In a complex market characterized by frequent short-term fluctuations and mixed signals, how can investors identify the next investment direction? Recently, during an online session, Chen Yi, Fund Manager at Guotai Fund and Head of the Cyclical Investment Research Team, shared his insights on the logic behind major asset fluctuations and investment opportunities in specific sectors, based on developments in the Middle East situation and current market trends.

He emphasized that investors should not be swayed by the emotional impact of反复 geopolitical volatility but should instead focus on the medium-term substantive effects on various industries.

Chen Yi, with ten years of experience in the securities industry, currently manages the Guotai景气Industry Fund and the Guotai金龙Industry Fund. He is particularly skilled at using macroeconomic cycles as an anchor and industry trends as a guide to uncover investment opportunities in complex environments.

Key points from Chen Yi's analysis include: - Overseas capital is expected to flow back into non-U.S. stock markets and physical assets. - Crude oil may carry a long-term risk premium. - The long-term investment thesis for gold has been strengthened. - The shipping sector is likely to see demand-side boosts, with clear opportunities in industrial metals and minor metals. - Equities and commodities are viewed favorably, with energy security potentially emerging as a core theme in the second quarter.

The following details from Chen Yi's discussion aim to help clarify thinking and identify next-step investment strategies:

**01. Non-U.S. Equities and Physical Assets May Present Medium-Term Opportunities** The most critical mistake in investing is being driven by short-term emotions, especially amid ongoing geopolitical tensions. Instead of focusing on daily developments, investors should concentrate on the medium-to-long-term substantive impacts of these changes on industries and capital flows.

A fundamental shift is occurring in the market: following recent conflicts, trust in the Hormuz Strait, a key chokepoint for the petrodollar system, has significantly declined among Middle Eastern nations. This suggests the hegemony of the petrodollar is beginning to weaken.

Moving forward, Middle Eastern countries are motivated to reduce their reliance on U.S. dollar-denominated assets and seek more stable investment channels, primarily in two areas: non-U.S. stock markets, including A-shares and Hong Kong stocks, and physical assets such as non-ferrous metals and gold, which possess value-preservation qualities.

This represents a substantive medium-to-long-term positive for A-shares and Hong Kong equities.

**02. Crude Oil May Maintain a Long-Term Risk Premium, with Prices Unlikely to Return to Pre-Conflict Levels** Pre-conflict, the equilibrium price for crude oil was around $60 per barrel. Post-disturbance, regardless of negotiation outcomes, oil prices are likely to stabilize above this level, implying a persistent risk premium.

Although oil prices have risen over the past month, there has been no fundamental supply disruption, as developed countries have temporarily alleviated pressure by releasing strategic reserves. However, in recent weeks, countries like Japan, South Korea, and Australia have begun experiencing shortages of refined products, indicating that supply-side pressures are gradually emerging.

If transit through the Hormuz Strait remains obstructed, global crude inventories will continue to deplete significantly, raising market expectations for future oil prices and potentially pushing the equilibrium price higher. Additionally, Europe faces challenges in replenishing natural gas stocks. The period from April to August is critical for building winter reserves; if negotiations stall and Strait transit is restricted, Europe could face another natural gas shortage this winter, further elevating overall energy prices.

**03. Gold: Short-Term Volatility Tied to Liquidity, Long-Term Logic Strengthened** In the medium to long term, gold's core valuation logic revolves around high U.S. debt levels and declining U.S. dollar credibility. This thesis has not only remained intact but has been reinforced by recent conflicts.

On one hand, U.S. debt pressures continue to intensify; on the other, the foundational credibility of the dollar is gradually weakening. As a traditional safe-haven asset and store of value, gold's medium-to-long-term allocation appeal is becoming increasingly prominent.

In the short term, gold's price movements are primarily influenced by real interest rates and liquidity. The metal's decline during the initial conflict phase was not due to a failure of its safe-haven status but resulted from a liquidity shock—rising oil prices pressured energy-dependent economies, affecting global liquidity.

Should tensions ease and oil prices retreat, gold could see a recovery as liquidity concerns diminish.

**04. Clear Opportunities in Shipping, Industrial Metals, and Minor Metals** Within specific sectors, the shipping industry appears promising. From a supply-demand perspective, tanker supply growth is limited in the coming years, while demand is supported by two key factors: first, detours caused by Strait obstructions lengthen voyage distances, directly boosting freight rates; second, currently low global fuel inventories mean any easing of transit restrictions could trigger concentrated restocking, further supporting the shipping sector.

Regarding industrial metals, aluminum warrants attention. Middle Eastern aluminum smelters have suspended production due to the conflict, and restarting idled smelters is a lengthy process, implying strong supply-side constraints. Copper prices, however, may remain more volatile due to liquidity fluctuations.

In minor metals, lithium carbonate and rare earths are favorable. Continued development in the new energy industry should drive demand, while overseas restocking needs are gradually increasing. With limited domestic supply capacity, the supply-demand dynamic remains positive.

**05. Q2 Investment Focus: Anchoring on Energy Security** From a medium-term perspective, equities and commodities are highly favorable, offering attractive risk-reward profiles.

For commodities, as dollar credibility wanes, the value of physical assets increases indirectly. Middle Eastern nations may increasingly prefer holding physical assets like oil, enhancing the long-term allocation appeal of commodities.

For the second quarter, energy security is likely to be a core theme, particularly in the mid-to-upstream segments of new energy, such as lithium resources and midstream materials. Valuations in these areas are currently reasonable to偏低, offering a margin of safety. Entering May and June, the traditional peak season for new energy could boost industry output, including battery cell production. Coupled with rising domestic and international demand, price increases for mid-upstream new energy products are possible.

Additionally, critical and minor metals related to resource security may perform well in Q2 and Q3. Structural opportunities also exist in traditional energy. If major domestic chemical companies secure stable crude oil resources, their global market share could see long-term growth. The upstream crude oil sector, where market expectations for long-term prices have not yet been revised upward, remains reasonably valued, offering配置 value and hedging benefits.

Risk Disclaimer: Fund manager views are for reference only and may change with market conditions. They do not constitute investment advice or guarantees. All investments carry risk.