On Monday, both major stock indices continued their upward trend, with sectors like commercial aerospace and lithium showing strong performance, further enhancing market profitability. The market is gradually becoming desensitized to the Middle East conflict. In March, the conflict significantly impacted market sentiment, causing many investors to lose confidence. At that time, I participated in a live dialogue with Professor Liu Jipeng, clearly stating that the Middle East conflict would only affect short-term market rhythms and would not alter the slow-bull and long-bull trajectory of the A-share market. This perspective greatly boosted market confidence. As the conflict nears its end, and with Trump potentially ending the war in April due to domestic pressure—consistent with my earlier prediction—the situation has largely been validated. Although the Strait of Hormuz has seen repeated blockades and reopenings recently, the most intense phase of the conflict has passed, with involved parties showing intentions to withdraw, thereby reducing the conflict's impact on the market. The ChiNext Index recently hit an 11-year high, posting substantial gains, while the Shanghai Composite Index has firmly held above the 4,000-point mark.
Non-ferrous metals were the best-performing sector last year, even outperforming technology stocks. The strength in this sector reflects investor optimism about the value of resources in the AI era. I previously introduced the investment concept of "HALO assets," suggesting two main investment themes this year: technological innovation and HALO assets. Technological innovation represents industries poised for major development in the AI era, while HALO assets signify the resources and energy essential for this era, including non-ferrous metals, oil, coal, power, and power equipment stocks. These are indispensable infrastructure components for the AI age. Among non-ferrous metals, copper has stood out as a major performer, while minor metals like lithium, tungsten, and nickel have also shown strong momentum. Recently, lithium carbonate prices have surged significantly. Lithium, often referred to as "white petroleum," owes its strategic importance to its chemical properties and irreplaceability. As the third element on the periodic table, lithium has the simplest atomic structure and the highest energy density among all metallic elements. It can complete charge transfer by losing just one electron, offering far superior energy storage and transmission efficiency compared to other metals. In modern industrial systems, lithium is the optimal carrier for large-scale electrochemical energy storage. Whether in new energy vehicles, energy storage power stations, drones, the low-altitude economy, or various portable power sources, all rely fundamentally on lithium batteries. In contrast, sodium, zinc, and hydrogen fuel cells have significantly lower energy densities than lithium batteries, especially in applications demanding high endurance, lightweight design, and compact size, such as new energy vehicles, humanoid robots, high-end equipment, and long-duration energy storage. Lithium batteries remain the best choice, underscoring lithium's strategic value as a foundational energy material in the electrification era.
Recently, lithium mining concept stocks have risen noticeably, driven by both demand growth and supply constraints. Lithium battery production has entered its peak season, with demand consistently hitting new highs. Coupled with reduced lithium supply and low inventory levels, lithium prices have potential for further increases. As electric vehicle market penetration continues to rise—currently exceeding 50% in China, meaning more than half of all vehicles sold are electric—future demand for lithium resources is set to grow steadily, contributing to the recent rally in lithium mining stocks. Cobalt is another essential element in lithium batteries, enhancing stability and reducing risks of explosion or fire. Although cobalt-free technologies have been developed, they fall short in stability compared to cobalt-containing batteries, making cobalt another strong performer this year. Tungsten is indispensable in super-hard materials and has extensive applications in the military sector. Last year, tungsten prices surged sixfold, reflecting a sharp rise in demand against limited supply. Overall, the non-ferrous metals sector still holds significant allocation value.
In the AI era, computing power is a critical demand. Future competition between nations can be summarized as a contest of "two powers": computing power and electrical power. The development of computing power is inherently dependent on electricity. During the 15th Five-Year Plan period, China plans to invest over 4 trillion yuan in grid equipment, a sector that has performed well this year. The demand for computing power is projected to be enormous. A specific term for "Token" in AI has been coined, translated into Chinese as "词元" (word element). Data shows that China's word element usage is growing at an astonishing rate: from 100 billion daily calls at the beginning of 2024, to over 100 trillion by the end of 2025, and reaching 140 trillion by March 2026—a more than thousand-fold increase in two years. This exponential growth validates the transition of AI applications from simple dialogue tools to intelligent agents with decision-making capabilities. At the 2026 GTC conference, Jensen Huang introduced "Token Economics," defining data centers as factories producing AI word elements. Computing power and algorithms have been standout sectors in recent years, supported by solid fundamentals. As one of the most beneficiary directions in the AI era, after a period of adjustment, this sector may see renewed upward momentum this year. In the age of artificial intelligence, computing power and algorithms form the foundation for AI development and represent areas with the highest potential for volume growth, warranting close attention from investors.
Market performance in April has aligned with earlier expectations, exhibiting a "barbell" structure: one end consists of technological innovation sectors prioritized under the 15th Five-Year Plan, such as chips and semiconductors, artificial intelligence, computing power and algorithms, embodied AI, controllable nuclear fusion, and commercial aerospace; the other end comprises sectors with high certainty and strong earnings, like non-ferrous metals, chemicals, and coal, which also serve as AI era infrastructure. Additionally, the chemical fiber sector has seen continuous gains recently, with several stocks posting consecutive advances. The rally in chemical fibers is driven by both short-term cyclical factors, such as price surges, and long-term growth logic tied to AI computing power demand. Against the backdrop of rapid AI computing power development, demand for chemical fibers is expected to rise significantly, categorizing this sector as a capital-intensive, low-elimination-rate HALO asset. Recent increases in international oil prices have also provided substantial support for chemical sector prices. Both chemicals and chemical fibers are integral to AI era infrastructure, representing industries with tangible future demand, and should be closely monitored.
Finally, investors are advised to pay attention to the Hong Kong stock market. Over the past six months, Hong Kong stocks experienced significant adjustments, yet new listings remain active. Data shows that, as of April 16, 22 out of 41 new listings this year saw over a thousand times oversubscription in public offerings. The underlying significance of this oversubscription wave is that Hong Kong's valuation logic has undergone a profound transformation. Adjustments by the Hong Kong Exchange to Chapter 18C listing thresholds for specialized tech companies, allowing all companies to submit confidential applications, combined with demand from mainland tech firms expanding overseas, are accelerating the aggregation of high-quality tech assets in Hong Kong. Amid uncertain Middle East conditions, several Middle Eastern sovereign wealth funds have relocated to Hong Kong, establishing it as a safe haven for international capital. Overseas institutions are also turning bullish on Hong Kong stocks. Goldman Sachs noted that international investor interest in Chinese stocks may have reached a yearly high, with only about 10% of surveyed clients viewing Chinese stocks as non-investable, a significant improvement from roughly 41% two years ago. Despite Middle East geopolitical tensions and soaring energy prices, Goldman Sachs maintains an overweight recommendation on Chinese stocks, including A-shares and H-shares. Citigroup reports suggest that Middle East turmoil may prompt investors to reassess asset allocations, diverting capital and talent to Asian financial hubs like Hong Kong and Singapore. Currently, there is a stable premium between A-shares and H-shares, with the A/H premium index around 120%, meaning A-shares are priced about 20% higher on average than their H-share counterparts. This makes Hong Kong stocks attractive from a valuation perspective, and investors need not be overly pessimistic. With increasing foreign capital inflows, Hong Kong stocks are poised for new opportunities. Compared to global major capital markets, Hong Kong stocks remain undervalued, representing a valuation洼地 (low-valuation area) in the global landscape.
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