GF Securities’ Liu Chenming: Rejecting Traditional Macroeconomics—Examining the 2026 Investment Window from Debt Resolution and Profit Structure Changes | Alpha Summit

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On December 19, at the "Alpha Summit" co-hosted by Wallstreetcn and CEIBS, Liu Chenming, Assistant Director and Chief Strategist of GF Securities, delivered a speech titled "Breaking Free: Overcoming the Shackles of Historical Experience—2026 Annual Strategy."

He stated that in 2025, global assets will display the unique phenomenon of "AI tech stocks and commodities (gold, copper)" rising together. This is not a logical contradiction but a joint pricing of the world’s major economies in response to the core issue of "debt." The only ways to resolve debt are either by relying on technological progress to boost total factor productivity (the AI path) or by inflating to dilute debt (the resource path). These two routes form two sides of today’s macro logic.

Liu Chenming believes the profit structure of China’s equity market has fundamentally changed, evolving from the past "80/20" to today's "60% traditional domestic demand + 40% emerging industries and overseas." Among these, the overseas chain shows higher profit quality than domestic business, becoming the core for supporting market resilience.

Looking forward to 2026, he believes the upward trend in A-share ROE will become even clearer. Under a context of restrained valuations, strengthened regulatory control, and the entrance of institutional and long-term funds such as the state team and insurance capital, the market will shift from a "fast bull" to a healthier "slow bull." As AI, semiconductors, and resource sectors face obvious "supply constraints," the industrial trend is unlikely to end soon.

Key viewpoints from the speech:

1. Starting with the most classic sovereign debt evolution equation, under the premise of no substantial default, there are three ways to resolve debt: real growth outpaces real interest rates (growth to resolve debt), inflation overshoots expectations (inflation to resolve debt), and fiscal tightening (fiscal to resolve debt). Under these paths, both AI and gold will ultimately benefit.

2. The profit structure of A-share listed companies has fundamentally changed: the profit share of emerging industries has risen from 20% a decade ago to 40% today, while traditional domestic demand (real estate, infrastructure, consumption) has dropped to 60%. This means the traditional logic that "stocks are the barometer of the economy" needs to be revised; even if domestic demand is under pressure, as long as 40% of advanced manufacturing and overseas sectors remain resilient, A-share ROE can still achieve cross-cycle stability and recovery.

3. The price of copper is likely to repeat gold’s performance at the beginning of 2024. As global inventories in major destinations are at historic lows and global fiscal and monetary easing lift manufacturing next year, the copper price has opened a new major rally wave after breaking the 100,000 CNY mark in Q4. This will become a core focal point in near-term asset allocation.

4. Although active equity-based public mutual funds are sluggish in issuance, deposit migration is already evident among ultra-high-net-worth groups. As fixed income product yields fall below 2%, funds seeking 5%-10% annual returns with controllable volatility are entering via private all-weather/hedge and index enhancement strategies—this will be the most certain incremental funding pool for 2025.

5. The strong stay strong is an “expression” of economic structural transformation. The top ten A-share firms by market cap (excluding finance) account for just 17%, much lower than the US at 34%. In the context of an AI industrial revolution, capital focus on leading companies is not "crowding," but a natural result of structural transformation as the traditional economy no longer flourishes across the board and liquidity gathers with a few globally competitive tech leaders.

6. December to January is the key “the more it drops, the more you buy” layout period of the year. Looking to 2026, as February-March is typically the "spring stir" period of highest risk appetite, the corrections in December-January are rare entry windows. In the first year of ROE improvement, maintain a bull market mindset, especially for segments like Hang Seng Tech and domestic computing power, semiconductors, etc., that have already adjusted sufficiently.

The following is the live speech transcript:

First, thank you very much to Wallstreetcn for the invitation. At such a key turn of the year, I’d like to share some overall views on major asset classes in the new year, including some basic views on A-shares and Hong Kong equity markets.

Global Market Review: Performance Driven by Tech and Resource Assets

Before looking ahead to 2026, I want to briefly review the past year’s market performance. I broke down the capital markets of several major countries and regions: US stocks, Germany, China A-shares, as well as Japan and Korea. For each market, I selected about a dozen key industries: blue bars denote earnings contribution, grey bars denote valuation contribution. As everyone knows, the core drivers of stock price rises are twofold: profit growth and valuation uplift.

Overall, the industries with the greatest gains were highly consistent across major markets, mainly concentrated in tech and resource sectors, especially non-ferrous metals. This is a very important common characteristic.

Next, let’s analyze the tech sector separately, initially excluding Germany, as AI is less correlated with its capital market. Focus is on China, the USA, Japan, and Korea—countries highly related to AI industries. Results show that tech stocks’ gains over the past year were generally healthy, mainly driven by earnings growth rather than mere valuation expansion.

For example, in the US market, a large part of the tech sector’s gains came from profit growth; for A-shares, the tech sector was also mainly propelled by earnings; in Japan, valuation contributed more; and for Korea, the rise was again mainly driven by earnings. In general, although tech stocks rose considerably in these countries, the foundation was profit improvement.

Core Macro Logic: Dual Pricing of AI and Resources Under Global Debt Issues

Here, there’s an apparently contradictory phenomenon worth discussing: This year, tech and resources, especially gold—these two types of assets almost hit historic highs simultaneously. Traditional thinking holds gold as a non-yielding asset, a risk-averse safe haven; AI tech stocks, by contrast, represent extreme optimism for future growth and, thus, high risk appetite. Logically, these seem opposed.

But if we view this phenomenon from a higher level—that the world’s major economies all face a core "debt problem"—then it’s no longer contradictory.

Whether it’s local government debt in China, US fiscal deficits, Japan’s long-standing high debt, or the EU’s debt problem, debt has become the sharpest issue for all major economies. In theory, solving debt is not complex: fiscal tightening, high economic growth, or inflation to dilute debt.

But in reality, fiscal tightening is nearly impossible under today’s political and social climate. It’s much harder to tighten after extravagance. All countries struggle to cut spending quickly. In this context, only two viable paths remain: rely on economic growth, or on inflation.

With global population growth slowing, core economic growth can only rest on technological progress—improved total factor productivity. The leading technological variable now is AI. At the same time, inflating debt away means resource commodities with global pricing will benefit for the long run, including gold, copper, and other basic metals.

So the two core asset trends globally this year—AI and resources—may seem opposed but are both market pricing responses to "how to solve global debt" via two different routes: proof of the same macro logic.

Transformation of China’s Market: From Domestic Demand to ‘Overseas + Advanced Manufacturing’

Next, I want to emphasize the change in profit structure in China’s equity market. Many investors still use traditional macro frameworks to understand A-shares, seeing the stock market as the "barometer" of the economy, but this logic has clearly failed in the past 2–3 years.

If we break down A-share listed company profits, a key change emerges: previously, about 80% of profits came from traditional domestic demand, with only 20% from emerging industries. Now, it’s changed substantially to around 60% vs 40%.

The 60% still highly related to domestic demand does face pressure, but its pace of decline has slowed. It now provides more of a "floor" function. The other 40% comes mainly from advanced manufacturing, tech, and overseas-linked sectors—here, profit elasticity is markedly higher.

A key statistic is revenue share from overseas. Currently, A-shares overall derive over 20% of revenue from overseas, and it’s still rising. More importantly, the profit quality of overseas income is significantly better than that of domestic business. In terms of gross margin, domestic business is about 14%; overseas, it can reach 20% or even higher.

This means that even if domestic profits remain under pressure, as long as overseas demand is relatively stable, the overall profits of Chinese listed companies will not suffer systemic decline. This is also an important reason why market performance and the macro "feel" diverged this past year.

2025 Demand Outlook: Manufacturing Pickup and Medium-term Commodities Logic

On that basis, let’s examine earnings outlook for 2025. For the 60% traditional segments, my view is downside risk is limited, but a sharp rebound is also unlikely. The real source of market elasticity remains the 40% emerging sectors, hinging on overseas demand.

Will overseas demand weaken significantly? For now, I’m not pessimistic.

First, major export destination countries are generally fiscally and monetarily loose; second, global manufacturing inventories are historically low, so restocking could be rapidly triggered by just marginal demand improvement; third, politically, whether the current or next US administration, no one wants a major economic slowdown in an election cycle.

Summing up, the chance of a global manufacturing PMI rebound in 2025 is not low, which will support China’s export chain as well as non-ferrous and other resource commodities.

On that, let’s look at resources—especially copper and gold. Gold broke out of a decade-long sideways range in Q1 2024, then entered an upward trend; copper likewise broke key price thresholds in Q4 2024, its trend similar to gold’s previous breakout.

This wasn’t short-term mood, but the result of multiple structural factors: the global manufacturing upturn, AI-driven power and grid demand, and a long-running supply-side constraint. These all mean the medium-term logic behind resources prices is unchanged.

Valuation and Fund Flows: ‘Slow Bull’ Based on Rising ROE Expectations

Next, on valuations. There’s a widespread belief in the market that A-share valuation gains typically last one to two years, and the third will see a clear correction. I don’t think this historical rule necessarily applies now.

There are three main reasons: First, this round of valuation recovery has overall been very restrained, far from past extremes; second, regulators and long-term capital have evidently gotten better at moderating market pace; third, 2025 will likely be the first year of rising ROE for A-shares overall.

Even with no further valuation expansion, current levels have some margin of safety. Comparing horizontally, China’s and the US’s valuation ratio is still at roughly 2018 levels, which is unreasonable given the current industrial competition structure.

So where will the funds come from? There are three relatively certain sources of incremental capital.

The first is long-term national team-type funds, whose stability and persistence have been repeatedly proven; the second is insurance funds, whose equity allocation shares will naturally increase as premium scale grows; the third is deposit migration by mid-to-high net worth groups. With fixed income yields falling, demand for 5–10% annualized, low-volatility asset allocation is rising.

As for mass retail deposit migration or a full return of foreign capital, these are less certain for now. This means this rally is more likely to play out as a "slow bull" rather than a fast, one-sided bull market.

Industrial Trends & Timing: Layout Window Amid Supply Constraint

Finally, at the industrial level, why can some sectors remain strong for years? The core reason is that supply constraints are becoming the dominant variable again. Whether it's AI computing power, semiconductors, non-ferrous resources, or basic power infrastructure—capacity expansion is objectively limited, unlike past cycles of rapid capacity expansions leading to in-fighting.

Historically, as long as supply can’t be quickly released, sector trends won’t end easily.

Looking at rhythm, in previous bull markets, leading sectors typically see a correction of around 20 trading days and 20% pullback. At present, whether it’s Hang Seng Tech, chips, or the AI industry chain, most are at or close to such a correction window.

So, in terms of time and space, December through January is relatively worth watching as a layout window.

Above are my core views for the 2025 equity market and major asset structures. Overall, the present rally is not based on sentiment or short-term stimulus, but on structural profit change, industry evolution, and capital structure adjustment.

It should be emphasized that uncertainty remains, but what’s different is that the key variables now driving market trends have shifted. The importance of traditional macro indicators is waning, and industry trends, global demand, and supply constraints are becoming the dominant pricing forces.

Against this background, investment strategies must also adapt: rather than try for a single macro inflection point, it’s better to focus on structural opportunities and participate patiently, controlling rhythm in relatively more certain directions.

My sharing today is mainly at the framework and logic level. I hope it can provide some useful ideas for your asset allocation and investment decisions in the new year.

That’s all for my sharing. Thank you all.

Risk Disclosure and DisclaimerMarkets are risky; investments must be made with caution. This article does not constitute personal investment advice, nor does it take into account any specific user's investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their own situation. You invest at your own risk. ```