Zhongjin: Global geopolitical risks are becoming more frequent, and Chinese assets will be increasingly favored by capital.

CICC released a research report stating that since the joint military strikes by the US and Israel against Iran at the end of February 2026, global assets have experienced significant volatility. Risk assets have almost all declined, with concerns about supply disruptions in the Strait of Hormuz causing a surge in crude oil prices. Brent crude oil has accumulated an increase of nearly 50% since the conflict. The energy sector and related commodities have led the way, while traditional safe-haven assets such as gold and US Treasury bonds have seen declines. The inevitability of Trump's policies will continue to drive a major reallocation of global assets in the medium to long term. It is expected that with the increasing geopolitical risks globally, the safety attributes of Chinese assets will become more attractive to investors, potentially boosting the A-share market. CICC believes that as the old international order weakens and geopolitical risks increase, the logic of safe-haven assets has shifted. Specifically, assets that can enhance a country's ability to withstand geopolitical risks are now considered safe-haven assets. In terms of market performance, there has been a rebalancing of funds across countries, styles, and asset classes over the past year. Emerging markets and European stock markets have reached new highs, while the US stock market has shown relatively weaker performance. Within the US stock market, the technology-dominated Nasdaq momentum has gradually weakened, while the Dow Jones, dominated by cyclical and value styles, has performed relatively well. In terms of sectors, raw materials, energy, industrial, and aerospace defense are generally leading the way, while information technology is showing signs of weakness. Across asset classes, funds have increased their allocation to commodities, and gold, crude oil, and Shenzhen Agricultural Power Group have performed well. The traditional safe-haven logic of the US dollar has loosened, with the yield on 10-year US Treasury bonds increasing significantly after the US-Iran conflict, while the strength of the US dollar has been relatively weak. CICC proposed the framework of Trump's "Great Reset" from a geopolitical economic perspective in March 2025 to understand and predict the clues of global asset rotation under Trump 2.0. In this framework, the core is moving from virtual to real, the goal is to reset the relationship between financial capital and industrial assets, the means are fiscal dominance and financial repression, and the result is a medium-to-long-term global fund rebalancing. In terms of assets, the US dollar is entering a trend of depreciating, especially against a basket of physical assets. After implementing explicit yield curve control (YCC), long-term US bond yields are expected to fluctuate downwards. In terms of stocks, globally, focusing on a major theme: safety and resilience under changing geopolitical landscape, focusing on two main threads: increasing productivity and self-sufficiency. Non-US markets, especially emerging markets, outperform US stocks. Within the US stock market, it is advisable to go long on "Main Street" sectors such as resources, energy, and heavy industry; technology is more driven by profits and starting to differentiate. The recent US military strikes against Iran have strengthened global demand for hard assets that contribute to enhancing national security and resilience: resources, energy, heavy industry (equipment manufacturing, aerospace defense, etc.), and technology that helps to address geopolitical risks and enhance industrial strength.