CITIC Securities says the latest Middle East-driven second oil shock follows
exhaustion of earlier buffers and is not a simple replay of the first shock; the
most crowded trades in the two episodes differ, so Q2 market patterns are
unlikely to repeat. The conflict is increasingly unpredictable and the risk of
prolonged tension has risen, making short-term de-risking unavoidable. However,
price, volume and sentiment indicators show the negative moves are largely
reflected in near-term extreme declines and the de-risking phase is approaching
its end. CITIC sees a high probability of broad rotational repair in August and
favors three convergence trades: 1) narrowing of excess returns between AI-chain
upstream hardware/price-sensitive names and downstream platform companies; 2)
valuation catch-up of domestic non-AI industrials versus overseas peers; 3)
convergence between tech and non-tech sectors.
