Yang Delong: Turmoil in the international situation has caused significant adjustments in global stock markets; long-term investment opportunities still exist.

How the Middle East conflict highlights the long-term attractiveness of China’s capital market?

In March, the A-share market experienced significant adjustments due to the escalation of the Middle East conflict, with the index falling below the 4000-point mark, affecting investor confidence to some extent. However, it is clear that the Middle East conflict has merely disrupted the rhythm of this slow bull market and will not end it, as the fundamental logic supporting this slow bull market has not undergone any fundamental changes.

The successful convening of the two sessions in March saw the government work report set the economic growth target for China at 4.5% to 5% for 2026, with a CPI target of 2%. In 2026, more proactive and effective macro policies will be implemented to boost domestic demand and promote economic recovery, leading to a certain improvement in the economic fundamentals, which is also the foundation for this slow bull market.

The “14th Five-Year Plan” outline has been reviewed and approved, with the focus on technological innovation still being a key area of interest for the capital market in 2026, such as humanoid robots, chips and semiconductors, computing algorithms, controllable nuclear fusion, quantum technology, biomedicine, commercial aerospace, and so on. Although there were significant increases last year, they remain the focus of the market this year, and after a period of adjustment, these technological areas are still worth paying attention to.

Moreover, the trend of residents’ savings shifting to the capital market has already formed. This year, up to 50 trillion in time deposits are set to mature, with interest rates exceeding 3% three years ago now dropping to around 1.2%. Therefore, when these deposits mature, residents face a choice: continue investing in deposits yielding only 1.2% or seek products with higher returns. After a year and a half of stock market gains, many funds have performed well, which may attract some residents’ savings to shift significantly towards the capital market, making it a new reservoir for residents’ savings after the real estate market, thus the underlying logic supporting this bull market has not changed.

In the past two years, China has made significant breakthroughs in technological innovation. Whether it is breakthroughs in high-end military weapons, such as the successful test launch of the Dongfeng-31AG missile, or breakthroughs with the sixth-generation fighter jets, it demonstrates our military strength to defend the nation. This Middle East conflict further highlights China’s advantages in military might as well as economic strength, making China the safest country in the world and the only country that the U.S. does not dare to provoke casually, which will boost global capital’s confidence in China’s capital market. On the other hand, we have achieved many breakthroughs in technological innovation. After the launch of the DeepSeek model, large models like Qianwen, Doubao, and Yuanbao have followed suit, capturing over 60% of the international market share, indicating our potential advantages in large model applications. Breakthroughs in humanoid robots, embodied intelligence, and chips and semiconductors further enhance investor confidence. Therefore, although the Middle East conflict led to significant market declines in March, it will not change the trend of this slow bull market. I believe that with the disclosure of annual reports in April, some industries and stocks with better-than-expected annual report performances may see significant rebounds, leading the market to a larger-scale upward movement.

The current situation in the Middle East remains ambiguous, with an uncertain future. U.S. President Trump is known for his indecision, and some joke that the only person who can defeat Trump is the Trump of the next day. Trump’s capricious style has even led investors to coin a term called “TACO trading”—where he first releases significant bad news, causing a market plunge, and when the market is in despair, he then releases significant good news, leading to a strong market rebound. This also creates considerable uncertainty about the outcome of the Middle East conflict, resulting in significant volatility in the capital markets.

From the perspective of the Middle East situation, all three parties involved in the conflict have shown signs of wanting to back down and do not wish to drag the war into a protracted conflict or attrition battle, as it would have very adverse effects on the world economy, international oil prices, and the global capital market. The closure of the Strait of Hormuz, a key oil transport route, has directly led to a 20% halt in oil transportation, causing many countries with insufficient oil reserves to begin implementing power rationing and queuing for fuel. Fortunately, our country has over a hundred days of oil reserves, and over the past year, we have been vigorously developing new energy sources to replace traditional energy, significantly reducing our dependence on oil. Additionally, we continue to import oil through previously repaired pipelines from Russia, Central Asia, and the Middle East, which has kept domestic oil prices stable. Although the rise in international oil prices has triggered a mechanism for price adjustments in domestic refined oil, there has been no oil shortage. This is attributed to the preparations we made in advance over the past year.

The Federal Reserve’s March interest rate meeting, as expected, maintained its stance and paused rate cuts. After the meeting, Fed Chairman Powell stated that whether there will be a rate cut this year primarily depends on whether the oil price increases caused by the Middle East conflict will trigger widespread inflation. The Fed’s monetary policy objectives are twofold: first, to prevent inflation, and second, to maintain full employment. If inflation rises significantly, the Fed may continue to delay rate cuts, with some already predicting that there will be no cuts this year. This is unfavorable for the capital market and prices of gold and other assets.

Recently, international gold prices have ended their previous significant upward trend and have seen a sharp decline. Although gold is a traditional safe-haven metal that generally benefits from wartime conditions, this conflict occurring in the Middle East has led to rising oil prices, delayed expectations of Fed rate cuts, and some institutions selling gold for liquidity, resulting in a drop in gold prices instead. Of course, from a long-term perspective, the logic supporting the long-term rise in gold prices has not changed, so the sharp drop in gold prices actually provides an opportunity for earlier bearish investors to position themselves at lower levels. I have suggested that investors allocate 20% of their investment portfolio to gold assets to hedge against the risk of currency depreciation, and this strategy still appears valid. Over the past few years, I have been optimistic about the trend of gold and silver, and this has been perfectly validated. Investors can consider gold and silver as part of their asset allocation, focusing on long-term holdings rather than short-term fluctuations, which is the correct strategy; short-term trading can easily lead to losses.

The recent market adjustments have indeed slowed the pace of the shift of residents’ savings to the capital market. Some deposits maturing may choose to invest in insurance or bond funds and other fixed-income products, and rapid market upswings often correspond to accelerated phases of residents’ savings moving to the capital market. However, from a long-term perspective, the trend of residents’ savings shifting to the capital market has already formed and will not be interrupted. Therefore, looking at the entire year, the shift of residents’ savings to the capital market will significantly boost the sales of equity funds. Several new funds have already launched this year with initial sizes exceeding 5 billion, which is a positive signal. Residents’ savings now need to seek products with higher yields, and a strong capital market undoubtedly increases its attractiveness. In the past, residents’ savings primarily flowed into the real estate market, but now, with the overall adjustment of the real estate market, it is difficult for it to exhibit sustained performance. In many areas, the supply-demand relationship in real estate remains in oversupply, with only properties in core areas of first-tier cities having some degree of scarcity, potentially rebounding first, although transaction volumes are unlikely to recover quickly. This has also allowed the capital market to become the second-largest reservoir for residents’ savings after the real estate market, which is the foundation for this slow bull market.

From the market’s perspective, the emergence of a slow bull market in the capital market is of great significance for boosting domestic demand. It can effectively enhance investor confidence, drive a recovery in the real estate market, and support the development of technological innovation. Therefore, this bull market is of significant importance for our economic growth and economic transformation. Now that this slow bull market has been initiated and formed a favorable trend, I actively call on all sectors of society to nurture this hard-won slow bull market. This is an important way to increase residents’ savings and wealth and is also a crucial aspect of driving economic growth, promoting the development of new productive forces, and finding a second curve for economic growth. (This viewpoint is for reference; investment should be cautious. Image source: Internet)