In recent months, the HALO trading strategy—centered on "Heavy Assets and Low Obsolescence"—has gained popularity on Wall Street. Concerns over "rapid AI innovation disrupting asset-light business models" have driven capital flows from software segments to high-barrier, demand-inelastic sectors such as energy and utilities. Reflecting this trend in the A-share market, sectors including petroleum and petrochemicals, nonferrous metals, basic chemicals, and power have delivered strong performances since the start of the year. "The HALO logic aligns well with A-shares," noted Chen Xianshun, Chief Equity Strategist at Bosera Asset Management. He suggested that current positioning should focus on three key aspects: selecting industry leaders with high barriers to entry, generous dividends, and low capital expenditure; avoiding pseudo-heavy assets and cyclical stocks trading at elevated levels; maintaining strict position control as a portfolio hedge and refraining from chasing sentiment-driven premiums; and closely monitoring interest rates, policy pricing, and supply-demand dynamics, while using cash flow and dividends as core valuation anchors to downplay short-term thematic fluctuations. Analyzing the strategy itself, interviewed institutions explained that HALO trading essentially represents a repricing of tangible hard assets with certainty, emphasizing heavy-asset barriers, low technological obsolescence, and perpetual cash flows. It is considered a long-term allocation strategy rather than a short-term thematic trade. Additionally, some institutions believe that China, with its globally comprehensive manufacturing system, vast infrastructure stockpile, and leading resource production capacity, may offer unique value under the HALO investment framework.
Investors are increasingly pursuing certainty and scarcity. Early in 2026, prominent international investment banks such as Goldman Sachs and Morgan Stanley began promoting HALO (Heavy Assets, Low Obsolescence) investing as a core strategy. The essence of HALO trading lies in "seeking assets with low AI substitution risks, resilience to technological shocks, and long-term stability amid uncertainties brought by AI technology," according to the strategy research team at China International Capital Corporation (CICC). At the industry level, HALO assets are typically concentrated in upstream segments, covering heavy-asset industries that provide essential services such as energy, raw materials, and logistics. These sectors require substantial upfront capital investment and feature high entry barriers, characterized as "high replacement cost, high construction barriers, and physical hard assets resistant to technological disruption." In the U.S. stock market, a clear trend of capital migration toward heavy-asset sectors has emerged since 2026. Institutional data show that, year-to-date, the energy sector within the S&P 500 has surged over 25%, leading the market, while industrials, materials, and utilities have also significantly outperformed the index. Meanwhile, the U.S. software sector has declined more than 30% from its peak. Wells Fargo Funds Management noted that HALO assets represent an "anti-narrative" in the AI era, presenting opportunities for systematic value reassessment. "The rise of HALO trading stems from market concerns that rapid AI advancements may disrupt business models of knowledge-intensive enterprises, such as software companies. In contrast, HALO assets, characterized by heavy assets and low obsolescence risks, may benefit from relative earnings certainty, attracting investor favor," explained Zheng Sien, Senior Macro Researcher in the Equity Research Department of Zhong Ou Asset Management. A representative from CITIC-Prudential Fund further analyzed that the emergence of HALO trading reflects a market repricing of certainty and scarcity in the context of AI. Specifically, first, defensive demand driven by fears of AI disrupting asset-light industries has prompted capital shifts toward HALO assets with physical barriers and slow technological iteration, such as power grids, oil and gas, and nonferrous metals. Second, AI development creates rigid demand for physical infrastructure. Third, global supply chain restructuring and geopolitical risk premiums have intensified the scarcity of key resources like oil, gas, and minerals. Fourth, in a high-interest-rate environment, cash flow preferences favor HALO companies with existing assets that generate immediate, ample cash flows, as their high-dividend, stable-cash-flow attributes become more attractive amid sustained higher rates. Some institutions even liken the HALO strategy to a "physical foundation" and "safe harbor" in the AI era. Does this imply that the popularity of HALO trading is supported by long-term logic? The CITIC-Prudential Fund representative believes HALO trading has the potential to become a mainstream strategy, underpinned by the irreplaceability of physical assets in the AI era and a balance between long-term defensiveness and growth potential. HALO assets can withstand technological cycles while gaining growth impetus from AI industry development, transitioning into assets with both value and growth characteristics. According to Chen Xianshun, HALO trading fundamentally represents a repricing of tangible hard assets amid high interest rates and AI-driven restructuring cycles, centered on heavy-asset barriers, low technological obsolescence, and perpetual cash flows. It is a long-term allocation strategy, not a short-term thematic trade.
How to position in A-shares under the HALO strategy? Is there room for the HALO strategy, favored by top international investment banks, to play out in the A-share market? Looking at the performance of related assets in A-shares, Wind data shows that as of March 10, sectors such as petroleum and petrochemicals, coal, nonferrous metals, basic chemicals, power equipment, and utilities under the Shenwan industry classification have all gained over 10% since the beginning of the year, leading the Shenwan primary industry indices. Among them, petroleum and petrochemicals, coal, and nonferrous metals have risen 22.82%, 19.59%, and 18.55%, respectively, ranking at the top. Basic chemicals and power equipment have increased by 16.96% and 13.53%, respectively. Zheng Sien believes that, domestically, the risk of AI advancements disrupting traditional knowledge-intensive enterprises also exists, making it possible for the HALO trading trend observed overseas to extend to the domestic market. He noted that HALO assets have two core characteristics: heavy assets and low obsolescence rates. In the A-share market, assets meeting these criteria are mainly concentrated in upstream resource extraction, midstream chemicals, metal smelting, and utilities. Simultaneously, the CITIC-Prudential Fund representative pointed out that the HALO strategy is applicable to the A-share market, which boasts globally leading HALO asset reserves, such as in manufacturing, energy, and nonferrous metals. He analyzed that these typically fall into four categories: First, energy and power, driven by surging AI data center energy consumption and inelastic electricity demand, including subsectors like grid equipment, oil, nuclear power, and hydropower. Second, resources and materials with monopolistic supply, fueled by surging demand for basic materials from AI and energy transition, such as copper, aluminum, and rare earths. Upstream resources feature monopolistic supply and slow technological iteration, including subsectors like nonferrous metals, coal, and basic chemicals. Third, infrastructure and utilities, supported by irreplicable right-of-way and municipal necessities, offering stable demand and strong inflation resistance, such as railway transport, water services, and utilities. Fourth, communication infrastructure, serving as physical nodes for 5G, 6G, and data transmission, operating on a "rent-collection" model with inelastic demand, including subsectors like communication towers and data center infrastructure. Additionally, Qianhai开源 Fund categorizes HALO assets into "defensive" and "offensive" types based on their relationship with AI development. Defensive HALO assets derive core value from being "hard to disrupt," including energy and basic materials, utilities and transportation, and defense and military industries. These often serve as "safe havens" when tech sector valuations are excessive or market volatility intensifies. Offensive HALO assets gain value as "AI development boosts demand," primarily found in industrial metals, power equipment and grids, and oil shipping and logistics. Qianhai开源 Fund views these as combining the "hard asset" attributes of HALO assets with benefits from AI growth, offering a balance of offensive and defensive characteristics. From a global perspective on physical resource demand, Wells Fargo Funds Management judges that Chinese assets may hold unique value under the HALO investment paradigm. "Looking ahead, global manufacturing capacity restructuring and AI industry expansion driving worldwide capital expenditure growth will create long-term demand for physical resources. China, with its comprehensive manufacturing system, vast infrastructure stock, and leading resource production layout, exhibits distinctive value in the HALO investment narrative," the company stated. From an investment perspective, Wells Fargo Funds Management cautions that the "anti-narrative" of HALO assets does not oppose AI technological revolution but rather seeks to hedge and coexist with its socioeconomic impacts. Essentially, it involves anchoring investments in areas with "anti-disruption" resilience or "spillover" expansion opportunities during technological "creative destruction."
Avoiding Pseudo-Heavy Assets and Cyclical Peaks While HALO assets are undergoing value reassessment, investors must remain vigilant about risks. The CITIC-Prudential Fund representative advises that positioning in HALO assets should avoid "blind following," focusing instead on three key dimensions: valuation rationality, industry景气度, and policy direction. Specifically, first, consider A-share characteristics, avoiding simple replication of U.S. stock logic, and adjust positioning based on policy调控 and domestic demand recovery traits. Second, be mindful of sector volatility risks, avoiding chasing highs, as HALO assets are often cyclical; avoid buying at peak levels. Third, maintain balanced allocation, avoiding over-concentration in HALO assets. Fourth, monitor policy and geopolitical risks, as HALO assets like energy and nonferrous metals are significantly influenced by policies and geopolitical conflicts; track policy trends and geopolitical developments to adjust positions timely. Zheng Sien提醒 that positioning in HALO assets should critically assess whether the assets possess low obsolescence characteristics over the long term. For example, while traditional coal power units have heavy-asset attributes, advancing new energy generation technologies and tightening global carbon emission standards may pose challenges to coal power units in the long run. Wells Fargo Funds Management also noted that prices of some commodities and intermediate goods have already risen substantially, and high prices may come with elevated volatility; investors should watch for alignment between price景气度 and earnings realization. Additionally, be aware of long-term technological disruption "gray rhinos," as shifts in technological paradigms could impact the underlying logic of some HALO assets. Furthermore, Chen Xianshun提醒 that economic structural differentiation and expectations of interest rate cycle shifts have fueled the HALO trading fervor. It will not dominate the market entirely but could be considered a defensive staple in institutional portfolios. "A-shares naturally align with HALO logic, given their high proportion of physical assets, stable cash flows from state-owned enterprises, and policy support for hard technology foundations. Current positioning can focus on three points: selecting high-barrier, high-dividend, low-capital-expenditure leaders while avoiding pseudo-heavy assets and cyclical peaks; strictly controlling positions as portfolio hedges and not chasing sentiment premiums; closely watching interest rates, policy pricing, and supply-demand dynamics, using cash flow and dividends as core valuation anchors to downplay short-term thematic fluctuations," analyzed Chen Xianshun.
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