Zhang Yidong: China's asset revaluation is far from over, and the revaluation of technology and new consumption has just begun

The Zhitong Finance App learned that recently, Zhang Yidong, the world's chief strategy analyst at Societe Generale Securities, said that the second-quarter adjustments did not change the core logic of this round of asset valuation in China; internal factors are the key variables that determine major trends in the A-share and Hong Kong stock markets. Defend actively in the short term, wait for the storm to pass, and don't use leverage. In the medium term, I have a firm view of Chinese assets. Because China's asset revaluation is far from over, particularly the revaluation of technology and new consumption, he believes it has only just begun. Therefore, from a medium-term perspective, using the turbulence in the second quarter, this golden pit can be used to strategically lay out strategic assets at a low point.

Zhang Yidong pointed out that Trump's tariff policy announced the full imposition of equal tariffs on April 2, leading to global inflation. What was directly impacted was the stock market, especially US stocks, which clearly started a bear market. There were actually no winners in this trade war that surpassed expectations. In the short term, it has affected global capital markets and destroyed global social wealth. In particular, America also stoned itself in the foot.

Judging from last week, the Nasdaq, the Dow, and assets represented by crude oil, the Japanese stock market, and the emerging market stock market all experienced a sharp decline. The sharp drop in gold and Bitcoin over the past few days just reflects that market logic has moved from emotional logic to liquidity shocks. It can even be compared to the global liquidity shock caused by the US stock market boom caused by the 2020 US epidemic. In the short term, the possibility that the US will expand its schedule to hedge against liquidity shocks can occur at any time, even before the Federal Reserve cuts interest rates.

Zhang Yidong believes that after the rebound, it will be difficult for US stocks to change their general trend of falling. The fundamental future of America is to decline first and then stagnate. This is a probable event, so the entire US bull market may have come to an end, and a bear market will basically be established.

Faced with current external risks, Zhang Yidong believes that whether China is A-shares or Hong Kong stocks, it is only an impact on the affected risk appetite. To really look at the medium term, we still have to look at fundamentals or internal factors. Internal factors are the core variables that determine things. After a short-term shock, the global capital market will be divided along with liquidity risk (release) and the hedging effect brought about by the relaxation of the Federal Reserve. Ultimately, it depends on whose fundamentals dominate.

Looking ahead to China's capital market, he believes that the second-quarter adjustments will not change the core logic of this round of asset valuation in China; internal factors are the key variables that determine the major trends in the A-share and Hong Kong stock markets. There is a misconception, that is, “stupid, kneeling”. As long as you go back to zero interest rates and zero tariffs, you can escape a robbery, but in fact, you can't escape it. Because the US is concerned about the deficit, not whether you have zero tariffs on the US. For example, in Vietnam, it's useless to “kneel.” As long as there is a deficit with the US, he has to levy taxes, and not only is it taxed; he even wants you to buy his long-term treasury bonds. He just wanted to do whatever it takes to tear down the east wall to fix the west wall and repair his balance sheet.

Zhang Yidong's view of the macro is “stable east and west”. With east stability, China is stable. We are constructing a dual-cycle economic development pattern, which has become a stable anchor for world economic growth. However, the West, and Trump in particular, is not going away. His bullying, whether in the trade war or the Russian-Ukrainian conflict, has torn it apart by himself as a beacon of the so-called community of human destiny, universal values, and international order.

Zhang Yidong believes that in the short term, the strength of China's policy hedging will definitely be visible in the next week or two, whether it is a downgrade or fiscal expansion. Macro fundamentals are “steady from east to west,” so the core of stock market fundamentals, whether this round of market conditions can continue, is whether the development trend of technology and new consumption will continue.

In the next few years, Zhang Yidong believes that the power game between China and the US will be a major change that has not occurred in 100 years. It will be difficult to reverse it, and the external environment will become more and more complicated. The position of China Securities listed in the US stock market has encountered increasing systemic risks. Therefore, in this context, Hong Kong stocks, as the preferred market for Chinese new economy enterprises to finance overseas, may even be the most stable alternative to Chinese securities.

If the wave of technology continues, he believes that China's tech bull market will continue. In other words, whether it's Hong Kong stocks or A-shares, the continued wave of technology is the winner and loser for continuing to reach new highs in the second half of this year and next year. I am very confident that this technological breakthrough, a breakthrough on the application side, will take the lead in China. Therefore, Zhang Yidong believes that by the middle of this year, if it is fast, June or July, and in the fourth quarter, China's robots and AR applications in China will have a sustainable commercial monetization path.

In terms of Hong Kong stocks, Zhang Yidong believes that the current Hong Kong capital market is not the same as a few years ago. In the past, the main characteristic of Hong Kong's capital market was the offshore market, which had no “anchor,” but now it has an “anchor”. The continuous inflow of domestic capital and the central government's care are the driving force behind the Hong Kong capital market. We must follow the physical hand and invest in value. Therefore, in the second quarter, he believes that to hedge against overseas risks, the country's policy will be more active. Stabilizing the economy, stabilizing the stock market, and stabilizing the property market, in particular, stabilizing the stock market is a good strategy that can raise expectations and boost confidence.

If Hong Kong stocks can be stabilized in a timely manner, and the offshore RMB exchange rate can be stabilized in a timely manner, then subsequent market adjustments for the entire Hong Kong stock market and even A-shares are basically in place, and there is very limited room for further progress. Well, it also means that it may be very soon. If Powell can take some final measures, then Hong Kong stocks and A shares will hopefully take the lead in stabilizing after short-term adjustments with US stocks, thus becoming safe havens for turbulent events. This is an optimistic situation.

In the medium term, Zhang Yidong has a firm view of Chinese assets. Because China's asset revaluation is far from over, particularly the revaluation of technology and new consumption, he believes it has only just begun. Therefore, from a medium-term perspective, using the turbulence in the second quarter, this golden pit is a dipping point to strategically lay out strategic assets.

The first dimension, the core is still the main line of technology. The main line of science and technology is worthy of deep cultivation, knowledge and energy. The second one is also relatively the main line. It is an opportunity in the field of new consumption; we need to find Alpha. The third strategic asset, which is based in the medium term and is worth allocating, is traditional strategic assets such as military industry and gold that hedge against the fragility of the international order and hedge against the turbulence of the original international system. Gold, in particular, has declined in the short term due to liquidity shocks, so once Powell has hedged, he believes that gold still has strategic allocation value. However, the military industry, the global military industry is expanding greatly. This is a turbulent world, which is no longer the same as the order after World War II.