CITIC Securities Mid-Term Strategy: Navigating the Recovery Divergence and Identifying Structural Main Lines Focus on Four Major Sectors for Subsector Investment Opportunities

Citic Construction Investment releases the 2026 Mid-term Investment Strategy Report stating that in the first quarter of 2026, China’s economy achieved a steady start, with PPI turning positive, marking an important macro watershed in the industrial cycle, and the domestic economic recovery process officially beginning. Although Middle Eastern geopolitical conflicts have caused phased stagflation disturbances to the global economy, they do not alter the core trend of gentle domestic economic recovery. Looking ahead to the second half of 2026, the macro economy will exhibit operational features of “recovery differentiation, policy support, and structural optimization,” with a continued expectation of RRR cuts in monetary policy, fiscal policy focusing on the implementation of existing policies, and policy themes centered around expanding domestic demand, technological innovation and independence, energy resource security, and industrial structure optimization. The implementation of the “14th Five-Year Plan” will lay the core tone for medium- and long-term development. The moderate appreciation of the Renminbi and corporate profit recovery resonate, creating a systemic valuation reassessment opportunity for Chinese assets. Investment should focus on structural main lines amid recovery differentiation, emphasizing segmented investment opportunities in consumption, technology, resource security, and thematic dividends.

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CITIC Construction Investment Policy Research 2026 Mid-term Investment Strategy: Time Waits for No One, Moving Toward the Sun

In the first quarter of 2026, China’s economy achieved a steady start, with PPI turning positive, marking an important macro watershed in the industrial cycle, and the domestic economic recovery process officially beginning. Although Middle Eastern geopolitical conflicts have caused phased stagflation disturbances to the global economy, they do not alter the core trend of gentle domestic economic recovery. Looking ahead to the second half of 2026, the macro economy will exhibit operational features of “recovery differentiation, policy support, and structural optimization,” with a continued expectation of RRR cuts in monetary policy, fiscal policy focusing on the implementation of existing policies, and policy themes centered around expanding domestic demand, technological innovation and independence, energy resource security, and industrial structure optimization. The implementation of the “14th Five-Year Plan” will lay the core tone for medium- and long-term development. The moderate appreciation of the Renminbi and corporate profit recovery resonate, creating a systemic valuation reassessment opportunity for Chinese assets. Investment should focus on structural main lines amid recovery differentiation, emphasizing segmented investment opportunities in consumption, technology, resource security, and thematic dividends.

In the first half of 2026, China’s economy achieved a steady start, with Q1 GDP growing 5.0% year-on-year, accelerating by 0.5 percentage points compared to Q4 of the previous year. In March, PPI turned positive, ending negative growth, and industrial enterprise profits increased 15.2% year-on-year in January-February, highlighting resilience in industrial production and ongoing economic recovery momentum. However, recovery shows significant K-shaped divergence: consumer confidence remains low and in the repair phase, private investment is still negative, and the real estate market is still bottoming out, all issues awaiting resolution. The outbreak of Middle Eastern geopolitical conflict at the end of February became a core variable in global markets, pushing up global inflation and energy prices. The IMF downgraded the 2026 global economic growth forecast to 3.1%, but the impact on the domestic economy was limited. The biggest external uncertainty remains the Federal Reserve’s monetary policy pace. Considering doubts about the independence of the new Fed Chair and the easing of inflation due to US-Iran negotiations, it is expected that the Fed may still cut interest rates within the year.

Looking ahead to the second half, the domestic economy will continue its recovery trend, with improvements in industrial enterprise profits gradually transmitting to the real economy. High-tech manufacturing and modern services will remain the core growth engines; macro policies will maintain stability while remaining flexible. RRR cuts are expected within the year, and interest rate cuts will depend on internal and external conditions. Fiscal policy will focus on accelerating the implementation of existing policies and targeted efforts. The “14th Five-Year Plan” related deployments will continue to strengthen the medium- and long-term development main lines of technological innovation, industrial security, and green transformation.

Regarding investment strategies, we recommend focusing on four main lines:

1. Domestic demand-driven consumption sectors, with key attention to cultural tourism, medical tourism, inbound consumption, and high-end consumer tracks;
2. Innovation-led technology sectors, focusing on AI computing power, innovative pharmaceuticals, robotics, and low-altitude economy as core productivity areas;
3. Resource security and energy transition themes, capturing the supply-demand mismatches in gold, copper mines, and the valuation of high-dividend energy assets like electricity and coal;
4. Policy and event-driven thematic sectors, such as RMB internationalization, military industry, and restructuring of the real estate landscape, to seize structural opportunities.

At the same time, caution is needed regarding risks such as worsening Middle Eastern conflicts and extreme climate disturbances.

(Source: Southern Finance Network)