CITIC Securities: Risk assets maintain high cost-effectiveness, recommend overweighting A-shares, H-shares, and US stocks

According to the Zhitong Finance APP, Guotai Junan released a research report stating that the geopolitical situation in the Middle East is repeatedly changing and uncertain, but the overall context still points towards a scenario of declining tail risks. The current market may still be affected by corporate performance verification, returns from the artificial intelligence industry, and geopolitical disturbances. Short-term volatility is unlikely to completely dissipate, but the market's sensitivity to negative information is expected to marginally decrease. The firm recommends overweighting A-shares, H-shares, and U.S. stocks.

Guotai Junan's main points are as follows:

The geopolitical situation in the Middle East is repeatedly changing and uncertain, but the overall context still points towards a scenario of declining tail risks. After the previous market adjustments, the accumulated profit-taking, leveraged funds, and other micro trading risks have been partially released, alleviating some valuation pressure on certain technology and growth assets, and improving the risk-reward ratio compared to before the adjustments. The current market may still be affected by corporate performance verification, returns from the artificial intelligence industry, and geopolitical disturbances. Short-term volatility is unlikely to completely dissipate, but the market's sensitivity to negative information is expected to marginally decrease.

In terms of equities: (1) The U.S. economy is relatively resilient and less impacted by geopolitical shocks, and corporate earnings expectations may still support a central upward trend in U.S. stocks, recommending an overweight in U.S. stocks. The narrative around the AI industry is shaky, and geopolitical uncertainties continue to disturb market sentiment and global macro liquidity expectations, leading to increased volatility in global risk assets. On the micro trading level, technology risk assets represented by semiconductors have been oversold, with limited further downside potential. (2) With decreasing uncertainty, released trading risks, and incremental capital entering the market, it is favorable for stabilizing market risk appetite, recommending an overweight in A-shares. The impact of super IPO transactions on liquidity will revert to past levels; despite the resurgence of U.S.-Iran conflicts, the marginal impact is not as significant as in March-April, and there are respective constraints; North American CSP manufacturers will announce financial reports and guidance in the next two weeks, but market expectations have already been lowered. The entry of important stabilizing institutions under the "buffer" of the capital market is expected to continue supporting the reduction of market volatility and preventing irrational sell-offs. (3) Hong Kong stocks also benefit from the strong and resilient economic performance of mainland China, recommending an overweight in H-shares.

In terms of bonds: (1) Financing demand and credit supply remain unbalanced, and high volatility in the capital market enhances the cost-effectiveness of bond allocation, recommending a standard allocation of government bonds. Against the backdrop of economic and risk appetite recovery, although financing demand and credit supply remain unbalanced, the supply-demand relationship is marginally improving; recent global capital market volatility has been significant, improving the cost-effectiveness of government bond allocation. (2) The resilience of the U.S. economy remains, and investors may repeatedly adjust macro liquidity expectations, recommending an underweight in U.S. Treasuries. The resilience of the U.S. economy remains, and geopolitical uncertainties may cause investors to repeatedly adjust expectations for Federal Reserve monetary policy and global macro liquidity, leading to U.S. Treasury yields fluctuating at high levels, with cost-effectiveness lower than that of risk assets.

In terms of commodities: (1) Geopolitical uncertainties may disturb or suppress market risk appetite. A standard allocation of industrial metals is recommended. The vigorous development of power-related construction equipment and transportation tools, as well as the expansion of AI computing power and military facility updates, have brought new demand for industrial metals, with industrial metals represented by copper potentially being in a phase of supply-demand imbalance. **(2) Geopolitical disturbances may boost the central price of global oil, recommending a standard allocation of crude oil ** Recent oil prices may be disturbed by geopolitical uncertainties, but global economic demand for oil is relatively weak, and OPEC+ production policies are volatile. In the long term, the oil price center still lacks upward momentum.

Risk Warning: There are limitations in the analysis dimensions, subjectivity in model design, deviations between historical and expected data, limitations of quantitative models, and geopolitical uncertainties