September portfolio strategy should revolve around three core themes, with a defensive base built on dividend-paying, high-yield low-volatility assets alongside gold as a hedge against stagflation. For structural offense, attention turns to A-share resource plays and hard tech names with strong earnings visibility, while on the US equity side, the focus shifts from crowded hardware bottleneck trades toward cloud vendors, software applications, computing power leaders, and semiconductor equipment makers. In other words, dollar-liquidity-sensitive assets may present opportunities this month, while caution is advised against chasing Chinese long-duration bonds and maintaining a wary view on long positions in domestic-demand growth sectors. The implied allocation hierarchy places gold, copper, and resource-dividend assets at the top, followed by US software applications, cloud vendors, and computing power equipment, with long-end bonds, domestic-consumption equities, and aluminum in commodities warranting a more guarded stance.
July-August Asset Performance: A Rebalancing of Extreme Moves
Asset performance in July and August largely mirrored a correction of the extreme tech rally and overly bullish dollar-liquidity expectations seen in May and June. Overseas, capital rotated from equities into commodities, while domestically it shifted from stocks into bonds. Within US equities, the rotation moved from hardware to software, and in China's A-share market, from tech into dividend plays. Expectations around domestic policy stimulus and overseas inflation control were mere distractions rather than the driving narrative for assets.
September Macro Trends: Three Key Determinants 鈥?Tech Industry, Geopolitical Risk Appetite, and Dollar Liquidity
Whether tech can reclaim its role as the primary market leader hinges on industry trends, which warrant continued monitoring. A key factor for risk appetite in both US and Chinese equities this month is the potential leaders' meeting, with attention on post-meeting developments in Sino-US tech cooperation and Middle East geopolitics. Late August saw the market price in a possible Fed rate hike, but our assessment is that a September hike is unlikely; as the market transitions from hiking expectations toward easing trades, liquidity-sensitive assets stand to benefit. While consensus holds that US-Iran relations will remain in a "hit-and-talk" limbo without substantial progress ahead of midterm elections, we believe the underlying friction cannot be resolved. Watch for any surprises in Middle East developments this month, as they relate to oil and gas opportunities and could determine whether liquidity assets face an external shock.
The September portfolio strategy can be built around three main lines. The defensive foundation consists of dividend and high-yield low-volatility assets, plus gold for stagflation hedging. For structural offense, A-share resource plays and hard tech with strong earnings certainty are favored, while US equities should pivot from crowded hardware bottleneck trades toward cloud vendors, software applications, computing power leaders, and semiconductor equipment. In essence, dollar-liquidity-sensitive assets may see opportunities in September. On the cautious side, avoid chasing Chinese long-duration bonds and maintain a guarded outlook on long positions in domestic-demand growth sectors. The implied allocation ranking places gold, copper, and resource-dividend assets first; US software applications, cloud vendors, and computing equipment second; while long bonds, domestic-consumption equities, and aluminum in commodities warrant caution.
September Macro Assessment: Restrained Domestic Policy, Overseas Variables as the Swing Factor
After weaker-than-expected economic and financial data from January to July, markets have been anticipating countercyclical policy within the year. However, we assess the probability of another round of strong countercyclical stimulus as very low. First, the likelihood of aggressive consumption and property stimulus measures is slim. The property policy announced at the end of August is fundamentally about industry transformation, signaling a definitive break from the financialized real estate model, which implies that the strong domestic-demand support some expected is unlikely this year. Second, the year will likely focus on improving the efficiency of previously allocated funds, and with the slower pace of government bond issuance in the January-July period, there remains room for year-end spending efficiency, making additional bond issuance unlikely. Third, the probability of broad-based RRR cuts or rate reductions is low, as monetary policy operations shift from aggregate injections toward maturity matching and refined control, with the central bank using short-term tools to smooth funding gaps; aggregate liquidity is not lacking, so the necessity and likelihood of September cuts are both limited. Fourth, should incremental policies emerge, they would likely target the "six networks" of investment, with possible marginal acceleration in fiscal spending, but under local debt constraints, debt-resolution priorities, and stricter transition-period discipline, incremental funds are expected to flow mainly into tech infrastructure and livelihood sectors, unlikely to form traditional infrastructure-style strong stimulus.
The core contradiction in the overseas environment is the trade-off between supply-side inflationary pressures and cooling employment, with attention on the probability of liquidity expectations turning from tight to loose and key event variables. Food, energy, and geopolitical risks could raise tail risks for inflation, but such inflation stems more from supply-chain fragility than demand overheating. If US employment weakens further, the Fed's policy focus may shift back from inflation to employment, potentially driving marginal improvement in dollar liquidity expectations. The September FOMC meeting, the Sino-US leaders' summit, and US-Iran and Russia-Ukraine situations are the primary event variables influencing global risk appetite, dollar rates, and commodity prices.
China Bond Outlook: Fundamentals Still Supportive, but Chasing Gains Offers Poor Odds
August saw the policy-easing-driven rally in long-duration bonds come to an end. Long-end yields initially fell then rose, with 10-year and 30-year government bond yields touching yearly lows of 1.68% and 2.12%, respectively. Late-month reversals were driven by scaled-back MLF rollovers, stronger equities, and profit-taking by trading desks, with 30-year paper correcting more than 10-year. Ultra-long bond dynamics have shifted from being fundamentally driven to being led by policy expectations, institutional behavior, and the stock-bond seesaw. Looking to September, expectations for RRR cuts and rate reductions may continue to disappoint, and combined with government bond supply, quarter-end funding pressures, and profit-taking by trading desks, the odds of chasing long-end gains have diminished. Allocation desks should still provide a floor of support, but there is a lack of catalysts to push yields into a sustained downtrend. We expect the 10-year yield to trade in a 1.67%-1.75% range, with a midpoint around 1.71%-1.73%, and the 30-year yield between 2.10% and 2.22%. The strategy should avoid extending duration.
A-Share Outlook: Limited Systemic Risk, Watching Tech News, Leaders' Meeting, and Fed Moves
August saw a structural repair rally following July's sharp losses, characterized by pronounced zero-sum trading and a sluggish recovery in turnover. Daily combined turnover in Shanghai and Shenzhen at one point contracted to RMB 1.8 trillion, a cyclical low, indicating weak willingness from incremental capital to enter. Style-wise, a mirror-image repair emerged, with growth sectors that had undergone deleveraging and valuation compression in July rebounding, while dividend-value sectors that had held up well earlier corrected in tandem. At the industry level, an "AI hardware + resources" dual-track emerged, with nonferrous metals, electronics, oil and petrochemicals, coal, and communications leading gains, while food and beverage and other domestic-consumption sectors lagged.
For September, there is no systemic risk on the horizon, and elasticity will depend on dollar liquidity and the strength of tech trends. Market liquidity remains broadly stable and ample, with clear national team support, and there is no systemic bear-market risk. The Shanghai Composite Index is expected to trade in a core range of 3,900-4,100 points, with the market continuing its pattern of shrinking volume and declining volatility, with returns coming more from sector rotation than index beta. If tech lacks further positive catalysts, a barbell structure of "dividend defense + tech elasticity" is advisable, with dividend, high-yield, and low-volatility assets serving as the base, and resource plays remaining a key rotation direction. The tech sector needs a catalyst from Fed policy, Sino-US relations, or industry events to boost risk appetite, with opportunities concentrated in hard-tech leaders with strong earnings delivery and high cash-flow quality, rather than broad valuation expansion across the sector. Dividend assets still offer absolute returns and base-portfolio value, but after the July-August rally, near-term odds have deteriorated, making September more suitable for holding rather than adding.
Hong Kong Stocks: Southbound Capital Sets the Floor, Overseas AI Sets the Ceiling
August saw overseas AI hardware rebounds create capital diversion, with southbound support limited and Hong Kong equities edging lower. Global capital continued to concentrate in high-growth tech assets, creating a drainage effect on Hong Kong. Meanwhile, southbound net inflows slowed, which, while providing a floor for the index, was insufficient to drive a sustained rally. For September, overseas AI determines the upside while southbound capital determines the downside. If US AI hardware resumes a trend-like advance, Hong Kong equities, especially Hang Seng Tech, will face continued capital outflows. If overseas AI stays rangebound or cools, southbound capital should provide support, making a double-bottom scenario less likely. The Hang Seng Index is expected to trade between 24,800 and 26,500, with the Hang Seng Tech Index between 4,400 and 4,900.
US Equities: AI Leadership Shifts from Hardware Bottlenecks to Compute Leaders and Software
August's key development was the leadership shift within the AI trade from hardware to software. Semiconductor sentiment cooled, with the Philadelphia Semiconductor Index falling 21.6% from its June 22 peak, and storage and optical module segments, which had led gains, retracing 40-50% from highs. Software ETFs rose 20.9% over the period, including 15.8% in August alone. The hardware-pricing narrative has loosened for several reasons: markets have turned negative on capital expenditure scale, smart commoditization and Chinese large-model price competition emerged, domestic equipment breakthroughs challenged the "bottleneck pricing" story, and deleveraging amplified the decline. Looking to September, the previous hardware supply-bottleneck and pricing-power trade has become overly crowded, with value likely migrating along the chain toward hyperscale cloud vendors, software platforms, and end-user applications. Within hardware, we favor computing power leaders and semiconductor equipment, expecting rotation from "bottleneck pricing trades" toward compute leaders and equipment, as capacity expansion represents the next certainty in the hardware chain. After first-half outflows from Nvidia, Broadcom, and other compute leaders, a catch-up rally is possible in the second half. Semiconductor equipment also deserves attention, with the global equipment market projected to grow 35% in 2026 and accelerate to 45% by 2027. We also expect hyperscale cloud vendors and a basket of software applications to outperform on a relative basis. The "SaaS doomsday" narrative was systematically corrected in late August; what AI threatens is single-vertical process software, while proprietary software with unique data or regulatory certainty is precisely a scarce asset in the agent era. A significant portion of the previous software short interest was "funding shorts" 鈥?where long positioning required liquid short hedges 鈥?so short covering explains the speed of the rebound, while fundamental corrections will determine the sustainability of the software rally.
US Treasury Outlook: Rates That Won't Come Down, Volatility Tied to US-Iran and Sino-US Summit
The factors behind the five-year bear market cannot be alleviated in the short term. Western economies' bond bear market, now in its fifth year, is rooted in a fractured global order, where inflation cannot be controlled amid supply fragility. Under these conditions, the rollover of high legacy debt eventually makes debt pressures transparent. There is currently no sign of the bond bear market ending. Whether US Treasuries turn more bearish or improve marginally depends on two things. A more bearish outcome would stem from supply-side factors pushing inflation higher, such as worsening US-Iran conflict, uncontrolled oil prices, or El Ni帽o-driven food price increases. Marginal improvement would come from Fed monetary easing, potentially even quantitative easing.
Commodities Outlook: Gold and Copper Remain the Main Lines, Copper Better Than Aluminum, Oil and Gas Event-Driven
August saw clear recovery across gold, copper, and aluminum, in that order of performance. Gold was supported by US fiscal credit risk and rising term premiums. Copper was driven by regional inventory dislocation from US tariffs and spot market tightness. Aluminum was lifted by Middle East supply disruptions, though the sustainability of its rally was relatively weak. For September, commodities remain supported by monetary credit risk, supply-chain security concerns, and geopolitical disturbances, with gold and copper prioritized over oil and gas. Gold's medium-term upward logic remains intact, but a transition from valuation repair to a new trend rally still requires confirmation from actual monetary easing and sustained net inflows into North American gold ETFs. Among industrial metals, copper's long-term industrial logic is superior to aluminum. Copper demand is shifting from the property cycle toward electrification, power grids, and new energy vehicles, presenting a favorable long-term supply-demand structure. Aluminum requires observation of whether Middle East production cuts, transport disruptions, and inventory declines can form substantive supply contraction. Oil and gas assets are primarily driven by geopolitical conflict and rank below gold and copper in allocation priority.
RMB Exchange Rate Outlook: Appreciation Bias Persists, but Space Constrained by Policy
August saw fiscal credit risk weaken the dollar, with the RMB continuing to appreciate toward 6.70. The foreign exchange market was primarily driven by yen and Treasury risk, with the dollar weakening notably. The RMB strengthened further, with spot rates trading significantly stronger than the fixing. The correlation between RMB movement and the dollar index has declined, with more influence now from China's supply-chain advantage revaluation and central bank adjustment pace. For September, the dollar is expected to remain rangebound and soft given the Fed's dovish stance, while the RMB faces increasing intervention, making it difficult to break meaningfully above 6.70. With a soft dollar and repricing of China's supply-chain advantages, the RMB retains appreciation momentum, but policymakers do not want rapid, one-way appreciation expectations to form. As USD/CNY approaches 6.70, exchange-rate stabilization operations may strengthen. The dollar index is expected to trade between 98.5 and 100.5, with a month-end midpoint near 99; USD/CNY is expected to trade between 6.70 and 6.75, with strong policy resistance around 6.70.
Four categories of variables require close tracking in September. First, the Fed's FOMC meeting and US employment and inflation data will determine global liquidity pricing. Second, the Sino-US leaders' summit and progress in economic, trade, and tech areas will determine risk premiums for the RMB and Hong Kong/China equities. Third, US-Iran and Russia-Ukraine conflicts and oil price movements will determine inflation tail risks and the performance of US Treasuries and gold. Fourth, domestic fiscal spending, government bond supply, and monetary policy operations will determine the relative performance of Chinese stocks and bonds. If the Fed turns hawkish again or geopolitical conflict drives oil prices out of control, the current baseline scenario of "stable liquidity and rangebound risk assets" could be broken. Conversely, if the Fed delivers clear easing signals and Sino-US relations improve marginally, tech growth, Hong Kong equities, and the RMB could see stronger risk-appetite repair.
Analyst disclosures include Zhou Junzhi, PhD in Economics from Zhejiang University, currently Chief Macro Analyst at China Securities, with multiple industry awards including Wind Gold Analyst and New Fortune macro rankings; Chen Yi, Hong Kong University of Science and Technology economics master's, covering domestic real economy, inflation, and commodities; Jiang Jiaxiu, Shanghai University of Finance and Economics undergraduate and Peking University master's, covering overseas macroeconomy, policy, and liquidity, with prior experience at BNP Paribas Global Markets and Northeast Securities; Wu Bin, Chinese University of Hong Kong (Shenzhen) economics master's, focusing on exchange rates and global liquidity; Xie Yuxin, Southwestern University of Finance and Economics economics PhD with Texas A&M visiting scholar experience, covering property, exports, and manufacturing investment; and Fu Siyu, Chinese University of Hong Kong master's, researching global fiscal and domestic bond market liquidity.
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