On September 7th, the Chief Economist and Executive Committee member of Haitong International issued a fresh report stating that September presents an opportune window for positioning in both the AI bull market and quality Chinese assets.

The strategist continues to endorse the AI technology rally, forecasting it has the momentum to persist for several more quarters, extending into 2027. This follows his earlier prediction in May that the equity market would follow an "N-shaped trajectory," a forecast that has since played out as global markets experienced sharp corrections in June and July, followed by a rebound in August.

Since August 16th, he had already cautioned that major global equity markets would face turbulence against the backdrop of rising long-end US Treasury yields. At Haitong International's autumn strategy conference on August 27th, he published a comprehensive report titled "Sowing in Autumn," which concluded that while the AI bull market had entered its "autumn phase," it could still persist for several quarters through 2027, with expectations for a volatile upward trend in the autumn of 2026.

In the latest report released today, the strategist explicitly states that after enduring hardships, September is the ideal time to build positions in the AI bull market and Chinese quality assets. He argues that the earnings logic for the Chinese equity market is ripe for re-evaluation, and that the "visible hand" of policy will ultimately bolster stock market confidence.

Last week, long-end global interest rates continued to climb, remaining the primary dampening factor for the autumn market's consolidation phase. The US stock market continues to fluctuate around interest rate hike expectations. Until the rate trajectory becomes clearer, while capital in the tech sector has not yet noticeably exited, overall risk appetite is unlikely to improve rapidly.

Regarding the current investment logic for A-shares, the focus should be twofold. On one hand, it is crucial to grasp the reshaping of earnings sources during the economic transition, driven primarily by technological innovation and industrial upgrades fostering endogenous growth, while asset revitalization and mergers and acquisitions open up space for exogenous expansion. On the other hand, with China's political and economic landscape stable, domestic risk-free yields persistently hovering at low levels, and the domestic "asset shortage" pattern continuing, the allure of allocating towards China's high-quality assets is set to enhance in the medium to long term.

Looking at the liquidity outlook, the key factor is the long-end US Treasury yield, with September serving as a window for domestic and external factors to align for position building. Long-end US Treasury yields are expected to spike and then retreat, though the exact timing depends on policy choices in September. A decline in US Treasury yields would open a significant window for domestic policy space to expand further.

Currently, the strategist recommends buying global AI stocks and Chinese equities, particularly A-shares, on dips. In terms of investment strategy, he maintains a bullish view that the AI technology bull market will likely continue, noting that Chinese equities, especially A-shares, currently offer high cost-performance. However, he cautions that the market dynamics in the coming months will differ from the broad rally seen after the "924" policies, requiring attention to a new phase led by AI applications and a "shrinking circle" in AI hardware.

More importantly, investors should grasp the two main lines of "endogenous growth + exogenous expansion." For endogenous growth, the TMT sector is expected to see further differentiation, with focus on AI applications, the domestic semiconductor supply chain, and companies going global with international competitiveness in new quality productive forces. For exogenous expansion, the market should focus on profit elasticity from mergers and acquisitions, asset injections, and securitization, particularly among central and local state-owned enterprises and platform companies with healthy cash flows, deep value, and industrial integration capabilities.

In sectors like healthcare, advanced manufacturing, energy, resources, finance, and defense, investors can seek "old trees blooming new flowers" assets—companies that can unlock second growth curves through AI empowerment and exogenous expansion.

The strategist's latest views can be summarized as follows:

Time to Position in A-Shares as 'Visible Hand' Boosts Confidence

Autumn is the right time to position in A-shares—the earnings logic for China's stock market needs re-evaluation, and the "visible hand" will boost stock market confidence. The current investment logic for A-shares requires grasping the reshaping of earnings sources during economic transformation, focusing on endogenous growth driven by tech innovation and industrial upgrading, and exogenous growth space unlocked through asset revitalization and M&A. Additionally, the stable political and economic landscape, persistently low domestic risk-free yields, and the ongoing "asset shortage" pattern will enhance the medium-to-long-term allocation appeal of China's quality assets.

First, China's new economic drivers will continue to maintain robust growth, serving as the fundamental source of growth and value for investing in Chinese stocks. To understand China's current economy, one should downplay short-term macro data and focus on structural changes behind aggregate growth. China is in a critical period of accelerating the shift between old and new growth drivers and transforming its development model. For overseas investors, assessing China's equity market shouldn't solely rely on the pace of recovery in real estate and traditional demand, but rather on improvements in corporate competitiveness, earnings quality, and shareholder returns.

In recent years, China's high-tech manufacturing has shown strong growth resilience. In July 2026, value-added output grew 16.9% year-on-year, significantly outpacing overall manufacturing. Since 2021, cumulative export growth from new growth drivers on a 12-month rolling basis has surged 186%, well ahead of traditional manufacturing. Even with weak traditional domestic demand, Chinese companies can still forge new earnings growth points through technological upgrades, product mix improvements, and international market expansion.

Interim reports further confirm the improvement in A-share earnings structure. In the first half of 2026, net profit for all A-shares grew 17.5% year-on-year, or 17.7% excluding financials and oil/petrochemicals. Sectors like computers, electronics, non-ferrous metals, and power equipment maintained relatively fast growth. Industrial prosperity is translating into A-share earnings growth, strengthening fundamental support.

Over the coming quarters, the sustainability of A-share endogenous growth will hinge on two directions: filling gaps in high-tech capabilities and the diffusion of "AI+". On one hand, China is still in a stage of supplementing high-tech shortcomings. The "supply what's lacking" demand provides certain tech industries with a longer growth window. This process won't be completed in the short term, and sustained policy support and industrial investment underpin a longer prosperity cycle for related fields.

On the other hand, "AI+" still has substantial room for development. As policies guide capital, talent, and industrial resources towards "AI+" sectors, and as infrastructure improves and application scenarios open up, conditions for AI to spread across industries will further improve. Related investment opportunities are likely to penetrate manufacturing, healthcare, energy, and enterprise operations, creating opportunities for emerging companies and enabling traditional firms to enhance efficiency and reshape business models.

The 'Visible Hand' Will Become More Proactive in Coming Quarters

Second, drawing lessons from history, the "visible hand" in the A-share market will become more proactive and effective in the coming quarters. Attention should be paid to exogenous growth opportunities brought by local government debt resolution, asset revitalization, and capital market reforms. The current comprehensive reform of capital market investment and financing can draw lessons from the A-share bull market at the turn of the century and the resolution of state-owned enterprise difficulties.

In the late 1990s, to address high leverage among SOEs and non-performing assets in the banking system, policies involved four asset management companies absorbing bad debts, debt-to-equity swaps, along with mergers, asset swaps, shareholding reforms, and equity transfers, improving both corporate balance sheets and operating mechanisms. By the end of 2000, quality assets were concentrated towards more efficient enterprises and listed platforms. The capital market gradually took on the vital functions of revitalizing existing assets and optimizing resource allocation beyond just financing.

In the coming quarters, China's equity market can revitalize assets and optimize allocation by combining asset swaps and M&A. This can help local governments and related entities improve their balance sheet structures and create conditions for alleviating debt pressure. Meanwhile, during the debt resolution and asset revitalization process, some quality operating assets may further concentrate into listed companies through injections and M&As, expanding listed companies' earnings sources. Combined with adjustments in control rights and governance mechanisms, this can pave the way for improved operating efficiency and ROE. Thus, local government debt resolution and existing asset revitalization could open up exogenous growth space for listed companies.

Low Rates and 'Asset Shortage' Underpin Equity Allocation

Third, the domestic low-interest-rate environment and "asset shortage" provide important support for allocating towards Chinese equity assets. Comparing domestic major asset classes, the earnings yield implied by the inverse of the A-share PE-TTM stands at 4.40%, higher than the 10-year Chinese government bond yield of 1.86% and above the 2.48% rental return on residential properties in major cities. This highlights the relative allocation value of quality equity assets in a low-rate environment.

Therefore, under the "asset shortage" scenario, quality stocks that can consistently generate earnings with long-term growth potential or provide cash dividends are important destinations for societal wealth allocation. As listed companies' earnings and shareholder returns improve, the stock market is well-positioned to absorb the reallocation of household and institutional funds, providing support for A-shares' medium-to-long-term trajectory.

Liquidity Outlook: September as a Window for Domestic and External Alignment

The key to liquidity conditions lies in long-end US Treasury yields. The common logic for allocating towards Chinese quality assets (A-shares and Hong Kong stocks) and the global AI bull market on dips in September is that long-end US Treasury yields are likely to spike and then retreat, easing liquidity constraints from the dollar.

The differentiating logic is that after long-end US yields peak and fall, and following the anticipated China-US leaders' meeting by the end of September at the latest, China is expected to further open up policy space for "enhancing capital market resilience for debt resolution" and "promoting domestic demand through new quality productive forces."

The prediction that long-end US Treasury yields will move "up first then down" remains, but the peak and pace of decline depend on September policy choices. If the US implements a rate hike in September that effectively stabilizes inflation expectations, a 10-year Treasury yield around 5% could mark the year's key high. Without a hike, yields might first break above 5% or briefly test 5.2%. In the fourth quarter, the forecast leans towards the 10-year yield retreating to around 4.3%.

A decline in US Treasury yields will become a vital window for domestic policy space to expand. If pressure on the RMB exchange rate and cross-border capital flows eases, external constraints on domestic monetary policy will further diminish, creating more favorable financing conditions for fiscal stimulus. Through fiscal-monetary coordination, this space can translate into conditions for debt resolution and consumption promotion policies—a logic similar to the "924" rally in 2024.

On September 18, 2024, the Fed cut rates by 50 basis points. On September 24, China announced a package of policies including RRR cuts, rate cuts, and capital market support. The key driver of that rally wasn't broad economic or earnings improvement, but rather eased external constraints creating favorable conditions for domestic policy action, prompting markets to re-evaluate risks and returns on Chinese assets.

Currently, there's no need to wait for all macro data to strengthen. Instead, focus should be on the incremental policy space opened by external environmental changes, seizing allocation windows that may emerge before a comprehensive fundamental recovery. As fiscal spending and policy-based financial instrument deployment progress, existing policies' support for investment, demand, and corporate cash flows will gradually materialize.

Therefore, the current recommendation to buy global AI stocks and Chinese equities, especially A-shares, on dips isn't about mechanically replicating the rapid gains after "924" in 2024. Rather, it's about pre-positioning for the potential window where US yields peak and fall, external constraints ease, and domestic policies for debt resolution and domestic demand promotion gain further traction, while capturing additional catalysts from improving China-US relations expectations.

In the medium term, industrial upgrading and asset integration provide opportunities for endogenous and exogenous growth, while expanded policy space helps drive balance sheet repair and domestic demand improvement. In the short term, adjustments triggered by external disturbances offer better buying opportunities to position for these growth prospects.

Tech Bull Market Continues; Chinese Equities Offer High Cost-Performance

Confidence remains in the sustainability of the AI tech bull market, with Chinese equities—particularly A-shares—currently offering high cost-performance. However, whether for the AI bull market or Chinese equities broadly, the market dynamics over the coming months will differ from the broad valuation-driven rally post-"924".

For the AI bull market, attention must be paid to a new phase led by AI applications and the "shrinking circle" of AI hardware. For Chinese equities, grasping the two lines of "endogenous growth + exogenous expansion" is paramount.

Regarding endogenous growth, TMT will experience further differentiation. Key focus areas include AI applications, the domestic semiconductor supply chain, and companies with international competitiveness going global in new quality productive forces. Regarding exogenous expansion, the focus should be on profit elasticity from M&A, asset injections, and securitization, particularly among central and local SOEs and platform companies with healthy cash flows, deep value, and industrial integration capabilities.

In sectors including healthcare, advanced manufacturing, energy, resources, finance, and defense, investors should seek "old trees blooming new flowers" assets—entities capable of unlocking second growth curves through AI empowerment and exogenous expansion. In the coming quarters, opportunities in the Chinese stock market will arise not only from endogenous growth elasticity in the second half of the global AI cycle but also require greater attention to the new exogenous growth logic opened by comprehensive investment and financing reforms.