CICC Research: Recommend a left-side positioning of adequately priced assets, hedging volatility with low-volatility dividends or reducing holdings.

On April 4th, China International Capital Corporation released a research report. The Iran conflict has entered its fifth week, and its evolution path is more complicated than the market initially expected. There is still a considerable distance to genuine de-escalation, and the path to easing will also encounter repeated setbacks. At this moment, the most pressing question for investors is: has the market “bottomed out”?

To answer this question, first, it is necessary to see whether the situation is escalating; secondly, even if the situation remains uncertain, one can observe whether asset pricing has already fully reflected the risks; furthermore, the valuation differences across various assets and industries can also lead to significantly different “cost-performance” ratios.

We believe that April is a critical juncture, and it depends on whether the “paper disturbances” in the financial markets will turn into “actual shocks” to real production. In terms of asset pricing, bonds, gold, and copper are relatively pessimistic; the equity market generally does not fully price in pessimistic scenarios. In allocation, it is recommended to adopt a cautious approach: position in assets with fully reflected prices, hold benefiting assets but avoid chasing highs, and hedge volatility with low-volatility dividends or by reducing positions.