Huatai Securities' analysis reveals that the A-share market witnessed a contraction in both trading volume and volatility last week. The market's trading patterns and capital flows signaled a waning appetite for risk, with geopolitical tensions and upward pressure on oil prices continuing to be the primary concerns for investors. On the macroeconomic front, short-term risks persist, and worries about global stagflation have escalated. Domestically, while liquidity remains ample, the sustainability of recent improvements in import/export and inflation metrics warrants further observation.

At the microeconomic level, global investors remain wary of the disruptive potential of artificial intelligence (AI). As the most crucial earnings season for A-shares approaches, the AI sector and resource commodities are emerging as key areas of focus. Given the current lack of clarity in both macro and microeconomic conditions, Huatai Securities advises investors to adopt a cautious stance by reducing their positions and maintaining operational flexibility.

In terms of asset allocation, investment opportunities can be explored within the power chain (encompassing batteries, traditional energy sources, and operators) as well as consumer staples. Furthermore, within the upstream hardware segment of the computing power chain—where valuation pressures are gradually easing and short-term catalysts are present—investors may consider accumulating leading stocks with favorable risk-reward profiles on dips.