Shenwan Hongyuan Strategy TACO Trading Resurges, Global Equities Rise Amid Precious Metals Correction — Weekly Focus on Global Asset Allocation (2025.10.17-2025.10.24) Jin Qianjing / Feng Xiaoyu / Lin Zundong / Tu Jinwen / Wang Sheng

Investment Highlights for this Issue: Global Capital Market Review: This week (2025.10.17-2025.10.24), the China-U.S. trade negotiations were held on the morning of October 25 in Malaysia, where Trump announced an increase in tariffs on China by 155%. Although Trump has taken a strong stance, previous trade negotiations suggest there is room for negotiation and maneuvering between both sides. Meanwhile, China's bargaining chips in the trade talks are gradually increasing, with significant purchases of U.S. soybeans and rare earths. The market expects this round to still reflect a "Trump backing down" scenario, resulting in an upward movement of most equity assets this week. 1) In fixed income, the 10Y U.S. Treasury yield stood at 4.02%, remaining stable, while the U.S. dollar index rose by 0.39%, currently at 98.9, still below 100. 2) In equities, A-share indices all posted gains this week, with notable increases in the ChiNext and STAR Market. Globally, all markets rose except for Vietnam's Ho Chi Minh Index, with emerging markets outperforming developed markets. 3) In commodities, gold dropped by 2.05% from its high, while energy assets like U.S. natural gas and Brent crude oil recorded significant gains of 10.94% and 7.18% respectively this week.

Global Fund Flow Tracking: As of 2025/10/23, in the past week, both domestic and foreign capital flowed out of the Chinese stock market; actively managed overseas funds saw an outflow of $1.52 billion, while passive overseas funds recorded an outflow of $3.67 billion in the same period; foreign capital saw an outflow of $519 million, while domestic capital exited at $481 million. In the past week, global funds flowed into money market funds, with significant inflows into developed equity markets and slight outflows from emerging equity markets; on the fixed income side, the U.S. saw significant inflows of $11.17 billion; in equity funds, the U.S. market experienced a large inflow of $12.29 billion. In the past week, U.S. stocks saw inflows into technology, industrial products, and utilities, while Chinese stocks received significant inflows into finance, technology, and healthcare.

Global Asset Valuation Indicators: After risk-adjusted returns for precious metals hit a new high, a correction occurred this week. Looking at valuation percentiles as of 2025/10/24, in terms of price-to-earnings (P/E) ratios, the valuation of the Shanghai Composite Index ranks second only to the S&P 500, surpassing the German and French stock markets, reaching 92.1% over the past decade. However, in absolute terms, the valuations of the Shanghai Composite Index, CSI 300, and Hang Seng China Enterprises Index remain lower than U.S. stocks. In terms of ERP, the ERP percentiles for São Paulo in Brazil, CSI 300, and the Shanghai Composite Index still remain high. From the perspective of equity and debt valuation, the Chinese stock market still holds good allocation value compared to the global market. In terms of risk-adjusted returns, as of 2025/10/24, the S&P 500's risk-adjusted return percentile increased from 44% to 51%, while the Nasdaq's rose from 44% to 47%. The risk-adjusted return percentile for the CSI 300 rose from 69% to 75%. Both developed and emerging markets showed marginal increases in risk-adjusted return percentiles. The GSCI precious metals risk-adjusted return percentile reached a historical high before experiencing a correction this week.

Global Asset Risk Sentiment Indicators: In U.S. stocks, looking at index levels, the S&P 500 closed at 6791.69 this week, above the 20-day moving average, with implied volatility showing a weakening trend; on the option side, as of October 24, the put/call ratio for the S&P 500 was 1.07, stable compared to the ratio of October 17. In A-shares, regarding option positions, the volume of call options for the CSI 300 set to expire in November showed a significant decrease in positions between the price levels of 4300-4800 compared to last week, indicating a cautious sentiment in the options market. In terms of implied volatility, compared to 10/17, the implied volatility structure of the CSI 300 options this week did not significantly differ with the overall upward trend, but the absolute level showed a notable decline. The drop in implied volatility suggests that the market is beginning to expect a narrow fluctuation range, with low probabilities for significant upward or downward movements in the index.

Global Economic Data: U.S. Economic Data: The U.S. September CPI recorded at 3%, slightly below the expected 3.1%, but still showing marginal strength; Chinese Economic Data: China’s Q3 2025 real GDP growth registered at 4.8%, steadily advancing towards the full-year growth target of 5%; the rate of new construction area in real estate improved marginally, and import/export growth showed marginal strength. The expectation for an interest rate cut by the Federal Reserve has marginally declined: as of 2025/10/25, the probability of a 25 BP rate cut in October stands at 98.30%, down slightly from 98.40% last week; the probability of the rate cut to 3.5%-3.75% in December is 91.10%, down from 93.70% last week. Upcoming important economic indicators: U.S. September non-farm payrolls, U.S. federal funds rate, U.S. Q3 real GDP growth.

Risk Warning: Short-term price fluctuations of assets may not represent long-term trends; a deep recession in the U.S. and Europe may exceed expectations; significant shifts in U.S. policy direction could occur during Trump's presidency.