On March 19, the CITIC Securities 2026 Spring Capital Market Forum was held in Beijing. Qiu Xiang, Chief A-Share Strategist at CITIC Securities, stated that the second quarter represents a critical window for rebuilding confidence along the path of a slow bull market for A-shares. From an index perspective, a long-term stabilization and recovery in corporate profit margins is a necessary precondition for the continuation of the A-share bull market. The focus in the next phase should shift from valuation to profitability.
Furthermore, Middle East conflicts are acting as a catalyst for style rotation this year. Disruptions to the global supply chain are providing another opportunity to assess the pricing power of China's leading manufacturing sectors. "The energy and chemical cost shocks stemming from Middle East conflicts offer us a window to observe and verify whether China's advantaged manufacturing sectors can truly demonstrate structural pricing power," Qiu Xiang noted.
From an industrial trend perspective, the manifestations in China include enhanced pricing power for its dominant manufacturers, accelerated disruptive innovation in AI, and disruptions to the global energy and chemical supply chain, all of which are reinforcing this trend.
"Revaluation of Chinese assets should not revolve around the HALO trade," Qiu Xiang argued. He believes the HALO trade logic, prevalent overseas, cannot be simply applied to A-shares. The core of the overseas HALO trade involves identifying defensive stocks that can withstand the impact of AI's disruptive innovation without suffering declines in free cash flow or returns on capital; it is essentially a passive defensive shift. China's logic differs: the focus is on resource and manufacturing enterprises that already possess market share and competitive advantages. These firms are proactively managing their future capital expenditure pace, converting existing competitive advantages into increased pricing power and improved profit margins, thereby initiating a new phase of free cash flow expansion following a period of high capital expenditure with low returns.
The current recommended core holdings remain in sectors where China has a share advantage, where the cost and difficulty of resetting overseas production capacity are high, and where supply elasticity is easily influenced by policy. These include chemicals, non-ferrous metals, electrical equipment, and new energy.