Brokerage Morning Meeting Highlights: Geopolitical and Oil Price Upside Risks Remain the Main Contradictions in Current Pricing

Last Friday, the market experienced a full-day fluctuation and quick decline at the close, with the Shanghai Composite Index dropping over 1% intraday. The combined trading volume of the Shanghai and Shenzhen markets was 2.4 trillion yuan. From sector perspectives, chemicals, wind power, and controlled nuclear fusion concepts led the gains. On the downside, computing power leasing, non-ferrous metals, tungsten, and other concepts declined the most. At the close, the Shanghai Composite fell 0.81%, the Shenzhen Component Index dropped 0.65%, and the ChiNext Index declined 0.22%.

In today’s brokerage morning meeting, Huatai Securities stated that geopolitical risks and rising oil prices remain the main contradictions in current pricing; CITIC Construction Investment believes that sharp increases in natural gas prices benefit new energy; CITIC Securities emphasizes the current investment value in the construction sector.

Huatai Securities: Geopolitical Risks and Rising Oil Prices Remain the Main Contradictions in Current Pricing

Last week, A-shares experienced a volume-contracted fluctuation. From the perspective of market trading structure and capital behavior, overall risk appetite cooled down, and geopolitical risks along with rising oil prices remain the core contradictions in market pricing. Looking ahead, macro-wise, short-term risks have not been fully released, global stagflation concerns are rising, and domestic broad liquidity remains ample, but the sustainability of improving import-export and inflation data needs verification. Micro-wise, global investors still worry about AI disruptive impacts, and the upcoming full-year earnings season for A-shares is approaching, with AI chains and resource commodities being key focus areas. Currently, macro and micro visibility is low, so investors are advised to reduce positions and respond flexibly. In terms of allocation, explore alpha in the power chain (batteries, traditional energy, and operators) and essential consumer goods. Additionally, as valuation pressures are gradually digested and short-term catalysts emerge in upstream hardware of computing power chains, it is advisable to buy on dips in leading stocks with high risk-return ratios.

CITIC Construction Investment: Sharp Rise in Gas Prices Benefits New Energy

Reviewing the impact of the Russia-Ukraine war and outlook on the US-Iran conflict, the conclusion that adding new energy and power equipment is very clear. Electricity prices (anchored to natural gas prices) are the core demand contradiction, far exceeding other factors such as costs and interest rates. New energy is an important choice for energy independence and control. After the Russia-Ukraine conflict, the new energy sector (mainly household storage in 2022) performed strongly, significantly outperforming the CSI 300. The war caused electricity prices to surge tenfold in the short term, triggering market frenzy and a long process of inventory reduction. The measures Europe has taken to address extreme situations should be relatively sufficient this time, and overall electricity prices and demand are expected to rise moderately. Compared to the impact of the previous Russia-Ukraine war, this round is expected to be more moderate and steady. The outlook for energy storage and offshore wind in new energy is optimistic.

CITIC Securities: Emphasize the Investment Value of the Construction Sector

During past downturn cycles, the construction industry has both optimized its competitive landscape and continued to expand its second growth curve. During the 14th Five-Year Plan period, industry demand is expected to bottom out and reverse, with overall sector valuations remaining relatively low. The current sector offers a dual investment logic: 1) Offensive side, companies with substantial second main business layouts in recent years are expected to be the first to see valuation revaluation; 2) Defensive side, some companies have increased dividend payout ratios against the trend, and dividend yields are relatively high. Maintain a “better than the market” rating for the industry.