Guotai Haitong: Multiple factors support the performance of Chinese equities, suggesting tactically over-weighting gold and A/H shares.

Guotai Haitong released a research report stating that the trading enthusiasm for breakthroughs in Chinese technology and emerging industries continues to rise, stability in total policy expectations, and capital market system reform boosting market risk appetite, as well as the central downward trend in risk-free interest rates in mainland China and the loose adjustment of overseas Fed monetary policy, are favorable for supporting ample and stable liquidity. Currently, there is a surge in demand from Chinese society and investors for "finding assets", especially for high-quality assets with solid development logic. Against the backdrop of increased capital market volatility caused by changes in international geopolitical environment, the short-term performance of gold is expected to be positive, and the long-term allocation value of gold is also favored. The bank maintains its previous tactical asset allocation view and recommends tactically over-allocating gold and A/H shares, tactically allocating US Treasuries, national debt, and the Renminbi. Key points from Guotai Haitong: Multiple factors support the performance of Chinese equities, maintaining a tactical over-allocation view on A/H shares. The enthusiasm for trading in breakthroughs in Chinese technology and emerging industries continues to rise, stability in total policy expectations, and capital market system reform boosting market risk appetite. The central downward trend in risk-free interest rates in mainland China and the favorable adjustment of overseas Fed monetary policy are conducive to supporting ample and stable liquidity. On a tactical level, the boundaries of this trade risk are relatively clear, China directly hitting the key points of retaliation, the US tariffs after 100% have no practical significance, and face practical constraints. With stable domestic financial conditions, another side of the conflict is China's loose fiscal/monetary reserves; a stable capital market now plays a role in supporting the economy and society. Currently, there is a surge in demand from Chinese society and investors for "finding assets", especially for high-quality assets with solid development logic. Therefore, conflicts and trade disruptions in the external situation may provide allocation opportunities. Expectations of loose monetary policy may push actual interest rates in the US downward, maintaining a tactical standard allocation view on US Treasuries. Powell's loose monetary policy guidance is conducive to the market adjusting monetary policy and liquidity expectations, while regional bank defaults may catalyze this process. It is expected that global macro liquidity will gradually improve while the cooling economy will help to suppress intrinsic inflation stickiness and actual interest rates. The bank believes that US Treasuries have temporarily moderate risk-return ratios and tactical allocation value. The imbalance of credit supply and demand and ample stable liquidity still support the bond market, maintaining a tactical standard allocation view on national debt. The themes of "central bank buying bonds" and adjustments to bond redemption fees will continue to be played out. In the background of geopolitical uncertainty and rising risk aversion, domestic interest rates may fluctuate significantly high. Against the backdrop of expectations for loosening monetary policies overseas, China's central bank may take action to ensure ample and stable liquidity in the interbank market. Despite significant adjustments in the bond market earlier, the imbalance between financing needs and credit supply remains an objective reality, and marginal improvements in liquidity may help stabilize market sentiment. Under the assumption that the macro picture and policy orientation do not experience unexpected changes, market trends will depend more on institutional behavior and changes in liquidity, with the bond market expected to continue in a turbulent pattern, with periodic geopolitical events catalyzing its performance. Improvements in global macro liquidity and rising risk aversion may support the performance of gold, maintaining a tactical over-allocation view on gold. After gold broke through the $3500 resistance level at the end of August, its rise has been strong, and by early October, it had exceeded the key level of $4000. The Fed's interest rate cuts, combined with global geopolitical situations and China's continued gold purchases, will continue to provide strong support for gold pricing. Against the backdrop of increased capital market volatility due to changes in international geopolitical environment, the bank is optimistic about the short-term performance of gold, as well as the long-term allocation value of gold. The resilience of the Chinese economy and decreasing risks of extreme geopolitical conflicts support the Renminbi exchange rate, maintaining a tactical standard allocation view on the Renminbi. The Chinese economy is running steadily and positively, with stronger growth momentum compared to other major economies. Good capital market returns and improved economic expectations are expected to support the stable appreciation of the Renminbi exchange rate. In the increasingly complex global macro environment, the Renminbi exchange rate is expected to show a fluctuating trend with stable appreciation at its core. Risk warning: There are limitations in the analysis dimensions, subjectivity in model designs, deviations between historical and expected data, adjustments in market consensus expectations, and limitations of quantitative models.