CITIC Securities Mingming: The RMB exchange rate may show a fluctuating and slightly strong trend in the second half of the year, and the yield curve of government bonds is expected to "steepen first and then flatten."

CITIC Securities' 2025 Capital Market Forum opened on May 28, 2025, in Shanghai, with the theme "Striving to Open a New Chapter." The conference provided a mid-term outlook on the Sino-U.S. economy, global macro and strategic landscape, A-share market, and Hong Kong and U.S. stock markets, engaging in thorough discussions on the path to breaking through domestic and international economic challenges under multiple changes and various hot topics.

CITIC Securities Chief Economist Mingming delivered a speech on the theme "Changes and Outlook of the Sino-U.S. Economic Landscape." He stated that the global economy is undergoing deep restructuring. The U.S. is currently facing structural contradictions such as the Triffin dilemma and high fiscal deficits. Employment, consumption, and private investment are maintaining resilience in the short term, but the Federal Reserve may be hesitant to lower interest rates due to the intertwined pressures of inflation and economic weakness.

In contrast, China's economy is showing signs of recovery amid fluctuations: retail consumption, infrastructure, and manufacturing investment all have highlights, and exports exhibit certain resilience. There is potential for fiscal policy to further strengthen in areas such as consumption and social security, new infrastructure, and technological innovation, while there is still room for reserve requirement ratio cuts and interest rate reductions in monetary policy. With more proactive macro policies, China is expected to achieve a GDP growth target of around 5.0% in 2025.

Regarding asset allocation, Mingming believes that the stock-bond cost-performance indicators show that the valuation level of A-shares remains advantageous; government bond yields still have room to decline, and the yield curve is expected to "steepen first and then flatten." Under relatively balanced disturbance and support factors, the RMB exchange rate may show a trend of oscillating strength in the second half of the year.

CITIC Securities Chief Macro and Policy Analyst Yang Fan delivered a keynote speech titled "Sharpening the Blade to Stabilize the Storm." She noted that looking back at the two typical periods of "uncertainty" during "Trump 1.0" and the "pandemic," investment and consumption activities in the private sectors of global economies tend to slow down, and the differing directions of government deficit expansion lead to structural differentiation in growth. Looking ahead to the current "Trump 2.0" period, the similarity may lie in the private sector facing investment contraction, while most economies will actively expand fiscal policies to counteract; the difference is that the "cost-push inflation" faced by the U.S. this time will erode residents' purchasing power, causing domestic employment and consumption to weaken simultaneously, bringing risks of weakened external demand to other countries.

In terms of the geopolitical environment, in the short term, the U.S.-China tariff war is expected to ease temporarily, with August possibly being the next critical time point for U.S.-China dynamics; in the long term, this round of trade conflict may profoundly reshape the global industrial landscape, and the four foundations supporting the dollar system have begun to loosen, potentially continuing the trend of "rebalancing" global assets.

On the domestic macro and policy front, with tariffs looming, it is expected that short-term "diverting trade" and "boosting exports" can support this year's foreign trade resilience, but the impact of tariffs on PPI will transmit from "upstream raw materials" to "midstream and downstream export chains," with price pressures remaining very prominent. Currently, there are two major bottlenecks in the domestic circulation: first, in the post-pandemic era, China's consumption has not shown a "gap-filling" recovery similar to that overseas, and more policies need to be introduced to enhance residents' consumption willingness and provide quality consumption supply through various channels. Second, during the economic development process, some local industrial investments exhibit certain converging characteristics, exacerbating structural contradictions in the industry. In the future, efforts should be made to optimize certain local government behaviors and focus on industrial upgrading and structural adjustment In response to global uncertainties, our country needs to cultivate internal strengths and strategize with a bottom-line mindset. As the "14th Five-Year Plan" begins, we must continuously improve the direction of long-term reforms in the Chinese economy.

Regarding stock investment strategies, CITIC Securities Chief A-share Strategist Qiu Xiang believes that looking ahead to the next year, Chinese equity assets are expected to usher in an annual bull market. Starting from the fourth quarter of 2025, it is anticipated that major global economies will synchronize again in terms of economic and policy cycles, with simultaneous fiscal and monetary expansion, leading the Hong Kong and A-share markets to potentially experience an index bull market; there may also be a significant shift in style, transitioning from the small and medium-cap rotation that has lasted for four years to a trend-driven market for core assets.

In terms of allocation, it is recommended to focus on three long-term trends: first, the trend of enhancing China's independent technological capabilities; second, the trend of Europe rebuilding its independent defense and enhancing energy, infrastructure, and resource reserves; third, the policy trend of China accelerating the improvement of social security and stimulating domestic demand potential. Behind these three trends lie three changes in industry selection direction: first, the transition from improving the localization rate to enhancing cutting-edge original technology capabilities; second, the transition of China-Europe trade from being primarily focused on goods exports to balancing goods trade and technological cooperation; third, the transition of domestic demand from a consumption logic driven by channels and average transaction value to a service consumption logic driven by product innovation and brand upgrading.

From a strategic perspective, the primary strategy should be to reshape the Hong Kong-A share ratio and further enhance the allocation to Hong Kong stocks; secondly, to return to core assets, focusing on leading companies in emerging industries as well as traditional industries; then, to consider industry selection issues, we recommend focusing on the aforementioned three long-term trends that are not affected by the China-U.S. trade war; finally, timing issues should be considered, with the end of the third quarter to the fourth quarter potentially being a key entry point for the index bull market.

CITIC Securities International Chief Economist Leif Eskesen also delivered a speech on the global macroeconomic outlook at the first-day forum. He pointed out that from the perspective of the U.S. economy, current hard data remains resilient, but soft data continues to weaken, with both business and consumer confidence declining simultaneously, and inflation remains sticky. On the policy front, Trump is accelerating the fulfillment of campaign promises in tariffs and immigration, with fiscal expansion and a contraction in labor supply jointly raising the risk of stagflation in the U.S.

From the perspective of the Chinese economy, under external shocks, the pace of policy has significantly accelerated, with the fiscal deficit rate raised to 4%, and multiple stimulus measures focusing on consumption and infrastructure, which may bring about a short-term recovery momentum. However, it is still necessary to observe the reversal trend of China's domestic demand recovery. In the medium term, reform and technology remain the core drivers of China's growth, with policies promoting structural transformation through easing access to the service industry and encouraging the development of high-end manufacturing and artificial intelligence.

From an overall Asian perspective, the inflation trend is gently retreating, and export-oriented economies generally face headwinds from external demand, while domestic demand-driven economies show stronger resilience. Taking Japan as an example, in the face of weak exports and external uncertainties, Japanese policies will tend to be more long-term oriented, focusing on improving factor allocation efficiency. Finally, from a long-term cyclical perspective, the current policies of major global economies are still influenced by traditional growth models, which misalign with future-oriented technology-driven paths. Without effective coordination mechanisms, this may suppress global economic growth Risk Warning and Disclaimer

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