The A-shares will become more "dominated by us" in the future! Chen Guo: China's new energy is a potential mid-term winner

What market concerns are reflected in Chen Guo’s shift towards controlling positions?

21st Century Economic Report reporter Sun Yongle, Shanghai report

The outlook for the U.S.-Iran conflict remains highly uncertain, global financial market volatility is intensifying, and investor panic continues to spread. On March 23, global stock markets experienced a “Black Monday,” with the Shanghai Composite Index falling below 3,800 points; on the 24th, global asset classes further diverged, with international oil prices dropping and stock markets and gold prices rebounding.

“As long as there is no severe recession or crisis overseas, the impact on the Chinese economy will be limited, and the A-shares will gradually become more ‘self-oriented.’ We believe that new energy may have both energy substitution and growth attributes and is one of the relatively certain directions in the medium term,” said Chen Guo, Deputy Director and Chief Strategist of Dongfang Caifu Securities Research Institute, in an exclusive interview with 21st Century Economic Report.

Previously, after the launch of the “9·24 market” in 2024, Chen Guo was the first to propose that “A-shares are a reversal, not a rebound”; subsequently, he gained attention for his strong optimism regarding core assets represented by “effervescent assets” in the Hong Kong market; since 2025, he has continued to be bullish on the “A-shares revaluation bull market” and has advised focusing on China’s domestic demand.

Recently, Chen Guo again expressed market-related views, stating, “At this position, controlling volatility and positions is the first priority, and then focusing on mid-term winners within the structure.” This clear shift in perspective quickly sparked widespread market discussion.

In this interview, Chen Guo pointed out that the current market is in a “crisis trading” mode (hedging, rising oil and gas chain), trending towards “stagflation trading,” and ultimately transitioning to “normal trading.” In an environment of uncertainty, investing in directions with higher certainty is a strategy. In this round of the oil crisis, China’s new energy industry is a potential mid-term winner.

Looking ahead to the 2026 market, Chen Guo believes that this year, A-shares will exhibit a sort of “N”-shaped trend, while the Hong Kong market has value at low levels globally. A-shares overall need some patience in the short term; logically, the situation in Iran is expected to clarify within the next month to a quarter, and at that time, A-shares are also expected to benefit from reduced uncertainty by shifting from defense to offense; the Hong Kong market is suitable for gradual positioning by value investors, and once expectations for domestic demand in China improve, it has upward elasticity.

21st Century: You recently proposed that “controlling volatility and positions is the first priority, and then focusing on mid-term winners within the structure.” Could you explain the core logic and risk considerations behind this viewpoint?

Chen Guo: Since the situation in the Middle East has not cooled down, especially with the Strait of Hormuz nearing blockade and some oil and gas infrastructure damaged by conflict, recovery in the short term is difficult. The macro assumptions of the global financial markets—including economic growth expectations and liquidity expectations—still face significant uncertainty.

Increased uncertainty tends to raise volatility. Managing volatility through hedging tools or position management is one approach. Additionally, investing in directions with higher certainty in uncertain environments is another strategy. For example, during the 1970s oil crisis, Japan’s auto industry was a mid-term winner; in this round of the oil crisis, China’s new energy industry is a potential mid-term winner.

Before this conflict, global stock markets were already at historical highs, especially driven by U.S. AI capital expenditure and economic growth models, which may not sustain creating new jobs or improving consumption, and could instead cause employment shocks. The U.S. “shadow banking” system’s private credit has encountered issues; the returns and sustainability of AI capital expenditure are doubtful; and the energy crisis may intensify stagflation risks, further constraining economic growth. The liquidity environment faces more uncertainties.

This external environment has a relatively limited impact on China’s economy. Historically, rising oil prices have shown a positive correlation with PPI and profits of state-owned enterprises, but if oil prices stay above $90 for an extended period, demand may contract, and global liquidity expectations could turn negative. During periods like 2008, 2011–2013, and 2022, the trend of A-shares has often been weak.

21st Century: You categorize market trading under the Middle East situation into three phases: “crisis trading, stagflation trading, and normal trading.” Which phase is the market currently in? What is the most likely direction of evolution?

Chen Guo: Expectations regarding the Strait of Hormuz are diverging, with recent oscillations between crisis, stagflation, and recovery outlooks.

Currently, the market’s overall expectation of a rapid “normalization” has been significantly lowered, showing features of intertwined crisis trading (rising oil and gas, mainly safe-haven assets) and stagflation trading (energy substitution and strong-growth industries).

We believe that for a considerable period ahead, the global inflation center will remain elevated, and the market is most likely to evolve towards stagflation trading.

21st Century: With external disturbances ongoing, rising oil prices reinforce global stagflation expectations, making it difficult for the Chinese market to remain unaffected. Do you think A-shares will become more “self-oriented” in the future? Which sectors have the capacity to withstand volatility?

Chen Guo: As long as there is no severe recession or crisis overseas, the impact on China’s economy will be limited, and A-shares will gradually become more “self-oriented.”

We believe that new energy may have both energy substitution and growth attributes, making it one of the relatively certain directions in the medium term. Additionally, “shovel sellers” and leading companies within China’s AI industry still have growth potential. Meanwhile, China’s financial stocks and low-volatility dividend sectors have stable fundamentals and the capacity to navigate volatility.

21st Century: Recently, gold and silver prices have experienced increased volatility. Against the backdrop of a global monetary system restructuring and rising geopolitical risks, what is your view on the investment value of precious metals?

Chen Guo: During the conflict, especially in the first half, precious metals were not favored. For example, in the first half of the Russia-Ukraine conflict, gold prices fluctuated downward. Crisis trading is often accompanied by liquidity pressures, with funds tending to liquidate assets like gold and silver that have unrealized gains and liquidity to meet margin calls.

Additionally, during conflicts, the U.S. dollar index tends to be strong. If the outcome leads markets to believe that the U.S. will win decisively and solidify the petrodollar dominance, gold prices could be suppressed.

However, we assess that this probability is low. If the conflict ends and oil prices retreat from high levels, and if the Federal Reserve continues to cut interest rates and the dollar’s credibility weakens, gold will remain in a bull market.

21st Century: Looking ahead to the Year of the Horse for A-shares, you previously predicted a sort of “N”-shaped trend. Has this judgment changed? What are the key variables for the transition between the first and second halves?

Chen Guo: No, the view remains unchanged. For the Year of the Horse, the A-share market in 2026 may exhibit an “N”-shaped pattern.

Key variables include the clarity of the Iranian situation, whether there will be a major turning point in the U.S. AI industry, further development of China’s AI industry, and whether domestic demand in China shows marginal improvement, along with whether policies will be further supportive.

21st Century: While major Asia-Pacific stock markets are hitting new highs, the Hong Kong market remains relatively lagging. Do you think the current valuation discount of Hong Kong stocks is reasonable? Where are the opportunities for recovery?

Chen Guo: The Hong Kong market has value at low levels globally.

First, the market’s position and valuation are extreme: the Hong Kong market has experienced sufficient correction, and the implied equity risk premium (ERP) of major indices is at historically extreme levels, reflecting very low risk appetite and pessimism.

Second, amid global stagflation risks, Hong Kong’s relative advantage is notable: rising oil prices due to the Iran situation and the risk of recession or stagflation globally make Chinese assets focused on domestic demand—such as internet and electric vehicle sectors—more resilient and relatively indirect in profit impact, thus becoming a “lowland” sought by global capital.

Third, the macro trading framework is shifting: the market is in a “crisis trading” mode (hedging, rising oil and gas chain). It may trend towards “stagflation trading,” eventually transitioning to “normal trading.” This process puts pressure on high-level global stock markets but reinforces the allocation logic for low-level Chinese domestic demand assets.

Fourth, the turning point for “external-internal switching” presents an opportunity: U.S. stagnation risks hinder growth drivers like AI, while China’s AI and domestic demand cycles are relatively independent and may initiate a positive cycle. Global funds are expected to shift from “overseas logic” to “China’s domestic demand logic,” and the Hong Kong market may be at this style transition point.

21st Century: Currently, external shocks are increasing, and various assets are experiencing continuous fluctuations. At this moment, what asset allocation advice do you have for A-shares and Hong Kong stocks?

Chen Guo: A-shares overall need some patience in the short term; logically, the situation in Iran is expected to clarify within the next month to a quarter, and A-shares are also expected to benefit from reduced uncertainty by shifting from defense to offense.

Meanwhile, the Hong Kong market is suitable for gradual positioning by value investors, and once expectations for domestic demand in China improve, it has upward elasticity.

21st Century: You mentioned that the expectation of RMB appreciation may lead to “Asset Revaluation 2.0.” What is the basis for this judgment? How will capital inflows significantly impact certain sectors of A-shares?

Chen Guo: The current trend of RMB appreciation is sustainable, and the RMB exchange rate generally has a positive impact on the capital market.

From the perspective of purchasing power and relative productivity and overall strength, the RMB has a solid basis for appreciation against the U.S. dollar. RMB appreciation will attract global capital flows back into Chinese stocks, benefiting assets with global competitiveness and scarcity in China, including new energy, domestic AI, central SOEs, financial stocks, and innovative pharmaceuticals.

21st Century: The disruptive innovation and code expansion driven by AI are still accelerating. Recently, OpenClaw experienced a phenomenon-level boom, accompanied by risk warnings. How do you view the investment opportunities brought by this wave of AI agents? Which segments of the AI industry chain are worth attention?

Chen Guo: We categorize assets affected by AI into three types for differentiated deployment:

The first includes AI-beneficiary sectors such as computing power leasing, power grids, core supporting infrastructure for AI (fiber optics, optical fibers, MLCC, optical interconnection, etc.), and non-ferrous metals (copper, rare earths).

The second includes AI-immune sectors like steel, construction, and essential consumer goods.

The third includes AI-restructuring sectors such as downstream applications, software, and media.

We recommend focusing on AI-beneficiary assets with strong prosperity certainty, while also paying attention to AI-immune sectors with clear fundamental improvements under policy guidance, and moderately considering sectors benefiting from domestic demand policies (e.g., real estate).

21st Century: Recently, the rapid development of the AI industry has made HALO assets (Heavy Assets, Low Obsolescence)—assets that are difficult to replace and have high barriers—become a main focus of capital allocation. How do you view the investment value of such assets?

Chen Guo: We believe this classification does not apply in the A-share market. For example, in the U.S. stock market, power companies and grid companies are both considered HALO assets. However, in the A-share market, power stocks and grid stocks do not move in tandem; they are more negatively correlated. Using our classification, power stocks are defensive assets in crisis trading, while grid stocks are “shovel sellers” in the AI chain during normal trading.