Zhang Yi Dong: International Order Restructuring Contains Dangers and Opportunities, China's Core Assets Bull Market Continues

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Text / Zhang Yidong, Member of the Executive Committee, Chief Economist, and Head of Research at Haitong International

Overseas Market Outlook: In the short term, wait for the real TACO2.0; before that, remain cautious. In the medium term, the influence of TACO will weaken, and safety premiums may persist long-term.

When will a genuine trend toward Risk-On occur? The key depends on when the U.S. takes substantive actions to compromise or de-escalate Middle East tensions, rather than Trump’s inconsistent statements.

Predicting geopolitical risks is difficult; patience and active response are better!

In the context of midterm elections, time is Trump’s enemy. Drawing lessons from March 2020 and April 2025, ultimately, stock market declines and inflation concerns will force Trump to take concrete actions to compromise, such as ceasefire agreements or troop withdrawals—then will be the true TACO2.0.

Under TACO2.0, global capital markets will have meaningful rebound opportunities

1. Stock Market: Return of tech growth style, focus on U.S. and Chinese stocks with strong technological fundamentals, especially China’s core assets.

2. Gold: Although short-term oversold due to profit-taking, oil-dollar logic, and recent liquidity shocks, medium to long-term upward trend will continue.

The logic behind this super bull market in gold stems from its role as a hedge against sovereign credit risk, its monetary nature, and the certainty premium from international order restructuring. Gold has become a strategic ballast and ultimate credit anchor in the reconstruction of international order.

In the medium term, the Risk-On effect caused by TACO will continue to weaken. Conversely, the risk premium in U.S. stocks, which has been declining over the past decade, may reverse trend by 2026.

Long-term, the Iran war marks a milestone in the era of international order reconstruction, with “hard assets” such as energy, gold, resources, and military technology gaining strategic revaluation.

Investment strategy: “Patience and steady progress, avoid arrogance and impatience,” seize strategic opportunities in China’s core assets.

China’s stock market has the lowest correlation among major global markets; during the international order reconstruction, China’s core assets are expected to lead a long bull run.

Currently, Chinese stocks are highly cost-effective, with valuations at a global low, significant discount effects, and considerable room to catch up with major overseas markets. China’s “hard assets” will be the core driver of future market trends.

We propose a “SMART” stock selection framework for China’s “hard assets”:

S: Security (energy/resource security) + MA: Manufacturing Abroad (overseas manufacturing) + RT: R&D Technology (hard tech).

Specifically,

S - Energy/Resource Security: Gold, energy industry chain, resources (rare earths, small metals, copper, aluminum, etc.), military industry (military tech, commercial aerospace).

MA - Manufacturing Overseas: Leading global companies in machinery, electrical equipment, household appliances, automobiles and parts, pharmaceuticals, petrochemicals.

RT - Hard Tech: Strategic emerging industries in the “14th Five-Year Plan”: semiconductors, high-end equipment, new energy, new materials, robotics, innovative drugs, aerospace; future industries: quantum tech, biomanufacturing, hydrogen and nuclear fusion energy, brain-computer interfaces, embodied intelligence, 6G; specialized and innovative leading companies.

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Editor: Chang Fuqiang