CITIC SEC China Theme 2026 Second Half Investment Outlook: Global Pricing of High-Quality Assets in China

CITIC SEC released a research report stating that looking ahead to the second half of 2026, the Chinese economy will be reshaped by the spill-over of AI industry capital expenditure cycles and input-driven inflation, with strong export conditions and stable domestic demand. It is estimated that the real GDP for the full year will be around 4.7%. The more certain directions for the second half of the year in terms of asset allocation are basic metals, crude oil, and equity assets. In the equity market, attention should be paid to structural opportunities in the "AI+ energy" combination. In terms of bonds, the interest rate range in the bond market is expected to fluctuate and may be difficult to break. Key points from CITIC SEC: Asset Classes: It is expected that asset allocation in the second half of the year will shift from trading liquidity to the certainty of the inflation and profit cycles. Macro liquidity decline, high PPI levels, and corporate profit verification will be core constraints, and caution is advised when betting on assets benefiting from loose liquidity. Basic metals, crude oil, and Chinese and American equity assets are relatively more certain. The A-share market should continue to be viewed with a K-shaped differentiation mindset, with "AI+ energy" forming an offensive and stable barbell structure. Looking ahead in the long term, adapting to AI may gradually become the main theme and opportunity in the next stage, with the focus on solidifying and amplifying inherent comparative advantages. In terms of bonds, there is still value in Chinese bonds, but it may be difficult to break the interest rate range, and it is suggested to explore interest rate and riding opportunities in local government bonds, real estate, subordinated financials, overseas bonds, and green/innovation bonds. Macro and Policies: In the second half of 2026, the core of China's macro economy will be supported by AI external demand and input-driven inflation. AI-related exports, hardware components, and artificial computing storage demand will continue to support external demand and industrial prosperity, while geopolitical conflicts will drive up upstream prices. Domestic demand is expected to remain stable overall, with consumption maintaining a focus on "strong services, weak goods", low investment increasing, and the impact of the real estate sector converging. The annual expected real GDP growth is about 4.7%, nominal GDP growth is about 5.8%, and the central rate of the renminbi may be in the range of 6.7-6.8. On the overseas policy front, Sino-US relations are expected to remain stable throughout the year, and resilient competition in global resource energy, modern industries, trade routes, and currency and financial fields will continue to catalyze independence and control. Strategies: Looking ahead to the second half of the year, Chinese... (Translated text is too long for a single response, please continue in a separate message)