Huatai Securities A-Share Strategy: Waiting for the Right-Side Signal Amidst Geopolitical Fluctuations

Ask AI: Why is capital rotating from crowded, high-concentration sectors into low-correlation assets?

Huatai Securities’ A-share strategy indicates that last week, the situation in the Middle East fluctuated repeatedly and the market continued trading sideways amid ongoing volatility. Combined with risk-avoidance positioning ahead of the Qingming holiday, the tracked A-share sentiment index remained in the “panic” range. Structurally, power, new energy, and coal—benefiting from geopolitics and high oil prices but having higher crowding—have seen funds take profits. Meanwhile, communications and innovative drugs, which have lower correlation, performed strongly. In addition, the earnings season’s results coming in above expectations have also become a new trading catalyst. The odds of left-side positioning may be gradually increasing, but before the geopolitical situation becomes clear, one should not place a one-way bet. It is recommended to continue waiting for right-side signals. Also, even after the surprisingly strong U.S. non-farm payroll data, investors still need to be alert to the risk chain of: rising oil prices → upward inflation pressure → tighter liquidity. For allocation, it is recommended to control position sizes and leave room; in the short term, maintain a certain level of defensive exposure and allocate to low-correlation assets, such as red envelope-style “dividend/return” themes, AI compute, innovative drugs, etc. In the medium term, add on dips around the two major leads: the power supply chain and overall business conditions.