China Securities Co., Ltd. has released a research report indicating that the A-share market is facing increasingly complex internal and external environments, which may suppress risk appetite. The market is expected to exhibit a range-bound trading pattern with clear upper and lower boundaries. The core investment strategy involves short-term rebalancing, moderately controlling exposure to high volatility, and focusing on specific high-growth sectors with stronger fundamental certainty while awaiting a recalibration of expectations as uncertainties resolve.

Key industries to watch include: AI (encompassing chips, semiconductors, optical communication), non-ferrous metals (industrial metals, minor metals), coal, non-banking financials, and new energy.

Short-Term Rebound Potential Limited by Capital Flows

Last week, the A-share market opened lower but stabilized overall, demonstrating resilience. Excessive pessimism is unwarranted, and a short-term market rebound is possible. However, the upside potential for this rebound is relatively limited, primarily due to current constraints in capital flows. Recently, margin trading and securities lending funds have seen outflows, and industry-themed ETFs have not shown signs of inflows. Overall, investor sentiment remains cautious.

On one hand, current market valuations are relatively high, with some sectors experiencing elevated trading concentration. On the other hand, external uncertainties such as fluctuating expectations for U.S. Federal Reserve rate hikes and the potential for a significant increase in domestic IPO volumes this year collectively dampen short-term willingness for further capital inflows.

Volatile Overseas Liquidity Expectations Amid High Rate Hike Threshold

The stronger-than-expected U.S. non-farm payroll data released recently, coupled with robust inflation figures last week, have sustained market concerns about potential Fed rate hikes. However, the current U.S.-Iran situation, while tense, remains manageable, and international oil prices have been relatively stable lately, reducing the urgency for the Fed to implement aggressive rate hikes.

Furthermore, an excessively aggressive tightening policy could trigger a hard economic landing and significantly impact the AI industry. It is anticipated that the Fed will maintain policy flexibility, preferring to balance inflation and growth through expectations management rather than through unconventional, sharp interest rate increases.

Focus on Short-Term Rebalancing Amid Uncertainty

In summary, against a backdrop of domestic capital flow constraints and volatile overseas liquidity expectations, the A-share market's internal and external environment is becoming more complex, likely suppressing risk appetite. The market is expected to trade within a defined range. The investment strategy centers on short-term portfolio rebalancing, moderating exposure to high volatility, and focusing on specific high-growth sectors with stronger fundamental certainty while awaiting a market expectation recalibration as uncertainties resolve.

Firstly, attention should be paid to active segments within the AI computing power industry chain. As a core technology growth sector, it still possesses strong potential for positive catalysts. Secondly, the resource sector benefits from solid fundamental support, with inflation resilience providing nominal pricing power, supply-side constraints adding a security premium, and new demand creating incremental growth. Finally, with short-term market styles rebalancing, sectors like non-banking financials and new energy, having undergone adjustments, now present allocation value. Should U.S.-Iran negotiations progress smoothly, sectors like petrochemicals and machinery could benefit from a recovery.