Huatai Securities: The Process of Revaluing Chinese Assets Has Just Begun

From June 4 to 5, Huatai Securities' 2025 Mid-Year Investment Summit was held in Shanghai. Themed "Seeking Certainty Amidst Order Reconstruction," the summit delved into the new logic of global order reconstruction and the revaluation of Chinese assets.

The two-day event comprised a main forum and 11 industry sub-forums, focusing on growth opportunities in sectors such as New Consumption 2, AI+, humanoid robots, and energy transition. Nearly 500 publicly listed firms were invited to participate in closed-door exchanges, attracting over 2,500 professional investors and institutional clients from public funds, private funds, banks, insurance companies, and publicly listed firms to register for the event.

Notably, the summit featured a special "China + Southeast Asia" sub-forum, exploring industrial breakthrough strategies and capital empowerment pathways amidst the reconstruction of trade order from an international perspective.

Experts such as Liu Yuanchun, President of Shanghai University of Finance and Economics, former Vice President of Renmin University of China, and co-founder of the China Macroeconomic Forum (CMF); Wu Xinbo, Dean of the Institute of International Studies at Fudan University, Director of the Fudan University US Research Center (a key humanities and social sciences research base under the Ministry of Education), and member of the Foreign Ministry's Foreign Policy Advisory Committee; Wei Shaojun, Professor at Tsinghua University, member of the National Advisory Committee for the Development of the Integrated Circuit Industry, Vice Chairman of the China Semiconductor Industry Association, and Chairman of the China JSTC of the World Semiconductor Council; and Siregar, Chief Economist of Indonesia's sovereign wealth fund Danantara, delivered keynote speeches on hot topics such as AI technological development, new logic in China's economy, and new policy approaches.

Exploring Certainty Opportunities Amidst Order Reconstruction in the Macro Context

In her opening remarks, Liang Hong, Chair of Huatai Securities' Institutional Business Committee, stated that in the face of prolonged trade conflicts, investors are eager to see how China will formulate new economic development strategies, promote broader and deeper economic reforms, and thereby increase residents' incomes and consumption willingness, as part of their expectations for the "15th Five-Year Plan."

Liang Hong suggested that investors should adopt a longer-term perspective to explore certainty opportunities amidst order reconstruction within macro contexts such as global order reconstruction, supply chain reorganization, and new directions in capital flows. This also represents the core logic for global investors to reevaluate the value of the RMB and RMB-denominated assets, particularly in China's competitive industries and high-quality enterprises.

The Huatai Research Macro Team conducted a roundtable discussion on current macroeconomic and market concerns.

Maintaining the Forecast of 5% Real GDP Growth in 2025

Amidst external disruptions, Huatai Securities' Macro Team maintains its forecast of 5% real GDP growth for this year. What policy and external environment assumptions underpin this forecast?What is the logical basis for the expectation of RMB appreciation?

Yi Huan, Chief Macroeconomist at Huatai Securities, stated that since April, the US tariff policy has been full of twists and turns, with uncertainties still remaining. However, on the whole, the impact of tariffs is relatively small compared to expectations at the end of last year.

Domestically, China's macro policies have shown notable highlights. The growth in fiscal expenditure for the entire year is expected to exceed the nominal GDP growth rate, surpassing market expectations. The accelerated development of the technology cycle, with new quality productive forces such as AI+ emerging as new highlights, has also alleviated the drag on the economy from the downturn in the real estate sector.

In addition, the depreciation of the US dollar has provided a boost to the development of emerging economies. From the perspectives of economic fundamentals and the repatriation of de-dollarization funds, the RMB has the momentum for appreciation, while the RMB's movement against a basket of currencies has remained basically stable. Under the trend of de-dollarization, RMB assets and the offshore RMB capital market will face structural opportunities for revaluation and expansion.

Asset allocation should abandon bear market thinking and emphasize trading and left-side positioning.

What are the key points for asset allocation in the second half of this year? The bond market is expected to maintain a fluctuating trend. What are the operational suggestions?

Zhang Jiqiang, Director of Huatai Securities Research Institute and Chief Fixed Income Analyst, stated that this year is a significant year for the macro cycle, with event-driven market trends being prominent and investors' allocations becoming more diversified and decentralized. In terms of asset allocation, investors should abandon bear market thinking, emphasize trading and left-side positioning, and focus on investment odds.

In bond investment, the core contradiction in the bond market in the second half of the year is the "lack of certainty" amidst multiple intersecting variables. It is highly likely to continue exhibiting characteristics of a fluctuating market, with many disturbances and difficulties in judging the rhythm. The 10-year Treasury bond rate is expected to fluctuate between 1.5% and 1.8%. Strategically, it is necessary to emphasize swing trading, duration adjustment, and selection of bond types.

The US stock market may face a concurrent downturn in three cycles.

Lin Xiaoming, Chief Financial Engineering Analyst at Huatai Securities Research Institute, conducted research and judgment on asset allocation and the style of the A-share market in the second half of the year from the perspective of quantitative models.

Lin Xiaoming pointed out that in the second half of the year, the global Kitchin cycle will enter a downturn phase, and the US stock market may face a concurrent downturn in the Kitchin, Juglar, and Kondratieff cycles. Against this backdrop, how to seek safe-haven assets amidst a liquidity crisis has become the key to asset allocation in the second half of the year.

Unlike previous cycle downturns where safe-haven assets performed well, in this cycle downturn, it is possible that shorts in risky assets will outperform longs in safe-haven assets. Due to the constraints of US fiscal issues on US Treasuries, they may not be ideal safe-haven assets during this downturn period. Against the backdrop of increasingly unclear global trade and fiscal prospects, the long-term allocation value of gold will become more prominent.

In the equity market, A-shares are likely to outperform overseas markets. It is recommended to adopt a barbell allocation strategy combining dividends and growth, and to pay attention to policy negotiation opportunities in the consumer sector.

The revaluation process of Chinese assets has just begun.

From a strategic perspective, given the expectation of RMB appreciation and the global de-dollarization process, will the pricing logic of A-shares change? What investment themes are worth paying attention to in H2?

He Kang, Chief Strategist and Co-Head of Financial Engineering at Huatai Securities Research Institute, stated that in the long run, the revaluation process of Chinese assets has just started. Against the backdrop of RMB appreciation and global de-dollarization, the expectation of foreign capital inflows has strengthened, and their preferences may dominate the pricing power of A-shares. Index-weighted stocks and companies with excellent fundamentals are likely to benefit, corresponding to the finance, consumer, pharmaceutical sectors, and industry leaders.

He Kang believes that multiple investment themes in the A-share market in H2 can be summarized as follows: After the trough of the real estate cycle, overlooked consumer demand and overlooked productivity improvements, especially capital expenditures in the high-tech sector, may gradually surface.

H-shares show greater resilience amid the revaluation of RMB assets.

This year, several top-tier enterprises have completed their H-share listings, injecting new vitality into the H-share market. Li Yujie, a strategy researcher at Huatai Securities, believes that factors such as Chinese enterprises going global, global reallocation driven by de-dollarization, and the internationalization of the RMB are highlighting the importance of the H-share market.

In the medium and long-term, the expansion of the H-share market implies a need for increased capital allocation. It is recommended to pay attention to two trend changes: First, the technology sector corresponding to improved growth prospects. Global capital is more overweight in US technology stocks but remains underweight in Chinese ones. Second, with improved liquidity, the AH premium is expected to narrow. Scarcity plays in industry leaders, large-cap stocks, and active stocks under the Stock Connect scheme are worth noting.

In the short term, external market disturbances may affect the performance of H-shares, but there are differences between Hong Kong and the US in terms of economic cycles and market positions. Moreover, H-shares show greater resilience amid the revaluation of RMB assets. The main driver of H-share performance in H2 may come from a "U"-shaped recovery in earnings.