CITIC Construction Investment: Currently, A-shares are starting a second round of market repair

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the A-share market has now begun a second round of repair, and that the macroeconomic game caused by the overseas Middle East geopolitical conflict boosting oil prices and interest rates on US bonds has been implemented in stages. Oil prices and long-term US bond interest rates have declined, and the main line of the market has returned to the booming sector; however, it is still necessary to continue to track overseas interest rates, the continuation of the decline in oil prices, and external disturbances caused by the FOMC meeting at the end of October. In terms of allocation, the idea of balanced allocation and hierarchical layout is adopted. The offensive side favors scarce computing power supply (optical chips, PCB manufacturing, CCL, server machines) and industries such as copper, aluminum, tin, etc., and the defensive side uses dividend assets as a bottom position to hedge fluctuations, while flexibly grasping phased opportunities for domestic demand sectors such as agriculture, medicine, textiles and clothing to be catalyzed by policy expectations.

CITIC Construction Investment's main views are as follows:

Starting in mid-August, the main pricing line of the global market focused on overseas inflation and changes in liquidity. The Middle East geopolitical conflict pushed oil prices back to high levels during the year, intensified global inflationary pressure. High oil prices increased countries' financial subsidy burdens and boosted PPI. Combined with official expectations and guidance, the market began early pricing and the Fed's interest rate hike cycle. With the implementation of interest rate hikes and the marginal easing of the situation in the Middle East, oil prices declined simultaneously with interest rates on long-term US bonds, and short-term external macroeconomic pressure eased. The oil price and liquidity disturbances caused by this round of geopolitical shocks mainly affect overseas markets. Although domestic PPI rose slightly, the loose domestic interest rate environment and the RMB exchange rate remained stable, and there was no significant impact.

Since July, the fundamentals of the technology sector have continued to be booming. After the phased end of the macro game, capital was in a position to return to the booming circuit. However, the interest rate hike cycle has already begun, and the market will continue to compete on the continuity of interest rate hikes in every subsequent round of FOMC meetings. At the end of October, the FOMC is still a key observation point; until then, whether this round of market repair can continue, the core depends on whether the decline in overseas interest rates and oil prices can continue.

In terms of industry layout, we will continue to adopt the idea of balanced allocation, hierarchical layout, and flexible adjustment. The offensive direction prioritizes segments of the computing power industry chain where supply is scarce and product prices continue to rise, focusing on optical chips, PCB manufacturing, CCL, and server machines; at the same time, industrial metals such as copper, aluminum, and tin are used to benefit from physical demand driven by computing power construction. Defend the bottom position and allocate dividend assets, rely on an environment where domestic interest rates operate at low levels to obtain stable dividend income and hedge against market fluctuations. The flexible allocation sector focuses on the direction of domestic demand. The rise in global food prices supports the fundamentals of the agricultural sector. The medical, aesthetic, textile and garment sectors are at low valuations and positions. It is expected that they will rely on consumer promotion policy expectations and usher in phased market opportunities.

Key sectors include: AI computing power, non-ferrous metals, banking, insurance, transportation, agriculture, medicine, aesthetics, textiles and clothing, etc.