Sinolink: The switch is not the core, active defense is the main idea.

Recently, Sinolink released a research report stating that due to the AI investment cycle suppressing non-AI fields from a fundamental perspective, the sequence of events that will occur in the future is as follows: AI-related investment chain stock prices peak - fundamental peak - global real interest rate suppression is relieved - non-AI field fundamentals are repaired. Therefore, objectively, the market does not support direct effective high and low switching. However, this should not be used as an excuse to blindly rush into strong assets. For institutional investors who must stay in the market, proactive defense is recommended. The recommended allocation is as follows: First, gradually determine the low energy prices, benefiting from the flow of Chinese manufacturing (coal + electricity) is a good absolute return combination, and the oil and petrochemical sector has seen valuation recovery; Second, controlling positions and increasing sharpness in the technology sector, semiconductors/AI materials, semiconductor equipment and manufacturing are important ways to invest in "inflation" and also effective defense in the first half of the "inflation stagnation" period; Third, emerging markets and Chinese manufacturing are still in a period of high real interest rate suppression, and it may be considered to position on the left, focusing on industrial metals, engineering machinery, power grid equipment, refining, and other directions. Sinolink's main views are as follows: The tail effect of deleveraging on the trading end is the direct cause of the market's sharp decline In recent days, the A-share market has plummeted sharply with technology stocks leading the decline, with the ChiNext 50 index falling by 3.4%; the Japanese and Korean stock markets are also plummeting, with the Nikkei 225 index falling by 1.9% and the South Korea KOSPI index dropping by nearly 9%. In a previous report on "Observations on Deleveraging in Trading", the institution pointed out that the trading volatility of technology stocks may continue for a while. The sharp adjustment of A-shares and overseas technology stocks was directly triggered by deleveraging in the overseas trading end, with A-shares indirectly following suit: the South Korean stock market had been the best-performing market globally since mid-March, but in the past two weeks, the market margin balance dropped from 6.49 trillion Korean won to 6.08 trillion Korean won, the Japanese stock financing amount also significantly decreased, and the options market's implied volatility compared to actual volatility plummeted rapidly, signaling the withdrawal of leveraged funds. The previous excessive optimism and slightly loose fundamentals in South Korea triggered this process. The downturn in overseas markets and the deleveraging process also transmitted to A-shares: as of July 10th, the margin balance has dropped by 88.20 billion yuan from the peak at the end of June, and the proportion of financing buy-in relative to total trading volume has fallen to a low for the year; from the options market perspective, the one-month implied volatility of the ChiNext 50 index compared to realized volatility has widened to -2.8%, which is itself a sign of deleveraging. The global financialization expansion process is being obstructed, and volatility within the stock is being amplified In the past two weeks, the sharp market fluctuations brought about by deleveraging in the overseas trading end were due to a slowdown in the global financialization expansion process. Since April, although the US stock market rebounded strongly after easing tensions in the Middle East, European and Hong Kong stock markets have underperformed, while the prices of Bitcoin and gold have continued to decline. The proportion of major global financial assets in global M2 has been declining over the past two months, from a high of 91.6% to the current 88.6%, slightly below the historical average level of +1.5 times standard deviation, indicating significant downward pressure at high levels. Considering the critical view of the new Federal Reserve Chairman Powell on the tools used by the Fed to expand the government's balance sheet in the past, the period of synchronized rise in various financial assets pushed by the Fed's large-scale balance sheet expansion since 2020 may be a thing of the past, and since March this year, there has been a noticeable divergence in the performance of major global assets. The slowdown in the global financialization expansion implies that the competition for existing liquidity in global assets will become more intense, which also amplifies the volatility caused by the recent sharp fluctuations in deleveraging in overseas trading. The financing demand of the US AI chain itself is forming a new source of financial surplus outside of US bonds, and in the future, there will be competition for liquidity between the US market and non-US markets within the AI chain, becoming a potential source of volatility. The direction of fundamentals will be the final observation of whether the technology trend has peaked The current adjustment of technology stocks is more similar to the decline in the mobile Internet in June 2015, core assets in February 2021, and new energy in November 2021. Trading volatility has triggered the first round of market adjustments, but there is not much fundamental evidence, and rebounds have occurred after trading volatility. The fundamental of the AI industry is relatively stable, with Token prices and usage volumes stabilizing and rebounding in the past week, and it is expected to rebound within 1-2 months. However, it is important to note that in the 2016 Q4, the decline in mobile Internet profit margin and ROE, the peak of the Maotai Index in 2021 Q3, and the decline in Ningbao composite revenue and profit growth in 2022 Q4 will all appear after what seems like a decline and rebound in trading volatility. In the context of the current technology industry, if there is a slowdown in Token consumption and semiconductor shipment growth, it will be a characteristic of the stagnation period in this round of the technology investment cycle, and the perfect logic of decline will be verified when the time comes. Risk Warning The domestic economic recovery is slower than expected; overseas economies decline significantly.