CITIC Securities: High Probability of Broad Market Rotation and Recovery in August

CITIC Securities has observed that the current oil price shock originating from the Middle East is not a repeat of the initial impact but a secondary shock following the depletion of buffers. The market's most crowded trades during these two oil price shocks have differed significantly, suggesting that the market will not simply replicate the performance patterns seen in the second quarter. The increasing unpredictability of the Middle East conflict and the rising risk of prolonged tension mean the market must undergo a period of reduced risk appetite in the short term. However, indicators of volume, price, and sentiment suggest that negative events and narratives have already been factored into the current extreme short-term declines. This risk reduction phase is nearing its end, and there is a high probability of a broad market rotation and recovery in August. CITIC Securities remains optimistic about convergence across three key areas: first, the convergence of excess returns between upstream hardware and price-increase stocks in the AI chain and downstream platform-based companies; second, the repair of discounts for domestic non-AI industrial stocks relative to their overseas counterparts; and third, the convergence between technology and non-technology sectors.