Heavy Assets Rise, Power Up Over 13% YTD, How to Position HALO in A-Shares

In the past two months, HALO trading, centered around the keywords “Heavy Assets” and “Low Obsolescence,” has become popular on Wall Street.

Due to concerns that “rapid AI technological iteration will disrupt the light-asset model,” funds have shifted from software sectors to high-threshold, demand-rigid fields like energy and utilities.

In the A-share market, since the beginning of the year, sectors such as petroleum and petrochemicals, non-ferrous metals, basic chemicals, and electricity have performed remarkably well.

“Chinese A-shares are highly aligned with the HALO logic,” said Chen Xianshun, Chief Equity Strategist at Bosera Fund, to 21st Century Business Herald. He suggests focusing on three points for current deployment: selecting leading companies with high barriers, high dividends, and low capital expenditure; avoiding false heavy assets and cyclical high-position targets; maintaining strict position control as a hedge, avoiding chasing high prices driven by market sentiment; and closely monitoring interest rates, policy pricing, and supply-demand patterns, using cash flow and dividends as core valuation anchors, while downplaying short-term thematic volatility.

From a strategic perspective, institutional analysis indicates that HALO trading essentially involves a definitive re-pricing of tangible hard assets, centered on heavy asset barriers, low technological obsolescence, and perpetual cash flows. It is a long-term allocation strategy rather than a short-term thematic trade.

Additionally, some institutions believe that China, with its complete manufacturing system, vast infrastructure stock, and leading resource capacity layout, may hold unique value under the HALO investment paradigm.

Funds Chase Certainty and Scarcity

By early 2026, major international investment banks like Goldman Sachs and Morgan Stanley have promoted HALO (Heavy Assets, Low Obsolescence) investment as a core strategy.

The core of HALO trading is: “In an environment of uncertainty brought by AI technology, seek assets with low risk of being replaced by AI, resistant to technological shocks, and capable of long-term stability. The investment logic shifts from chasing growth to emphasizing certainty and scarcity,” said the strategy research team at China International Capital Corporation (CICC).

Focusing on industries, HALO assets are mostly located upstream in the industrial chain, covering heavy asset industries that provide energy, raw materials, logistics, and other basic services. These industries require huge upfront capital expenditure and have extremely high entry barriers; they are characterized by high replacement costs, construction barriers, and physical hard assets that are difficult to disrupt technologically.

In the U.S. stock market, since 2026, there has been a clear trend of capital migration toward heavy asset sectors.

According to institutional data, since the beginning of the year, the S&P 500 energy sector has risen over 25%, leading the market; industrials, materials, and utilities have also significantly outperformed the index. Meanwhile, the software sector in the U.S. has fallen over 30% from its highs.

Wanguo Fund pointed out that the “counter-narrative” in the AI era—HALO assets—are experiencing a systematic valuation reassessment.

“The rise of HALO trading mainly stems from market concerns that ‘rapid AI technological progress could disrupt the business models of knowledge-intensive companies, represented by software firms.’ Compared to this, HALO assets with heavy assets and low obsolescence risk may benefit from more predictable future profits, attracting market capital,” said Zheng Sien, Senior Researcher at the Equity Research Department of China Europe Fund.

A related analyst from CITIC Prudential Fund further explained that the emergence of HALO trading reflects a re-pricing of certainty and scarcity related to AI.

He elaborated that first, panic about AI disrupting light-asset industries has driven funds toward entities with tangible asset barriers and slow technological iteration, such as power grids, oil and gas, and non-ferrous metals. Second, AI development creates rigid demand for physical assets, especially heavy infrastructure.

Third, global supply chain restructuring and geopolitical risk premiums have intensified the scarcity of critical resources like oil, gas, and minerals. Fourth, in a high-interest-rate environment, cash flow preferences have increased; as global funds have historically flowed into light-tech stocks, investments in physical assets like mines, power grids, and refineries have been insufficient. Companies with existing assets and immediate cash flow—offering high dividends and stable cash flows—are favored by the market.

Some institutions even compare HALO strategies to “physical foundations” and “safe harbors” in the AI era. Does this imply that the long-term logic behind HALO trading is well-supported?

A CITIC Prudential Fund representative believes that HALO trading has the potential to become a mainstream strategy, based on the irreplaceability of physical assets in the AI era and the balance between long-term defensive and offensive capabilities. HALO assets can withstand technological cycles and, with AI industry growth, evolve into assets with both value and growth attributes.

Chen Xianshun sees HALO trading as essentially a re-pricing of tangible hard assets under high interest rates and AI-driven restructuring cycles, focusing on barriers, low obsolescence, and perpetual cash flows—making it a long-term allocation strategy rather than a short-term theme.

How to Deploy HALO in the A-Share Market?

Given the high regard for HALO trading by top international investment banks, is there room for its development in the A-share market?

Looking at the performance of related assets in the A-share market, Wind data shows that as of March 10, the indices for Shenwan Petrochemicals, coal, non-ferrous metals, basic chemicals, electrical equipment, and utilities have all gained over 10% since the start of the year, leading the Shenwan first-level industry indices.

Specifically, Shenwan Petrochemicals, coal, and non-ferrous metals have increased by 22.82%, 19.59%, and 18.55%, respectively. Basic chemicals and electrical equipment rose by 16.96% and 13.53%.

Zheng Sien believes that, domestically, the risk of AI technology disrupting traditional knowledge-intensive enterprises also exists, so the HALO trading logic observed overseas could be reflected in the Chinese market.

He notes that HALO assets are characterized by heavy assets and low obsolescence, and in the A-share market, such assets are mainly found in upstream resource extraction, midstream chemicals, metal smelting, and utilities.

Furthermore, the same CITIC Prudential Fund analyst pointed out that HALO strategies are suitable for the A-share market, which has a substantial reserve of global-leading HALO assets (such as manufacturing, energy, and non-ferrous metals).

He analyzed that these can be grouped into four major sectors: first, energy and electricity—driven by AI data center energy consumption, with rigid demand in power; second, monopolistic resources and materials—driven by increased demand for basic materials due to AI and energy transition, including copper, aluminum, and rare earths. Upstream resources tend to have monopolistic characteristics, slow technological iteration, and include sectors like non-ferrous metals, coal, and basic chemicals.

Third, infrastructure and utilities—based on irreplaceable rights of way and municipal needs, with stable demand, strong inflation resistance, including sectors like rail transport, water utilities, and public services. Fourth, communication infrastructure—driven by 5G, 6G, and data transmission nodes, operating on a “rental” model with rigid demand, including telecom towers and data center infrastructure.

Additionally, related to AI development, Qianhai Open Source Fund categorizes HALO assets into “defensive” and “offensive” types. Defensive HALO assets’ core value lies in their resistance to disruption, including energy, basic materials, utilities, transportation, and defense industries. When tech stocks are overvalued or market volatility increases, funds tend to flow into these “safe havens.”

Offensive HALO assets’ core value is that “as AI advances, demand grows stronger,” mainly in industrial metals, electrical equipment and grids, oil transportation, and logistics. Qianhai Open Source Fund believes these assets combine the “hard asset” properties of HALO with the benefits of AI growth, making them a balanced choice for both offense and defense.

From a global resource demand perspective, Wanguo Fund believes that Chinese assets may hold unique value under the HALO investment paradigm.

“Looking ahead, the restructuring of global manufacturing capacity, expansion of AI industries, and increased global capital expenditure will create long-term demand for physical consumption. China, with its complete manufacturing system, large infrastructure stock, and leading resource capacity, will stand out under the HALO narrative,” the firm stated.

From an investment perspective, Wanguo Fund reminds that the “counter-narrative” of HALO is not an opposition to the AI revolution but a hedge and symbiosis with its social and economic impacts. Essentially, it involves anchoring investments in areas with resilience against disruption or spillover expansion opportunities during the process of technological “creative destruction.”

Avoiding False Heavy Assets and Cyclical High Targets

While HALO assets are experiencing valuation reassessment, investors should also be cautious of risks.

A CITIC Prudential Fund representative advised that deploying HALO assets requires avoiding “blind following,” focusing on valuation rationality, industry prosperity, and policy guidance.

Specifically, first, it is necessary to consider A-share characteristics, avoiding simple replication of U.S. logic, and adjusting deployment according to domestic policy regulation and demand recovery; second, be aware of sector volatility risks, avoid chasing high prices, as many HALO assets are cyclical stocks; third, maintain balanced allocation, avoiding over-concentration in HALO assets; and fourth, monitor policy and geopolitical risks, as sectors like energy and non-ferrous metals are sensitive to policies (such as environmental and energy policies) and geopolitical conflicts, requiring timely adjustments.

Zheng Sien emphasizes that deploying HALO assets should focus on whether the assets have low obsolescence over the long cycle. For example, traditional coal-fired power units are heavy assets, but with ongoing advances in renewable energy and stricter global carbon standards, they may face new challenges in the long term.

Wanguo Fund also notes that prices of some bulk commodities and intermediate products have surged significantly, and high prices may lead to volatility. It is important to watch for the resonance between price prosperity and performance realization. Long-term technological disruptions, or “gray rhinos,” could impact the underlying logic of some HALO assets.

Additionally, Chen Xianshun reminds that structural differentiation in the economy and interest rate cycle shifts are fueling the hype around HALO trading. While it may not dominate the entire market, it can serve as a defensive core holding in institutional portfolios.

“Chinese A-shares are naturally compatible, with a high proportion of tangible assets, stable state-owned enterprise cash flows, and policy support for hard technology foundations, aligning closely with HALO logic. Current deployment can focus on three points: selecting high-barrier, high-dividend, low-capital expenditure leaders; avoiding false heavy assets and cyclical high targets; controlling positions as a hedge, and focusing on interest rates, policy pricing, and supply-demand patterns, with cash flow and dividends as core valuation anchors, while downplaying short-term thematic fluctuations,” Chen Xianshun concluded.