Sinolink: Attractiveness of Chinese assets is strengthening; recommend seeking defensive allocation along both macro and industry lines.

Sinolink released a research report stating that, considering the inherent stability of Chinese assets remains solid and recent efforts to stabilize policies have intensified, the attractiveness of Chinese assets is strengthening. Under AI deceleration, the path to lower capital costs has become clear: the first phase of impact comes from a synchronous decline in capital returns, while in the second phase the world will welcome opportunities. Some signs of earnings resilience and marginal improvement have already emerged, and it is recommended to seek defensive allocation clues along both macro and industry lines. Specific allocation recommendations: First, as U.S. real interest rates peak and decline, gold is expected to see opportunities; subsequently watch whether the intensity of U.S.-Iran geopolitical tensions picks up again, though a medium-term bottom is being established. Second, for the energy chain (coal, oil, oil shipping), after the short-term price decline and the stress-test period, it will continue to benefit from global restocking demand for energy; in fact, the energy chain itself is a resilient asset under capital cost volatility and geopolitical conflict. Third, from an earnings perspective, recommend focusing on: continued high prosperity: medical services, shipping ports, and sub-sectors within nonferrous metals and chemicals; turnaround reversal strategy: sub-sectors within textiles and apparel, as well as papermaking, refining and trading, medical devices, express delivery, dairy products, etc. Sinolink's main views are as follows: Global computing power begins a synchronous pullback This week (November 2 to November 6, 2026, same below), volatility in the U.S. stock market increased significantly. Affected by the midterm election results, with the Democratic Party completing a "sweep of both chambers," the market began to reassess the policy risks facing AI data center expansion after the U.S. midterm elections, and the AI computing power chain suffered concentrated selling. The Philadelphia Semiconductor Index on Thursday at one point recorded its second-largest historical decline, and with panic spreading, global risk assets came under significant pressure, while safe-haven assets such as gold and U.S. Treasuries rose. From the perspective of policy risk alone, tighter regulatory scrutiny of data centers has long crossed party lines, with the difference lying more in the scope and degree of restrictions involved; by comparison, Democrats are stricter, with more candidates supporting bans or moratoriums. The fundamental reason for the sharp market reaction may still be that in the previously released third-quarter reports of cloud vendors, the pace of realizing AI-related profits and cash flow struggled to match the expansion of capital expenditures, and the core contradiction between future investment returns and financing sustainability remains unresolved. Coupled with the slowdown in the second derivative of capital expenditure expectations among core cloud vendors (META, Microsoft, Google, Amazon, and Oracle, same below), any potential downward revision risk is easily interpreted by the market as a signal that the hardware prosperity cycle has substantially peaked, and after the midterm results, the Democratic Party's "landslide victory" further intensified this concern, ultimately triggering comprehensive risk aversion in the market. The U.S. AI siphon effect weakens, the peak in interest rates is basically confirmed, and room for decline needs observation Objectively speaking, what is happening now is still mostly a change at the level of market expectations. Considering that, as the main driver of U.S. economic growth over the past two years, AI data center construction itself has strong job and income creation capacity, it is therefore still necessary to closely track the substantive implementation of the policies of those elected and the final return rates of cloud vendors' data center projects after new reviews and cost-sharing arrangements are completed. As for a new round of trending gains in the AI trade in the future, what may be more important is whether new application scenarios can emerge or evidence of broader penetration into various macro industries can appear, driving up investment returns and ultimately completing a positive cycle of "cloud business growth cash flow repair capital expenditure expansion." For U.S. Treasury yields, expectations for slower AI capital expenditures have further strengthened; however, October U.S. manufacturing PMI and nonfarm payroll data show that the current U.S. economic fundamentals remain resilient, and with oil prices at high levels, short-term room for decline still needs observation. A rapid decline in interest rates still requires waiting for substantive signals of a rapid contraction in AI financing or a pullback in oil prices after a major U.S.-Iran easing. The end of the strong dollar, Chinese assets show resilience amid volatility Despite overseas disturbances, this week, through the joint efforts of stabilizing capital entering the market, market buybacks, and other forces stabilizing the capital market, combined with inherently lower valuation levels on a cross-market basis and a certain degree of decoupling from the U.S. AI industry chain, A-shares and H-shares showed some resilience. The CSI 300 ended 12 consecutive weeks of declines, while the Hang Seng Index/Hang Seng Tech rose 5.1%/8.6% for the week, outperforming major global markets. This round of global AI deceleration, from a long-term perspective, weakens the ability of U.S. dollar assets to attract global capital, and for non-U.S. assets it is a medium-term positive, with Chinese assets being an important choice among them; therefore, one should not be pessimistic in the long term. From the perspective of market breadth, whether for all A-shares or within tech stocks, this week both showed a rebound from the bottom, and under A-share resilience, market breadth improved marginally. Combined with the trading indicators we have continuously tracked previously: As of Thursday this week, the margin financing guarantee ratio was 262.6%, rebounding from last Friday's low of 245.56%. However, considering that A-shares also fell on Friday amid overseas market volatility, if Friday's market adjustment is taken into account (assuming other conditions remain unchanged, calculated based on the 1.86% decline in the Wind All A), then Friday's margin financing guarantee ratio may have fallen to around 257.7% from Thursday. The current implied volatility of the market remains at a high level. At present, the implied volatility of the STAR 50, ChiNext Index, and CSI 1000 has further risen to percentile levels above 95% over the past three years, while last Friday it was at percentiles above 90% over the past three years.