Recent shifts in overseas market risk appetite and liquidity have been significant. Looking beyond short-term market fluctuations, two underlying trends are apparent. First, the urgency for the US and Europe to shift from a virtual to a real economy is intensifying, with critical minerals and supply chain security becoming priorities. The policy stance of the newly nominated Federal Reserve Chair also reflects a pressing need to prevent capital idling and lower financing costs for the real economy. Second, disruptive innovation driven by AI is breaking down monopolies and high-return barriers in traditional sectors. The software industry has been notably impacted recently, leading to heightened anxiety. Both strategic security investments and emerging infrastructure and technology investments signal that the US and Europe will face fiercer competition, alongside the challenge of balancing short-term shareholder interests with the long-term strategic value of infrastructure spending—a tension likely to repeatedly surface in capital markets. For investors accustomed to earning "easy money," global financial market uncertainty will continue to rise. Risk assets heavily reliant on distant cash flow projections or capital rotation expectations are more susceptible to sustained valuation corrections. In contrast, China's capital markets have already priced in the shift from virtual to real economy in recent years and are now in a phase of verifying and pricing "quality and efficiency improvements." There is no need for anxiety over short-term market volatility. Regarding asset allocation, maintaining a foundation in "resources + traditional manufacturing" is advised, while accumulating non-bank financials on dips and increasing exposure to the consumer and property chains.
A risk indicator designed to gauge global risk appetite and liquidity has shown a notable surge. The latest reading reached 42%, the highest since September 2024, with only three prior instances exceeding 30%—on April 7, November 5, and November 21, 2025. The most sensitive component of this indicator is Bitcoin, whose trajectory has closely mirrored that of the Hang Seng Tech Index since last September, indicating converging underlying risk factors. Two recent events have significantly impacted markets: the nomination of Kevin Warsh, which coincided with a maximum Bitcoin drawdown of 33.1%, and Anthropic's release of plugins for its Claude Cowork platform, spanning 11 domains like sales and finance. This sparked concerns that highly integrated platforms could disrupt traditional SaaS subscription models, leading to a sharp adjustment in the software sector and broader tech stock turbulence. While A-shares maintain relative liquidity independence, many heavily-weighted growth sectors held by institutions are linked to North American AI. The sustainability of North American AI infrastructure significantly impacts A-shares. Calculations show that direct and indirect AI holdings of active public funds accounted for approximately 60% of their portfolios at the end of last year, similar to the third quarter. Risk-sensitive absolute return funds also exhibit high holding similarity due to performance competition mechanisms, with exposures closely aligned to the North American AI computing chain. This facilitates the transmission of overseas tech sector volatility to A-shares.
The urgency for the US and Europe to shift from virtual to real economy is strengthening. On February 2, the Trump administration announced the launch of a strategic critical minerals reserve project named the "Vault Plan," with initial funding of $12 billion for procuring and stockpiling rare earths, gallium, cobalt, and other critical minerals. From February 4-5, 2026, the US State Department hosted the "First Ministerial Conference on Critical Minerals" with representatives from 55 countries and regions, resulting in bilateral agreements with Mexico and trilateral pacts with the EU and Japan to strengthen critical mineral supply chains. Policy support for critical minerals over the past two years underscores a focus on supply chain security. The policy stance of the newly nominated Fed Chair also highlights the need to prevent capital idling and reduce real economy financing costs. This reflects a government-driven push for Fed change to redirect capital from the vast virtual economy to the real economy.
Disruptive innovation from AI is breaking down high walls in traditionally monopolistic, high-return sectors, leading to intensified competition. Investments in AI infrastructure currently lack robust revenue-side business models, and the inability to establish significant technological generational gaps hinders the formation of monopoly barriers and excess profits, which is unfavorable from a capital return perspective. Last week's CapEx guidance from major CSP providers significantly exceeded market expectations but elicited negative stock price reactions, indicating a market shift from excitement over capital expenditure to concerns about eroding returns and profits. However, from a broader industrial development perspective, massive AI infrastructure investment provides the foundation for next-generation innovation, making such spending necessary. The conflict between long-term strategic benefits and short-term shareholder interests may persist. Furthermore, new technology investments not only dilute short-term earnings but also destabilize traditional "stable profit" models through disruptive innovation. Recent plugin integration by Anthropic triggered heavy selling in US ToB software and SaaS companies, reflecting accelerated innovation and heightened competition in the AI era—an inevitable cost during the transition between old and new growth drivers.
The US and Europe face a trade-off between short-term shareholder interests and the long-term strategic value of infrastructure investment. Disruptive innovation spurs fiercer competition, while massive AI infrastructure spending increases cost pressures on private enterprises. This process enhances long-term national competitiveness but often impairs short-term shareholder value. For capital accustomed to earning excess returns effortlessly, this environmental shift is significant. Early in this transition, cycles of selling, recovery, and further declines, along with criticism of current conditions and policies, are inevitable. Similar patterns occurred previously in A-shares and Hong Kong stocks; Chinese investors are familiar with the pain of long-term超前投入 on shareholder value. Currently, most Chinese industrial sectors have passed their investment peaks, with fixed asset investment now emphasizing quality over quantity, evidenced by a historic negative growth rate last year. Whether欧美 investors can accept this environmental change remains to be seen.
Globally, risk assets excessively reliant on distant cash flow projections or capital rotation expectations are more prone to sustained valuation corrections. The US and Europe's push towards a real economy shift, regardless of pace or effectiveness, reflects emulation of the Chinese model and a return to long-termism. The era of "easy money" will gradually fade, competition will intensify, and lower returns on invested capital will become the norm—an unavoidable growing pain. Against this backdrop, global risk assets overly dependent on远期现金流 or资金接力 expectations will likely face continued valuation correction pressure. Since 2023, the "quality" factor in US stocks has shown persistent underperformance, though high-quality stocks began outperforming low-quality ones again since Q4 2025. Bitcoin, as the most sensitive asset to global risk appetite and liquidity, has remained below its 30-week moving line since October 2025, its longest such stretch since 2022, despite this decline occurring during a disinflationary rate-cutting cycle. Financial institutions' exposure to cryptocurrencies now far exceeds 2022 levels. According to a November 2025 AIMA report surveying 122 institutional investors and hedge fund managers managing $982 billion in assets, 55% of traditional hedge funds held crypto digital asset exposures in H1 2025, up significantly from 47% in 2024, indicating increased contagion from crypto volatility to traditional financial assets.
China has already completed the pricing of its shift from virtual to real economy and is now in the process of verifying and pricing "quality and efficiency improvements." This transition inherently involves short-term impairment of capital returns and the accumulation of long-term strategic value, a process fully reflected in China's capital markets. Social resources are continuously flowing out of over-financialized sectors towards technology areas with long-term strategic value but near-term capital return challenges. China has already endured this transition pain in recent years, with market pessimism largely priced into asset prices. Over the past five years (2021-Q3 2025), the average annual ROE for the CSI 300 was 10.5%, compared to 18.4% for the S&P 500—a significant gap at historical highs. However, this divergence is expected to converge in the medium to long term. A-shares' ROE is gradually bottoming from long-term lows and trending upwards, while US stocks face increasing difficulty maintaining high long-term ROE as core corporate assets become "heavier" and competition intensifies. In the short term, inflows from allocation-oriented funds like insurance capital persist, investor confidence continues to recover and warm, and the overall market remains in an environment where sentiment leans towards gains. The number of new exchange accounts in January hit a high since October 2024, reaching 4.92 million, up 89% month-on-month. Newly registered private fund product scales have also risen steadily in recent months. January also saw the best monthly performance for active public equity fund issuance since 2022, with total new issuance reaching RMB 49.8 billion, including a single fund raising over RMB 7 billion—unprecedented in the past three years. Short-term volatility is a common experience during market style rotations and warrants no anxiety.
Regarding allocation, maintaining a base in "resources + traditional manufacturing" is recommended. Accumulate non-bank financials on dips and increase allocation to the consumer and property chains. Chemicals, non-ferrous metals, and power/new energy sectors continue to represent industries where China holds market share advantages, overseas capacity重置成本 are high, and supply elasticity is constrained by policy. The transformation of market share advantage into pricing power and the sustained recovery in profit margins are still in early stages. Long-term ROE has significant room for recovery, and potential profit elasticity remains underestimated. The allocation logic for these sectors does not rely on a weak US dollar assumption, and recent sharp commodity price fluctuations do not affect their underlying fundamentals. Some pullbacks help flush out short-term speculative capital. For the "price increase" theme, the key is to wait for commodity volatility to subside, which historically takes 1-2 weeks. Once volatility recedes, increased allocation and stock differentiation are expected. The underlying logic of the "price increase" theme remains fundamentally unchanged, and market conviction here is far weaker than in the significantly overweight AI and computing sectors. The market is still in an expectation trading phase. On this allocation base, continuously increase exposure to brokers and insurance on dips. A more stable bull market clearly benefits their long-term valuations. Against a backdrop of sustained RMB appreciation, leading institutions' global expansion is expected to accelerate, potentially lifting profit margins. Furthermore, activity in the consumer and property chains is expected to continue through the spring. For the consumer chain, focus on duty-free, airlines, hotels, scenic spots, and freshly made tea beverages. For the property chain, focus on quality developers, building materials, and REITs.
Risk factors include intensified Sino-US friction in technology, trade, and finance; domestic policy implementation effectiveness or economic recovery falling short of expectations; unexpected tightening of domestic or international macro liquidity; further escalation of conflicts in regions like Russia-Ukraine or the Middle East; and slower-than-expected digestion of China's real estate inventory.
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