STOCKS | Citic Securities Says A Stronger Dollar Signals Global K-Shaped Market Divergence

A Citic Securities research note said the U.S. dollar can serve as a signal for accelerating K-shaped divergence across global markets. According to Jin10, Citic Securities said the dollar’s strengthening in early May, alongside rising expectations for interest-rate hikes, coincided with a point at which global K-shaped divergence began to accelerate, driven mainly by the damage that tightening expectations inflict on demand outside the AI sector. The note said the divergence has now reached a temporary extreme, with overseas technology stocks also narrowing internally. It added that pricing across equities, bonds, commodities, and foreign exchange has already reflected early signs of a recession trade. Citic Securities said that if tightening later materializes, it may further weaken demand in the non-AI economy. If tightening does not occur, the firm said the K-shaped divergence may narrow on a temporary basis. Compared with more volatile overseas markets, the note said China’s A-share market has shown greater resilience. It added that some non-AI sectors have shown signs of early-stage capital participation, and that a small number of low-valuation sectors have a basis for recovery but are waiting for a catalyst.