Zhang Yidong: Hold on with Hengke for now, it's not the time to actively buy. First buy hard assets in Hong Kong stocks, then buy consumer goods

On February 27th, Zhang Yidong, Chief Economist of Haitong International Securities, shared his views on A-shares, Hong Kong stocks, and US stocks in 2026 during the Chief Connection column of The Paper.

The investment notebook representative summarized the key points as follows:

1. In the first two months of 2026, the biggest change in the global market is the shift in narrative logic—the weight of value and growth has shifted.

2. By 2026, or even starting from the end of 2025, the market focus, especially overseas, has turned to "AI anxiety"—concerns about the long-term and significant uncertainties brought by technological advancements. This is the biggest difference from the previous three years.

3. The main theme of today's world is no longer peace and development, but has entered a phase of high winds and waves in the reconstruction of the international order, with deepening concerns about the sovereign credit of the United States... This indicates that the global macro environment in 2026 will be more complex and less stable than in 2025.

4. Hong Kong stocks are still in early summer, but are currently facing a cold wave (Korean wave), with snow in June, which feels a bit unfair. So how to remove the Korean wave? Rather than waiting for fluctuations in the Korean market, it is better to focus on the steady recovery of the Chinese economy.

5. From the perspective of the impact of the "Korean wave," the influence on Hong Kong stocks has reached the later stage or even the end. Secondly, the aversion to "old economy" technology represented by the internet has also been fully released.

The disruption caused by AI to them is objective. However, the problem is that even if they are not considered technology stocks, but as consumer stocks, the valuation of "old economy" consumer stocks has also reached a reasonably low level. Therefore, the downward short-selling momentum is waning.

6. For Hong Kong stocks, whether it is Hang Seng Technology or the Hang Seng Index, we can now view them as consumer goods for valuation.

It is not yet the time to actively buy Hang Seng Technology. But how to buy Hong Kong stocks now?

It is to buy according to the logic of China's economic recovery. The first stage is to buy hard assets...

7. For A-shares in the Year of the Horse, the trend is bullish, and the rhythm is steady. Therefore, "climb high and walk steadily," with opportunities focusing more on high cost-performance assets.

The index will no longer fluctuate wildly, but will show a more obvious upward trend under the "brake and accelerator" of institutional dividends, with a more orderly rise.

A-shares in the Year of the Horse will not experience violent ups and downs like in 2015, but will be more moderate. The risk of systemic deep declines is low, with more of a central upward shift, stepping up. This is the Chinese-style long bull under institutional dividends.

8. This year, the logic of the A-share market will shift from the valuation increase brought by confidence improvement in 2025 to the improvement of China's fundamentals, focusing on performance.

This year, investment must be cautious of purely speculating on small stocks, mythical stocks, and thematic concept speculation, which is difficult to sustain. Conversely, investing in A-shares should focus on quality companies with real orders, capable of delivering profits, and healthy cash flow Eliminating the false and preserving the true is an important magic weapon for structural opportunities in A-shares this year.

1. This year, the U.S. stock market is more about structural differentiation. From an index perspective, it is a small year with small ups and downs, and the increase is more converged compared to last year. Structural opportunities and the profit-making effect are both weaker than in 2025.

Although the U.S. stock market is not in a major bear market this year, its cost-performance ratio is weaker than that of non-U.S. markets, and we even believe it will be weaker than the Chinese market.

Zhang Yidong, a member of the Executive Committee of Haitong International Securities, head of the stock research department, and chief economist, has over twenty years of experience in the securities industry and has won the first place in the New Fortune Best Analyst award more than ten times.

The following are the highlights compiled by the investment notebook representative (WeChat ID: touzizuoyeben), sharing with everyone:

Global Market Changes in the First Two Months of the Year: Narrative Logic Switch

As the saying goes, "In chaotic times, gold shines," and the continuous rise in gold prices is indeed an important signal.

In the first two months of 2026, the biggest change in the global market is the switch in narrative logic—shifts in the weights of risk aversion and growth, value and growth.

Specifically, the main theme of the global market in 2025 was the yearning for "poetry and the distance," driven by technological progress and an increase in risk appetite.

We saw a dual bull market in stocks and gold in 2025—both stocks and gold rose. Major global stock indices, especially the Hang Seng Index and the Shanghai Composite Index, performed well in U.S. dollar terms, leading by a wide margin. Gold rose in tandem, and developed markets like the U.S. and Europe also saw gains.

Overall, the simultaneous rise of global stocks and gold reflects optimistic sentiment, especially regarding the AI technology revolution and optimistic expectations for future global labor productivity improvements, which characterized 2025.

By 2026, or even starting from the end of 2025, the market focus, especially overseas, has shifted to "AI anxiety"—concerns that technological progress will bring long-term, significant uncertainties. This is the biggest difference from the previous three years.

What was once a beautiful technological landscape has now entered the era of AI anxiety. At the same time, geopolitical risks have sharply escalated. After gold prices broke through $5,000, they surged to $5,600 at the beginning of the year, marking an epic performance.

This further confirms that the main theme of today's world is no longer peace and development but has entered a phase of turbulent international order reconstruction, deepening concerns about U.S. sovereign credit.

Recently, the U.S. invasion of Venezuela, pressure on Iran, and the repeated negotiations over Trump's tariffs have greatly increased global risk aversion sentiment and demand. This indicates that the global macro environment in 2026 will be more complex and unsettled than in 2025.

This also requires us to focus on the certainty of value in our investment portfolios and the hardness of asset quality.

Since the beginning of the year, it has been evident that in the field of hard assets, there has been a significant differentiation in AI. Areas with disruptive risks, or at least those that are "impressive but unverifiable," have seen substantial adjustments and declines, especially in U.S. software and Hong Kong internet stocks.

In contrast, "shovels" are becoming increasingly solid—new stocks from Japan, South Korea, and Hong Kong, as well as A-share computing and aerospace hard assets, have become concentrated areas of investment.

Another aspect is value certainty. Core assets at low points are making a comeback, returning as kings. These trends are markedly different from those in 2025 For 2026, I focus on four words: "Climb high and walk steadily." The market position is higher than in 2025, but the complexity of the international environment and the uncertainty of technological waves have increased. However, we still believe that both overseas and Chinese markets are suitable for professional investors and have great potential.

U.S. Stocks: Less Cost-Effective than Emerging Markets, and also Less than A-shares and Hong Kong Stocks

In short, the performance of U.S. stocks is not as good as that of emerging markets, Japan, and South Korea, and I even believe it is not as good as A-shares and Hong Kong stocks.

Although Hong Kong stocks started the year passively, by the end of the year, when measured in U.S. dollars, we still believe that the Chinese stock market is better than the U.S. market.

Returning to U.S. stocks, the biggest problem is that they are expensive and crowded. The potential return rates reflected by the low valuations of the three major U.S. stock indices, along with the risk premium reflected by the difference from the risk-free rate, are at historical lows.

In recent years, the world has been focused on the "American exceptionalism," and U.S. stocks have enjoyed immense popularity. Now the trend has reversed, and global capital allocation will shift more towards non-U.S. markets.

The U.S. economy is experiencing a "weak recovery" this year, transitioning from last year's soft landing to this year's weak recovery. The fundamentals indicate that U.S. stocks will not face a major bear market, systemic collapse, or a repeat of 2000 or 2008, as the U.S. economy still shows resilience. However, under weak recovery, valuations and risk premiums have already priced in optimistic expectations.

This year, U.S. stocks are more about structural differentiation; from an index perspective, it is a small year with small ups and downs, and the gains are more constrained compared to last year. Structural opportunities and profit-making effects are weaker than in 2025. Although this year is not a major bear market for U.S. stocks, their cost-effectiveness is weaker than that of non-U.S. markets, and we even believe it will be weaker than the Chinese market.

U.S. stock earnings are experiencing a weak recovery, and valuations are under strong pressure. This year overall belongs to a period of volatility, with funds flowing more from U.S. stocks to emerging markets.

A-shares: Bullish Trend, Central Level Rising, Market Logic Shifting from Valuation Improvement to Performance Focus

Next, let's focus on the Chinese market.

For A-shares in the Year of the Horse, the trend is bullish, and the pace is steady. Therefore, "Climb high and walk steadily," with opportunities focusing more on high cost-effective assets.

From an index perspective, it can be measured at about three times the nominal GDP.

The index will no longer experience drastic fluctuations but will show a more obvious upward trend under the "brake and accelerator" of institutional dividends, with a more orderly rise.

Overall, we believe that A-shares in the Year of the Horse will not experience the violent ups and downs seen in 2015, but will be more moderate. The risk of a systemic deep decline is low, with more of a central level rising and a step-up pattern. This is a Chinese-style long bull market under institutional dividends.

From an investment logic perspective, first, we must have confidence in China, in the Chinese economy, and in the stock market.

The new triangular support has formed in 2025: the release of institutional dividends, the bottoming and warming of the Chinese economy, and the strategic shift of social wealth towards equity assets.

We actually do not need to care about overseas markets; it is more important to tell a good Chinese story based on Chinese logic.

First, strengthen confidence; the triangular support will continue to exert force in 2026.

Second, look at the structure. This year is very important for the "14th Five-Year Plan." Around the plan, according to national strategic directions and industrial policies, guide where all social wealth should be invested; that is where the hot spots will be, which is a structural direction.

Another direction is low-position assets, finding signs of recovery in "less frequented" areas, that is, "old trees bearing new flowers." On one hand, we seek value certainty, that is, "old trees bearing new flowers," in places with fewer people, which are already quite safe, like convertible bonds with limited downside. On the upside, if the Chinese economy stabilizes and recovers, with improvements in PPI and CPI, low-position assets will have strong explosive potential, akin to upward options in stocks.

On the other hand, there is "hardness," which refers to asset hardness. Hardness is the kinetic energy and guidance given by the energy of the times and national policy orientation. If it aligns with overseas technology logic, it creates a cumulative effect. Therefore, we need to pay attention to asset hardness and value certainty.

For 2026, we generally believe that Chinese assets still have good cost-effectiveness. The overseas pricing of Chinese assets is absolutely low, and there is insufficient estimation of economic recovery.

The market logic in 2026 will shift from the valuation increase brought about by confidence improvement in 2025 to the improvement of China's fundamentals, focusing on performance.

We will transition from "unclear but impressive" and chasing themes to genuinely looking at performance. Looking at performance does not necessarily mean looking at EPS; for example, "old trees bearing new flowers" means looking at performance, and traditional assets like construction machinery and chemicals also focus on performance improvement. However, looking at performance also includes examining orders and R&D, which is also about performance—looking at policy orientation and industrial direction.

Thus, we shift from chasing themes to focusing on performance and fundamentals, broadening our thinking.

Emerging fields may currently lack EPS and profitability, but if we see a clear direction in R&D, R&D investment, and orders exploding like bamboo shoots after rain, these are also performance indicators.

This year, investment must be cautious of purely speculative concepts like small caps, trendy stocks, and thematic plays, which are difficult to sustain. Conversely, investing in A-shares should focus on high-quality companies with real orders, the ability to realize profits, and healthy cash flow.

Distilling the genuine from the false is an important tool for structural opportunities in A-shares this year and is also a source of finding alpha and obtaining excess returns.

AI may still be a tale of two extremes

Strategically, the AI wave has not ended, but we should avoid purely story-driven companies and focus on key segments of the industrial chain that have barriers—such as storage, which, although expensive, is critical and has strong capacity constraints, at least until 2026.

Additionally, we should fill in the gaps in the current AI chain. Those with clear price increase logic and capital expenditure logic will continue to be strong.

Conversely, business models that are unclear and consume cash flow may still experience a tale of two extremes.

Hong Kong stocks are still in "early summer": Hang Seng Technology and Hang Seng Index can be viewed as consumer goods; when will it ease? Look at three dimensions

In March 2024, I wrote "The Spring of Hong Kong Stocks." In 2025, I said Hong Kong stocks might enter summer.

Now many investors are worried: are Hong Kong stocks entering a bear market again?

If we outline the four seasons, I believe Hong Kong stocks are still in early summer. However, early summer has encountered June snow and a cold wave. This "Korean wave" is indeed a Korean wave—specifically from Korea.

Recently, it is evident that the weakness in Hong Kong stocks is not due to their own lack of strength, but rather because others are too strong. Since 2025, foreign capital has been returning to Chinese assets, particularly to A-shares and Hong Kong stocks, with a significant increase in foreign capital inflow willingness towards Hong Kong stocks.

Unfortunately, since February, a large amount of capital has flowed from Hong Kong stocks and Hang Seng Technology to Japan, South Korea, and Taiwan, especially South Korea. South Korea is a typical "Korean wave," essentially revolving around two stocks—Samsung and SK Hynix, which is very extreme. The entire South Korean market appears to be a South Korean market, but in reality, it has become a duet of two stocks Excluding these two companies, the performance of others is more passively driven.

So when will this process ease? I have three dimensions.

The first dimension: The current diversion of capital from the Japanese, South Korean, and Taiwanese stock markets to Hong Kong stocks may have reached its later stage. On one hand, the South Korean market is increasingly showing signs of short-term overbuying, particularly crowded. South Korea is also a retail-driven market, experiencing rapid growth. However, as we are currently at a short-term emotional peak, the impact of the "Korean Wave" may ease at any time.

On the other hand, in Hong Kong, regardless of the two major weights represented by Tencent and Alibaba, in my discussions with many hedge funds, they also feel that shorting is no longer profitable.

In the past few months, shorting has led to significant declines. Currently, Tencent's valuation is just over ten times. Alibaba still possesses China's strongest AI large model, which has technological momentum. However, everyone's focus is now on its traditional economy and domestic consumption logic.

Moreover, foreign capital is relatively cautious about China's domestic consumption.

I believe that from the perspective of the impact of the "Korean Wave," the influence on Hong Kong stocks has reached its later stage or even its end. The second point is that the aversion to the "old economy" technology represented by the internet has also been thoroughly released. In the past month, there has been a withdrawal of foreign capital and a sell-off by domestic investors.

Especially in the few trading days after the Spring Festival, domestic investors sold off, reversing the pattern of the past three years where southern capital bought more as prices fell, instead accelerating downward adjustments. As a result, the Hang Seng Technology Index should no longer be regarded as a technology index.

The disruption caused by AI to them is objective. However, the issue is that even if they are not considered technology stocks but rather as consumer stocks, based on the valuation of "old economy" consumer stocks, they have reached a reasonably low valuation. Therefore, the downward momentum for shorting is waning.

The third point, from a timing perspective, is that the two sessions in March and Trump's visit to China at the end of March or early April could be turning points for confidence in Chinese assets. With these three factors combined, the Hong Kong market is currently in a phase of being abandoned by global investors. However, I believe this is somewhat overly pessimistic.

As long as we believe in the new triangular support for Chinese assets, it is equally applicable to A-shares and Hong Kong stocks.

We have also recently been calling on the Hong Kong regulatory authorities to quickly adjust the weight of the Hang Seng Technology Index stocks, allowing it to truly represent the future of Chinese technology rather than the "old economy" technology of the past decade. The Hang Seng Technology Index indeed lacks sufficient elasticity in responding to the future of the Chinese economy.

In 2026, Chinese assets will be viewed from two dimensions. One dimension is that the hardness towards future industries and emerging industries must be sufficiently strong—commercial aerospace, computing power, high-end manufacturing, which represents asset hardness.

The other is the certainty of value. Therefore, for Hong Kong stocks, whether it is the Hang Seng Technology Index or the Hang Seng Index, we can now regard them as consumer goods for valuation purposes.

It is not yet an active buying time for the Hang Seng Technology Index; buying Hong Kong stocks should be divided into two phases.

In the second half of this year, as housing prices stabilize in a hundred cities in China, especially in first-tier cities, domestic demand will gain vitality. The previously concerning issue of internal competition will no longer be a problem. With traditional businesses stabilizing, and programmers having technological attributes, there will then be upward elasticity.

Overall, it is now a time for sowing seeds with tears, and we must also pace ourselves.

The logic of sowing seeds with tears now follows the logic of stabilizing the Chinese economy, rather than the logic of confidence recovery from last year For Hong Kong stocks, since the trajectory of the Chinese economy is projected for 2026, the first thing to buy should be hard assets. Those with Hengke should hold on.

Shorting internet leaders at this time is quite pointless; the downward space may just be from those who cannot hold on and sell out, which will lead to a bottom.

Therefore, it is not yet the time to actively buy Hengke. But how to buy Hong Kong stocks now?

It should be based on the logic of China's economic recovery.

The first phase is to buy hard assets, which means buying related to hearing the call of the cuckoo, hearing the small spring in real estate, and buying those related to the bottoming of the real estate fundamentals, even if it’s not a V-shape, that’s fine; a V-shape is difficult now. As long as it stabilizes, we can look for alpha within the real estate industry chain.

Whether it’s engineering machinery, chemicals, steel, or even real estate itself, these are companies that won’t die and have dividend capabilities.

Additionally, non-bank financials and commodities are also related to the stabilization of domestic demand. Stock prices reflect pessimistic expectations, but the economy has quietly bottomed out. The subsequent elasticity may first recover.

The second phase is consumption. If the real estate chain recovers, whether quickly in the second quarter or slowly in the second half of the year, both traditional consumption, food and beverages, and the internet will rise.

The internet is now being valued as traditional consumption; when it rises in the second half of the year, everyone will realize that the expectations for its main business were overly pessimistic, and the upward elasticity will instead rely on its business model entering the profitable application dimension.

Overall, I believe Hong Kong stocks are still in the early summer season, but now they are facing a cold wave (Korean wave), with snow in June, which feels a bit unfair. So how to remove the cold wave? Rather than waiting for fluctuations in the Korean market, it’s better to strive for oneself and focus on the steady recovery of the Chinese economy from the bottom.

Corporate earnings in Hong Kong stocks are expected to recover by 12% to 15% in 2026, which has not yet been reflected in stock prices.

Therefore, the judgment on Hong Kong stocks should be about sowing tears, based on fundamentals rather than valuation increases. The Chinese economy is at a bottom, not a strong recovery, which is very suitable for institutional investors but not for ordinary retail investors and short-term trend investors.

One should have long-term confidence in the Chinese economy and lay out positions at low points.

Focusing on two directions: one is asset hardness—new and recent stocks.

Of course, new and recent stocks have risen a lot recently, so be cautious of valuation bubbles. The hardness of assets is very important, reflected in strategic assets—commodities, non-ferrous metals, energy, and oil transportation, which can benefit from AI and even from international turmoil.

The other is around the improvement of fundamentals, including the overseas chain and the revaluation of leading companies brought about by the improvement in domestic consumption, as well as local stocks in Macau and Hong Kong, which have reasonable valuations and dividends, and are also worth exploring.

Source: Investment Workbook Pro, Author: Wang Li

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