focus in mid to late April will shift to sectors with high growth in the first quarter earnings reports. Based on the current data, the resource sectors such as non-ferrous metals, petroleum and petrochemicals, as well as the new energy, optical communication, and semiconductor industry chains are expected to be the industries with the most eye-catching performance growth. CMSC's main points of view are as follows: Investment style and sector allocation strategy: At the style level, large-cap styles are expected to dominate in April, with a balanced growth value. Recommended index combinations include: Shanghai 50, CSI 300, CSI 300 Quality, CSI 300 Energy, CSI 300 Materials. Firstly, April is a concentrated disclosure window for quarterly and annual reports, where the market shifts from chasing themes to pricing earnings, historically showing a clear dominance of large-cap and value styles in April. Second, in terms of fundamentals, the domestic economic fundamentals have stabilized since the beginning of the year, better than market expectations; and as the central energy prices rise, driving the continuous rebound of the PPI, it is favorable for the performance of the cyclical value sectors. Thirdly, the uncertainty in the US-Iran situation remains high, the liquidity risk composite index is in the low-risk zone, providing some suppression on the growth style, and the recovery of the growth style awaits clearer signals. Fourth, in terms of funds, attention should be paid to the trends of financing funds and important institutions. If the US-Iran situation further exceeds expectations and causes a market plunge, it may lead to a further increase in the outflow of financing funds, which will intensify the pressure on small-cap stocks. However, if the market plunge triggers the stable market mechanism of important institutions, driving the risk preference recovery of A-shares, then, similar to the market stabilization in April 2025, small-cap stocks may have more resilience. In terms of industry selection, looking ahead to April, industry allocation is recommended mainly around the transmission of moderate inflation and the industry clues presented by first-quarter earnings. Taking into account the previous performance, valuation, trading activity, changes in business climate, policies, and event catalysis, it is recommended to focus on: 1) Exports advantageous manufacturing sectors, such as power equipment (batteries, photovoltaic equipment, wind power equipment), machinery equipment (construction machinery, automation equipment); 2) Sectors benefiting from energy security and high oil prices, such as coal, utilities (electricity, gas); 3) High-demand AI sectors, such as electronics (semiconductors), communications (communication equipment) etc. Track selection, in April, the focus is on five major tracks with marginal improvements: coal, lithium battery industry chain, overseas computing power, commercial aerospace, military trade. Liquidity and supply-demand of funds: Incremental funds in April may remain tight, ETFs are expected to be the main source of incremental funds. In terms of macro liquidity, interbank funding conditions were spontaneously loose in March 2026, and the loose funding landscape is expected to continue in April. Regarding external liquidity, concerns about stagflation due to the Middle East war are warming up, and the market expects the Fed to refrain from cutting interest rates in 2026, with the US dollar index and US bond rates likely to remain strong. In terms of supply and demand of funds in the stock market, the stock market tracked a tight balance in March, with new funds continuing to be the main source of incremental funds. On the supply side, the scale of newly issued equity funds rebounded, ETF net outflow shrank, and risk preferences for margin financing funds continued to decrease. On the demand side, the scale of net reductions by important shareholders expanded; the IPO issuance scale rose, while the refinancing scale declined, with the demand for funds steadily increasing. In terms of major incremental funds in March, new funds became the main source of incremental funds in the market. Medium-term economic prospects and industry recommendations: Marginal recovery in corporate profit expectations, focusing on resource commodities, information technology, and some midstream manufacturing profit repairs. In terms of profits, the profit of industrial enterprises in January-February exceeded expectations, with high growth in total volume and optimized structure. Profit recovery is driven by resonance of quantity and price and cost improvements, with upstream resource industries and high-tech industries leading the way, while downstream consumer sectors are weak. Overall, sectors with higher first-quarter earnings growth or expected improvements are expected to concentrate in the following directions: 1) Price increase chain: oil and petrochemicals, non-ferrous metals, chemicals, power equipment etc.; 2) Exports advantageous manufacturing: textiles and apparel, integrated circuits, medical devices, components, general equipment, construction machinery, ships etc.; 3) TMT sectors with price increases spreading: semiconductors, components, communication equipment etc. In terms of business climate, high-performing areas in March are mainly focused on resource industries and utilities, with the resource sector seeing general oil and chemical price increases, midstream manufacturing seeing crude oil shipping price index rising, engineering machinery sales slowing down, consumer services group such as Maotai seeing an increase in batch prices, financial and real estate markets seeing a slowdown in market trading, and utilities seeing gas prices rising. In April, the key recommendations focus on the sectors benefiting from the upward movement of oil prices and profit improvements, as well as sectors poised to realize their first quarter earnings, focusing on: 1) Exports advantageous manufacturing sectors such as power equipment (batteries, photovoltaic equipment, wind power equipment), machinery equipment (construction machinery, automation equipment); 2) Sectors benefiting from energy security and high oil prices, such as coal, utilities (electricity, gas); 3) High-demand AI sectors, such as electronics (semiconductors), communications (communication equipment) etc. Investment in tracks and industry trends: Alibaba releases the new generation model Qwen3.6-Plus, taking technology to the level of expert productivity. On April 2, 2026, Alibaba Cloud officially announced the birth of Qwen3.6-Plus to the world. The choice of this milestone is not only a precise control of Alibaba's own large-model iteration rhythm, but also a strong response to the current global trend of AIAgent and automation programming. The release of Qwen3.6-Plus marks a decisive step in the transition of domestic large models from "usability" to "expert productivity". Risk Warning: Economic data falling short of expectations, incomplete policy understanding, and overseas policies tightening beyond expectations.