CITIC Securities: In August, maintain a tactical overweight view on A-shares and U.S. stocks

According to the Zhitong Finance APP, Guotai Junan released a research report stating that in August, it maintains a tactical overweight view on A-shares and U.S. stocks. Recently, the improvement in market risk appetite continues to dominate the pricing of major asset classes, with risk assets significantly outperforming safe-haven assets, in the order of equities > commodities > bonds. There is a high level of optimism for A-shares due to continuous upward revisions of economic prosperity expectations, strong national support for capital market development, stable market liquidity, gradually improving risk appetite, and solid optimization of micro trading structures. There is relative optimism for U.S. stocks, as the short-term economic recession is difficult to confirm and the probability of interest rate cuts is increasing.

The main points from Guotai Junan are as follows:

The current low interest rate environment raises higher demands for asset allocation research. Under the guidance of the policy goal of high-quality development in the capital market, the entry of medium- and long-term funds into the market has become a long-term trend, and the continuous enrichment of diversified investment tools provides good conditions for multi-asset allocation strategies. If assets are likened to food, then factors are like the nutritional elements in food. Optimizing allocation based on factors is equivalent to "penetrating" food and adjusting nutritional components. Allocating from the perspective of factors can achieve true risk diversification. Starting from the construction of macro factors, a scientifically balanced Strategic Asset Allocation (SAA) plan has been developed by diversifying macro super-risk expectations (with an annualized return of 9.1% as of the end of July and a Sharpe ratio of 1.57). Based on this plan and macroeconomic assumptions, the bank sets the strategic benchmark proportions for equities, bonds, and commodities at 45%, 45%, and 10%, respectively, with an upper limit deviation of 10%.

The improvement in risk appetite is the core factor affecting the current tactical asset allocation. Multiple factors are expected to support the continued strong performance of equity assets. The enthusiasm for trading in Chinese technology breakthroughs and emerging industries continues to rise, stable total policy expectations, and marginal fiscal stimulus in infrastructure boost market risk appetite. The state places great importance on the development of the capital market and has recently continued to promote institutional optimization. These factors are expected to continue supporting the performance of Chinese equities. Overseas markets are also welcoming an improvement in global investors' risk appetite, with reduced concerns over tariff trade boosting marginal optimism for U.S. and Japanese stocks. The Tactical Asset Allocation (TAA) plan has an annualized return of 55% for 2025, with a Sharpe ratio as high as 1.65 in the full sample backtest.

August allocation recommendations: Equity allocation weight: 55%; bond allocation weight: 40%; commodity allocation weight: 5%; among equity assets, the bank is highly optimistic about A-shares and Hong Kong stocks due to continuous upward revisions of economic prosperity expectations, strong national support for capital market development, stable market liquidity, and gradually improving risk appetite. The bank is marginally optimistic about U.S. and Japanese stocks, which are boosted by improved risk appetite from global investors and reduced concerns over tariff trade. Among bond assets, the bank is relatively cautious about government bonds, which are suppressed by the triple factors of market risk appetite revision, redemption pressure, and fluctuations in funding prices. In commodities, the bank believes that oil prices may still be subject to dual pressures from supply and demand. In global foreign exchange, the bank believes that the stable and improving trend of China's economic operation, along with stronger growth momentum compared to other major economies, is expected to support the stability of the RMB exchange rate center.

Risk warning: There are limitations in the analysis dimensions, subjectivity in model design, deviations between historical and expected data, adjustments in market consensus expectations, and limitations of quantitative models