From Energy Independence to Valuation Uplift: "Safety Premium" Repricing Chinese Assets

Question AI · How do Chinese assets reflect a safety premium amid global stock market volatility?

On Monday, global stock markets plummeted, with the Shanghai Composite Index falling 3.63%, ultimately dropping below 3,800 points, pressuring market sentiment. Against the backdrop of ongoing conflicts between the U.S., Iran, and Israel, as well as disruptions in global energy supply chains, the adjustment in A-shares has triggered widespread investor anxiety.

But at such moments, we need to remain calm and assess whether the current market fluctuations are merely short-term emotional outbursts or a reversal of long-term logic. Stepping beyond daily price movements and viewing from the perspective of macro changes worldwide reveals a very different picture.

A review of recent core viewpoints from several major institutions, as summarized by 21st Century Business Herald, shows that under the grand narrative of the collapse of the old order and the reconstruction of a new one, “safety” has become the most scarce resource globally. Chinese assets, with advantages in energy security, supply chain resilience, policy stability, and pricing power, are undergoing a systematic strategic reassessment.

This may offer another important perspective for understanding the current market.

The global macro environment is experiencing a profound restructuring, and this change could be the main theme of market operation in the coming years.

CICC Research Department’s Zhang Jundong and Fan Li team recently pointed out that since 2026, global markets have shown significant divergence. Emerging markets and non-U.S. stock markets have hit new highs, while within the U.S., there is notable differentiation: tech stocks, mainly in the Nasdaq, are oscillating downward, while the Dow Jones, dominated by cyclical and value styles, performs strongly. Sector-wise, materials, energy, industrials, and defense aerospace generally led gains, while information technology remained weak.

They believe that this “asset reallocation” behind the divergence is an inevitable choice amid the dramatic changes in the geopolitical landscape. Although the foundation of the global bull market remains solid, volatility has increased, and rebalancing across countries and sectors is accelerating.

This divergence reflects the upheaval in geopolitical patterns. Guotai Haitong Strategy Team recently commented that “the Trump administration’s continued hegemonism has damaged the international geopolitical order, U.S. sovereign credit has been significantly weakened, and global central banks and large asset management firms are trending toward reducing U.S. debt holdings.” This indicates that the decades-old U.S.-centered global financial system is undergoing a trust rebuild.

In this macro context, “safety” has become a scarce resource. Liu Yuhui, Vice Director of the Financial Development Center and Chief Economist of Shanghai, pointed out that the old dollar order centered on oil dollars is collapsing, while a new renminbi order based on China’s industrial strength is taking shape. This is a long-term narrative, with the core argument that China’s supply chain integrity and the stability of its massive market are becoming “ballast stones” amid global turbulence.

“Safety has now become the most scarce commodity worldwide. Buying Chinese assets is equivalent to buying safety!” Liu emphasized that this is a clear consensus emerging from global turbulence. The world is rapidly forming a consensus: In the future, safety can only be bought through China’s supply chain. “This is not just a slogan but an irresistible choice.”

Guotai Haitong Strategy Team also believes that stability is scarce, and Chinese markets have lower risk premiums. “The growth logic is a breakthrough in breaking the ‘stagflation’ risk narrative; China’s market is more diverse.” They point out that the downward shift of risk-free yields, reforms in the capital markets, and economic structural transformation are the fundamental drivers and pillars supporting China’s “transformation bull” market.

Recently, the escalation of tensions in the Middle East and volatile energy prices pose severe tests for manufacturing giants heavily reliant on imports. The energy structure differences among major manufacturing economies directly determine their resilience to shocks.

Zheshang Securities Research Institute’s Liao Jingchi Strategy Team provided key data. They state that China’s energy self-sufficiency rate has reached 85%, far higher than Japan and South Korea’s approximately 15%. This difference means that under geopolitical spillover effects, A-shares and Hong Kong stocks are more resilient. The rising crude oil price center could expose the vulnerability of high-valuation Japanese and Korean markets, while China’s relatively stable energy security and industrial system may become a “safe harbor” for global capital.

Caitong Securities Research Institute’s Lian Tongsang and Zhang Wei team offer more detailed data, analyzing the evolution from “cost shocks” to “supply shocks.” In 2024, China’s primary energy self-sufficiency is approximately 83.2%, characterized by “coal as a foundation, oil and gas as supplements, and non-fossil energy sources rising.” Non-oil and gas energy accounts for over 70%, with domestic coal resources combined with nuclear, wind, solar, and hydro power forming a stronger supply base.

In contrast, Japan’s oil dependency is 37.4% with an approximate self-sufficiency of only 17%; South Korea’s are 42.8% and 17.5%, Germany’s 37.3% and 32.0%, Italy’s 42.4% and 25.5%, and the Netherlands’ 47.2% and 27.6%. Overall, these countries show higher oil dependence and lower energy self-sufficiency.

More importantly, the nature of the current oil shock is changing. “The oil shock is no longer just a simple ‘cost increase,’ but a test of the resilience of the global manufacturing supply chain’s bottom line,” state Lian Tongsang and Zhang Wei. About two-thirds of industrial oil is used as raw materials in the chemical industry. If key straits are blocked, it could directly cause overseas chemical plants to halt production. When overseas economies face shutdowns due to rising energy costs and raw material shortages, China’s manufacturing, with its complete industrial chain and delivery stability, is well-positioned to reallocate global orders.

Macro team from Zheshang Securities, led by Li Chao and Lin Chengwei, used quantitative analysis to support this view. They estimate that if energy prices in Japan, South Korea, ASEAN, and India rise further, causing production constraints, it could trigger a “reshoring” effect. In extreme cases, this could boost China’s overall export growth rate by approximately 2.89% to 4.82% by 2026.

This explains why, under energy shocks, China’s exports might show an asymmetric “short-term dip, long-term rise” pattern. Lian Tongsang and Zhang Wei of Caitong Securities also forecast that as substitution procurement kicks in in Q3, export dividends will become more prominent.

If energy security is the “shield,” then China’s manufacturing pricing power in the global supply chain is the “spear.” The fundamental market confidence lies in whether companies can turn their share advantages into profit margin improvements.

CITIC Securities Strategy Team points out that profit margin recovery is key to the next phase of the A-share bull market. “Disruptions in the global supply chain once again provide an opportunity to test China’s manufacturing pricing power.” They believe the core of trading is to identify industries and companies with production capacity that is difficult to replicate globally, where significant share advantages under government-controlled capacity can gradually translate into external pricing power, thereby increasing profit margins and cash flow.

This institution notes that the rapid rise in oil prices offers such an observation window, with sectors like chemicals, non-ferrous metals, electrical equipment, and new energy being key focus areas under this logic.

This enhancement of pricing power is reflected not only in traditional manufacturing but also in technological independence. Liao Jingchi of Zheshang Securities highlights that China’s technological自主化 wave, represented by Huawei’s产业链, is reshaping the global tech landscape. The Hong Kong stock market, especially core assets with high dividends and leading new economy companies, has become an important channel for international capital to share this dividend.

From a valuation perspective, the team believes that the Hong Kong market offers a relatively high safety margin. As of March 16, 2026, the Hang Seng Tech Index PE TTM was 21.2x, far below Korea’s KOSDAQ at nearly 120x and also significantly below the Nasdaq’s 38.6x. In global asset valuation comparisons, Hong Kong stocks’ low valuation further highlights its relative advantage.

Market stability relies on a supportive institutional environment.

Haitong International’s Zhang Yidong team summarized policy trends, noting that from the 2023 Central Financial Work Conference’s declaration to “unswervingly follow the path of financial development with Chinese characteristics,” to multiple Central Politburo meetings since 2024 emphasizing “stabilizing the stock market” and “continuously stabilizing and activating the capital market,” and the “14th Five-Year Plan” calling for “accelerating the construction of a financial powerhouse” and “expanding patient capital,” the policy direction is clear and continuous.

Zhang Yidong believes that strategic investors and resident funds entering the market are expected to become the main drivers of sustained growth in China’s stock market; RMB appreciation may attract foreign investment and generate resonance.

In recent years, state-owned funds like the Central Securities Depository and Huarong, as well as insurance and long-term institutional capital, have increased allocations to stock ETFs, becoming important stabilizers.

On the operational front, the Shanghai Stock Exchange’s recent efforts are noteworthy. First, improving the quality and investment value of listed companies through ongoing initiatives to “enhance quality, efficiency, and returns”; second, accelerating the creation of a “long-term investment” ecosystem, with the Shanghai ETF market expected to surpass 3 trillion and 4 trillion yuan by 2025, with long-term capital holdings growing significantly. These solid infrastructure developments provide institutional guarantees for the long-term value of Chinese assets.

Returning to today’s market correction, we should view it rationally. Short-term sentiment is undoubtedly affected by geopolitical conflicts and oil price fluctuations. But amid macroeconomic upheaval and global asset rebalancing, market volatility is a normal phenomenon. The Shanghai Index falling below 3,900 points reflects a contraction in short-term risk appetite, not a reversal of China’s long-term asset value.

In the context of loosening global old orders and scarce safe assets, Chinese assets with energy self-sufficiency, supply chain integrity, policy stability, and manufacturing pricing power are undergoing a structural valuation reassessment. This process will not be smooth, but its long-term logic warrants ongoing attention.

Looking at the longer cycle, markets tend to reward investors who maintain resolve amid turbulence. For investors, rather than being swept by short-term emotions, it’s better to look long-term and focus on industries and companies that demonstrate resilience during upheaval.