CITIC Securities says the latest Middle East oil-price shock is a second, larger
shock after initial buffers were exhausted, not a repeat of the earlier, smaller
move. Crowded trade structures differ materially between the two shocks, so
market dynamics are unlikely to simply replay Q2. The war’s trajectory is
increasingly unpredictable and the risk of prolonged conflict has risen,
implying an inevitable near-term de-risking phase. However, volume, price and
sentiment indicators show negative news has been largely priced into near-term,
extreme declines and the de-risking process is close to completion. CITIC sees a
high probability of broad, rotation-led repair in August and remains
constructive on three convergence trades: narrowing excess returns between
AI-chain upstream hardware and price-rally names versus downstream platform
companies; compression of the valuation discount for domestic non-AI industrials
versus overseas peers; and convergence between tech and non-tech sectors.
