Heavy-asset low-elimination track is booming; institutions favor undervalued quality targets.

Securities Times Reporter Chen Jiannan

On March 3rd, the A-share cyclical sector once again experienced a surge, with the petroleum and petrochemical industry leading the gains. Multiple stocks such as Bohui Co., Tongyuan Petroleum, and QianNeng Hengxin hit the daily limit. The three major giants—PetroChina, Sinopec, and CNOOC—also hit the limit up. Besides petroleum and petrochemicals, industries like coal, transportation, and utilities all showed broad strength.

Since 2026, the cyclical sector has become the strongest mainline in the A-share market. As of the close on March 3rd, the petroleum and petrochemical industry index has increased by over 37%, ranking first among the Shenwan first-level industry indices; non-ferrous metals and coal industries have both gained more than 20%, while building materials and basic chemicals have increased by over 10%.

This year, many cyclical stocks have performed exceptionally well. Tongyuan Petroleum, Keli Co., and Xianglu Tungsten have each more than doubled in value this year. Stocks like Zhangyuan Tungsten, QianNeng Hengxin, and Xiaocheng Technology have each risen over 150%. Among the stocks that doubled, more than ten hit new all-time highs on March 3rd.

The strong rally of cyclical sectors, represented by petroleum, petrochemicals, and non-ferrous metals, is not an isolated phenomenon in the A-share market but a common trend across global capital markets.

Recently, international investment banks such as Goldman Sachs, Morgan Stanley, and JPMorgan have proposed the “HALO Trading” strategy (Heavy Assets, Low Obsolescence), which emphasizes heavy assets and low obsolescence trading strategies. Cyclical sectors are at the core of this approach.

Guotai Securities pointed out that “HALO trading” is a hedging strategy aimed at avoiding AI risks. Its screening criteria exclude “light-asset” sectors that are easily replaced by AI, focusing instead on industries with physical assets, infrastructure, and natural resources that are “scarce.” In environments with AI-induced uncertainty, this strategy seeks assets with stable cash flows and low AI replacement risk, providing a safe haven against AI shocks. Heavy-asset, low-obsolescence industries have three natural advantages: high entry barriers, long industry renewal cycles, and the ability to withstand technological cycles.

From an overseas perspective, “HALO trading” mainly covers six core sectors: Industry (construction machinery, agricultural machinery), Materials (non-ferrous metals, chemicals), Energy (oil and gas, refining), Utilities (electricity, gas, water), Transportation (railways, pipelines, ports, airports), and Consumer Staples (fast-food chains, food and beverages).

Guotou Securities summarized the core logic of “HALO trading” as: going long on heavy assets that are “difficult to replace by AI and relied upon by AI,” while shorting light assets that are “easily disrupted by AI.” Based on this logic, assets in power grid equipment, energy, and mining sectors are worth attention.

Accordingly, when investors allocate related sectors, low-valuation high-quality stocks offer particularly attractive cost-effectiveness.

According to Securities Times Data Treasure, among stocks rated by ten or more institutions, 29 stocks (from sectors such as petroleum, coal, non-ferrous metals, and chemicals related to HALO trading) have a projected 2026 consensus PE ratio below 15. Among them, Huaneng International has the lowest forward PE at 8.01. Additionally, Huadian International, Xinji Energy, and China Eastern Logistics all have forward PE ratios below 10.

In terms of institutional attention, XCMG Machinery leads with ratings from 21 institutions. Wuxi Securities stated that as a leading domestic construction machinery company, XCMG maintains stable core operations. Its mining machinery business has become a new growth engine, and through strategic deployment in electrification and globalization, it is building core competitive barriers, expected to fully benefit from the current industry upcycle.

China Coal Energy and Satellite Chemical each have ratings from 20 institutions, while stocks like Juxing Technology, Zoomlion, Zhejiang Dingli, and Shaanxi Coal & Chemical have ratings from over 15 institutions. Western Securities believes that Juxing Technology, as a leader in hand tools, has achieved effective electric tool deployment and is expected to see accelerated growth over the next three years.

(This edition’s data is provided by the Securities Times Central Database.)