"Buying Chinese means buying safety"! Institutions are issuing frequent statements.

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Recently, geopolitical developments have shaken up the balance, triggering sharp volatility across global capital markets. Against this backdrop, how to find assets with “a sense of safety” has become a key focus for investors. Multiple brokerage reports suggest that the current international order is undergoing reconstruction, and “hard-core assets” are seeing a strategic reassessment of value. The valuation advantage and structural resilience of China’s stock market are also worth paying attention to.

Safety is the scarcest resource

Geopolitical conflicts directly boost the allocation value of hard assets.

On crude oil: as the Strait of Hormuz remains continuously blocked and inventories of crude oil in major economies decline, oil prices still have upside momentum. Institutions including Guotai Junan and Yuekai Securities believe that a higher price center for crude oil will bring expectations for earnings recovery to related companies. Worth noting is that in a view published by Zhang Wei, Guotai Junan’s macro chief analyst, the logic of this round of crude oil shocks has shifted from “price cost” to “physical supply”—when overseas economies face shutdown risks due to energy-cost surges and raw-material shortages, China’s manufacturing is expected to take on the reallocation of global orders, thanks to the completeness of its industrial chain and stable delivery.

On gold: Fang Yi, chief strategy analyst at Guotai Junan Securities, believes that amid the accelerated reshaping of the global order and a trend deterioration in geopolitical conditions, safety has become the scarcest resource, and gold is the core asset for hedging uncertainty. Large asset management institutions and central banks of various countries continue to purchase gold, providing strong support for the long-term gold price center. Lu Zhiheng, chief economist and director of the research institute at Yuekai Securities, also stated that gold’s allocation value and the strategic value of rare earths remain solid.

On industrial metals: Guotai Junan Securities proposes that industrial metals represented by copper may be in a state of temporary supply-and-demand imbalance. Construction, power grids, and electric vehicles are the main demand drivers at present. The expansion of AI computing power and the modernization of power grids also bring additional structural demand. At the same time, copper’s development costs and complexity have risen significantly, weakening investment willingness and potentially pushing up copper prices at least in the short term. Yuekai Securities similarly believes that while the non-ferrous metals sector may retrace in the short term due to financial attributes, fundamentals such as tight copper ore supply, constrained aluminum supply, and demand from new energy and AI have not changed.

“Buying China means buying safety.” Liu Yuhui, Deputy Director of the Financial Development Center and a council member of the China Chief Economist Forum, Shanghai Chief Economist, said that the underlying logic of global capital markets has undergone a fundamental reversal—“safety” has replaced “efficiency” as the world’s scarcest asset, and the “safety premium” will be the largest weight in future asset pricing.

Focusing on Hong Kong stocks and A-shares

In the equity asset segment, Hong Kong stocks and A-shares’ advantaged manufacturing sectors are the directions that institutions are concentrating on and favoring.

Hong Kong stocks may benefit from valuation troughs combined with capital’s risk-avoidance dividends. Li Chao, chief economist at China Merchants Securities, clearly believes that the U.S.-Iran conflict could become the “watershed” for global capital flows, and Hong Kong is expected to see a global risk-avoidance dividend. Specifically, Hong Kong stocks’ level of industry diversification is far higher than Japan and South Korea and also higher than other regional markets. High-dividend blue chips (such as HSBC, Hang Seng, etc.) and new-economy leaders (such as the Huawei industry chain, etc.) form a “defensive + growth” combination, which is a core channel for international capital to share China’s development dividend.

A-share manufacturing advantages bring an upgrade in pricing power. Qiu Xiang, chief A-share strategy strategist at Citic Securities, said that global supply-chain disruptions are creating an opportunity to enhance pricing power for China’s advantaged manufacturing industries. Industries with share advantages such as chemical, non-ferrous metals, power equipment, and new energy all benefit from this. In addition, overseas capacity resets have high costs, and supply elasticity is easily affected by policy; raising prices remains a core trading theme.

Zhang Jundong, macro analyst and executive general manager at CICC, believes that new technology narratives and geopolitical narratives are pushing global capital toward rebalancing. A-share assets that have been consistently undervalued and under-allocated over the past several years may regain global investors’ favor. On the one hand, China’s technological strength has leaped forward, and the global innovation index ranking has, for the first time, placed China among the world’s top ten. China has the world’s largest number of publicly filed patents in high-tech fields represented by AI. On the other hand, China’s manufacturing value added accounts for nearly 30% of the world total. Strong supply capacity is favorable to exports of domestic intermediate goods and capital goods under the backdrop of global reindustrialization.

In terms of specific execution, Lu Zhiheng suggests that investors should reasonably control position sizes in the short term, reduce trading frequency, and improve expectations for market volatility. For short-term trading strategies: first, reduce positions moderately; second, allocate more evenly to avoid over-concentrating investments up or down in a single sector. Zhang Yidong, a member of the Executive Committee and chief economist at Haitong International, proposed a “SMART” stock-picking framework for China’s “hard-core assets,” covering energy/resource safety (gold, rare earths, defense and military), manufacturing for overseas markets (globalized leaders in machinery, power equipment, pharmaceuticals, etc.), and hard technology (semiconductors, high-end equipment, robots, quantum technology, etc.).

China’s asset advantages provide the underlying foundation

At the macro level, China’s unique energy structure and valuation advantages provide fundamental support for asset safety.

Energy security builds supply resilience. Caftong Securities believes China’s primary energy self-sufficiency rate is approximately 83.2%, clearly higher than traditional manufacturing powerhouses such as Japan, South Korea, and Germany. This forms a “coal as the foundation, oil and gas as supplementation, and non-fossil contributions lifting the total” combination model. Crude oil procurement sources are diversified, and there is a deep reserve of technology in coal-to-chemicals. In extreme situations, it has stronger capability for supply security and hedging.

Valuation advantages provide a margin of safety. Haitong International stated that China’s stock market correlation with the U.S. stock market is the lowest among global mainstream markets. Valuations are currently at a low level globally, with a significant horizontal discount effect, and there is a notable catch-up opportunity. Meng Lei, China stock strategy analyst at UBS Securities, observed that A-share implied volatility is below April 2025 and also below that of major overseas markets; “de-risking” may be close to ending. The spread between M1 and M2 is widening, financing balances have not decreased significantly, and deposits of 55 trillion to 60 trillion yuan may enter the market indirectly through insurance wealth management, all providing liquidity support.

In addition, UBS Securities expects that under a benchmark scenario, the growth rate of total A-share earnings in 2026 could rise to 8%. Recent upward revisions to consensus earnings expectations have already shown characteristics similar to the overall favorable earnings environment in 2017, 2019, and 2021. Multiple institutions have also pointed out that potential risks still include intensifying friction in areas such as China-U.S. technology, further escalation of regional conflicts, and adjustments to market consensus expectations.

Author: Lu Yi, Xu Wei

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