Guosen: The global asset allocation logic is undergoing a shift; the macro narrative is transitioning from valuation repair to profit realization.

Guosen released a research report stating that stocks > commodities > bonds. The current global asset allocation logic is undergoing a profound shift, with the macro narrative transitioning from valuation repair to profit realization. Equity assets are being driven by the expansion of US stock profit margins, the storage cycle of Korean stocks, and the significant advantage of the bond-to-stock ratio in A-shares, with strong upward elasticity. Commodities benefit from AI-driven resource pricing restructuring and are expected to perform well in the medium to long term. The bond market is constrained by the fiscal premium of US bonds and the rebound in risk appetite for Chinese bonds, weakening the defensive nature of the long end. Guosen's main points are as follows: Commodities: Transitioning from real estate and infrastructure to computational power and electricity, restructuring the logic of commodity pricing. Currently, global commodities are showing strong upward momentum, with fundamental changes in logic occurring behind the scenes. The traditional pricing power of industrial metals such as copper and silver is weakening, deviating from the trend of PMI, reflecting a decoupling of the global economy from old dynamics to new quality productivity. The AI industry follows a new path of "computational power expansion - electricity demand - resource consumption," with large-scale hardware construction providing rigid support for electrical and thermal materials. In addition, physical hoarding demand triggered by trade protection expectations and the "safety premium" brought about by geopolitical factors endow commodity currencies with risk-hedging properties. In the long term, demand elasticity has systematically increased, and despite short-term pressure for excessive price increases, the long bull market for commodities remains stable. Bond Market: Chinese bonds see a fluctuating recovery on the long end, US bonds focus on fiscal risks. In terms of Chinese bonds, the slowdown in macroeconomic growth momentum supports the bond market, but the historical low level of long bond spreads needs to digest valuation, coupled with the strength of the equity market leading to an increase in risk appetite and the release of pressure from the January issuances of long bonds, the momentum of the long end varieties is under short-term pressure, showing a fluctuating recovery trend. As for US bonds, there is a divergence in macro data, with the resilience of the service industry delaying expectations of interest rate cuts. Trump's directive to purchase $200 billion in MBS as a type of QE measure has substantially raised long-term inflation expectations, focusing on fiscal dominance risks. It is recommended to strictly control long-term risk exposure strategically adopt a "short duration + steepening" strategy, and hedge sticky inflation with TIPS. A-shares: Policy guiding the transition from "crazy bull" to "slow bull," profit momentum expanding from individual points to broader areas. Measures to reduce leverage such as raising the margin requirement have clearly signaled the regulatory shift towards a "slow bull" market, with short-term corrections not changing the medium to long-term upward trend. The comparison of major asset classes shows that the A-share dividend yield relative to bond yields is at an extremely high level of 7% since 2005, making it highly attractive in terms of cost effectiveness. The bull market is entering its second phase, with fundamental improvements shifting from point-wise recovery represented by the Sci-Tech 50 to a broader industry. With the implementation of anti-convergence policies and systemic interest rate cuts, it is expected that by 2026, the net attributable profit to shareholders of the entire A-share market (excluding financials) will substantially increase by 10% year-on-year, shifting the market logic from simple valuation repair to dual-drive of performance and valuation. US stocks: AI efficiency dividend realized, profit margin expansion solidifying the bull market base. The outlook for US stocks in 4Q25 earnings season is optimistic, with Bloomberg forecasting a 20% increase in 4Q25 earnings, significantly higher than market consensus. The core lies in the substantial realization period of AI technology application for cost reduction and efficiency enhancement, with giants such as Amazon and IBM optimizing cost structures through AI, driving a stepwise increase in operating profit margins. Although valuation premiums still exist, the optimization of profit quality by improving efficiency of businesses solidifies the foundation of the bull market. As profit momentum spreads from the "Tech Fab Five" to second-tier technology and energy sectors, US stocks demonstrate strong resilience. Future market trends will rely more on the continuous expansion of profit margins rather than simple multiple expansion of valuations. Japanese and Korean stock markets: Structural transformation of Japanese stock profits, Korean stocks enter a super cycle of memory chip storage. Japan and South Korea as important pillars of the Asian technology chain have both recorded significant upward revisions in profit prospects. The Japanese stock market benefits from governance reforms and benign inflation cycles, with profit margins for large companies expected to climb to historical highs of 9.4%, despite the high forward PE ratio of nearly 24 times for the Nikkei 225, strong EPS upgrades continue to provide a safety cushion. The South Korean stock market is directly benefiting from the super cycle of AI memory chips, with profit expectations rising by nearly 30% since the second half of 2025, leading the emerging markets. The explosive increase in foreign investment in the South Korean semiconductor sector reflects the global funds' reinvestment within the AI hardware industry chain, with South Korean stocks becoming a new growth engine for Asian technology. Risk warnings: Uncertainty in the pace and extent of overseas monetary policies; geopolitical and trade disruptions; unexpected tightening of liquidity; technical valuation bubble retracement.