CITIC Securities Co., Ltd.: The most important aspects of the structural market remain "resource security, corporate overseas expansion, and technological competition," with limited room for other factors

Resource security, corporate overseas expansion, and technological competition remain the most important structural market clues, corresponding to the industry allocation framework of resources + overseas expansion + new productive forces. Apart from this, there are limited directions worth speculating on. For the resource sector, the essence of market driving force is still the supply constraints caused by insufficient investment in traditional resource industries under the global high interest rate environment. The complex geopolitical environment and the security autonomy claims of various countries lead to more frequent fluctuations in such supply. For corporate overseas expansion, the market will gradually realize that the overseas expansion of Chinese enterprises and globalization are the core yet relatively obscure fundamentals and market clues of this round of market. The stability of the trade environment and China's anti-involution are two very important conditions for maintaining the market. The subtle balance of mutual checks and balances between China and the United States is crucial for the current market. Chinese enterprises can only see the continuously rising market value ceiling by standing in the global market. The APEC meeting in October and the Fourth Plenary Session are two very important verification points. Regarding technological competition, Chinese enterprises are shifting from strategic restraint to strategic proactivity, and the Sino-U.S. technological competition is becoming increasingly intense. In the future, AI competition will spread from the cloud to the edge, with AI Agents becoming popular on edge devices. The already established mobile internet application ecological barriers may be restructured again, bringing enormous business opportunities comparable to the initial outbreak period of mobile internet applications. Once this industrial trend is realized, Chinese enterprises will officially enter a strategic counterattack period in the technology field.

Resource Security: Insufficient Investment in Traditional Resource Industries Under Global High Interest Rate Environment Leads to Frequent Supply Shocks

1) Many traditional industries, especially upstream resources, have not resolved the long-term issue of insufficient investment. Aside from the booming AI infrastructure construction in North America, under the high corporate debt interest rate environment in Europe and the United States, private sector investment in most developed countries and regions remains weak, especially the capital expenditures of traditional industrial enterprises in Europe and the United States have continued to remain sluggish in recent years. If we observe the year-on-year amount of machine tool orders exported from Japan to Europe and the United States, it has shown negative growth for 28 consecutive months (data from the Japan Machine Tool Builders' Association). Historically, the bottom of the capital expenditure cycle in the manufacturing sector in Europe and the United States usually occurs at the bottom of interest rates. As long as long-term interest rates have not bottomed out, manufacturing capital expenditures will not bottom out. During this round of interest rate cuts in Europe and the United States, not only have long-term interest rates not significantly decreased, but there has also been a continuous sell-off of sovereign bonds (especially in Europe), leading to high financing costs for the private sector. To address this issue, the United States has adopted measures such as tariff wars and government strategic equity stakes (according to Reuters, the recent move is that the Trump administration is seeking to acquire shares in American Lithium Corp), which are clearly non-commercial means and exhibit characteristics of state capitalism, while European countries have evidently not yet responded adequately. For many traditional industries, especially upstream resources, the long-term issue of insufficient investment has not been resolved, resulting in insufficient redundant supply elasticity, while demand continues to grow. Recently, Freeport's production cuts have once again verified that the situation of supply constraints has not fundamentally changed. Taking copper as an example, according to the forecast by the non-ferrous group of CITIC Securities Research Department based on data from 2Q24-2Q25, although the LME copper price has risen from $8,100 in April 2025 to the current $10,200, the production expectations of major global copper mining companies for 2025 show a trend of quarterly downward adjustment, from 14.89 million tons down to 14.21 million tons, with the incremental output adjusted from 900,000 tons down to 80,000 tons, corresponding to a growth rate adjustment from 6.4% down to 0.6% 2) The complex geopolitical environment and the security autonomy claims of various countries have led to more frequent supply shocks. The Democratic Republic of the Congo recently established a quota system, and on September 20, the Congolese government updated its cobalt export policy, extending the cobalt export ban until October 15, 2025. The cobalt export quota for 2026-2027 is only 44% of annual production, and the intention to control prices through long-term quota adjustments is very clear. According to Wind, cobalt prices have recently broken through the 300,000 yuan/ton mark as expected. Indonesia has recently tightened the export of nickel products further (suspending some nickel ore operating licenses in September). China's rare earth export regulatory system is gradually improving. More and more resource-holding countries are realizing that the long-term undervaluation of strategically scarce resources is unsustainable and that supply must be controlled to ensure a reasonable price level, thereby leveraging certain geopolitical discourse power or safeguarding their own rights and interests.

Going Global: The Globalization of Chinese Enterprises is the Most Important Fundamental and Market Clue

1) The going global and globalization of Chinese enterprises is the core yet relatively obscure fundamental clue of this round of market trends. We previously proposed a viewpoint that we should view the fundamentals of A-share listed companies from a global market perspective; A-shares are no longer merely a reflection of the domestic economic cycle. According to our calculations based on Wind data, non-financial listed companies with overseas revenue accounting for over 20% contribute 40% of the profits of all non-financial A-shares and account for 37% of the market capitalization, which is sufficient to influence the overall market trend. Over the past three years, the ROE of A-share non-financial enterprises with overseas revenue exceeding 20% has continued to rise, increasing from around 7% at the beginning of 2022 to about 10% and remaining stable. In contrast, the ROE of other enterprises has declined from 9% to around 6%. This differentiation has led the mainstream narrative in the market (especially among foreign investors) to remain at the level of "divergence between market trends and fundamentals, mainly driven by liquidity," overly focusing on the process of deposit migration. In reality, what truly affects the sustainability of market trends is whether China can respond to the complex trade and geopolitical environment through technological positioning, maintaining a relatively stable environment for Chinese enterprises going global and globalization. Once this trend is recognized and consensus is formed in the market, the valuations of many leading Chinese manufacturing companies may experience systematic increases.

2) The stability of the trade environment and China's anti-involution are two very important conditions for maintaining market trends. On the demand side, the going global and globalization of Chinese enterprises require a relatively stable economic and trade environment. In fact, the initiation of this round of A-share market trends corresponds precisely to the formation of a mutually balanced and stable trade environment following the Sino-U.S. Geneva negotiations. The continuous valuation expansion of core institutional varieties such as overseas computing power chains, T-chains, consumer electronics, innovative pharmaceuticals, or gaming has formed the main source of profit in this round of market trends, benefiting from a stable economic and trade environment and overseas demand. Because of this, the Fed's hawkish stance and the strengthening of the U.S. dollar index will not affect the continuation of structural trends in A-shares. What we need is precisely a stable overseas economy rather than a recession, requiring "the East rises while the West remains stable" rather than "the East rises while the West declines." China's "anti-involution" policy is equally important. The external environment presents an opportunity for Chinese enterprises, but if they continue to revert to the old path of competitive capacity expansion, they may miss this critical window to transform the advantage of manufacturing market share into pricing power advantage This may even lead to more trade barriers and non-commercial means of confrontation. Overall, the logic of Chinese enterprises' globalization and profit margin improvement must be smoothly interpreted in the context of "demand stability" and "supply optimization." For this reason, the Fourth Plenary Session at the end of October and the APEC meeting are crucial. The 14th Five-Year Plan may strengthen the "anti-involution" logic on the supply side, while the stability of trade relations between China and the United States determines the sustainability of the demand side, both of which together form a solid foundation for China's mid-term "going global" strategy.

Technological Competition: Chinese Enterprises are Shifting from Strategic Restraint to Strategic Offense, and Sino-U.S. Technological Competition is Heating Up

1) The AI strategy of major Chinese companies is becoming increasingly clear. Compared to the aggressive AI strategies of North American tech companies over the past three years, Chinese internet giants have been relatively vague in their AI investments and strategies in recent years. However, recently, leading internet companies have unveiled ambitious plans. On September 24, Alibaba announced at the 2025 Yunqi Conference that it is advancing a three-year plan for AI infrastructure construction worth 380 billion yuan and will continue to increase its investment. On the same day, Alibaba also announced a collaboration with NVIDIA on Physical AI; Tencent unveiled its AI implementation strategy on September 16; JD.com announced on September 25 its goal to create a trillion-yuan AI ecosystem in the next three years. In contrast, North America's AI infrastructure has reached a boiling point. According to a recent report by International Data Corporation (IDC) titled "Worldwide Artificial Intelligence and Generative AI Spending Guide," global AI IT investment is expected to reach $1.2619 trillion by 2029, with a compound annual growth rate (CAGR) of 31.9% from 2025 to 2029. Meanwhile, the user commercialization market may require new application scenario breakthroughs to open up commercial market space to match the current capital expenditure expansion. According to the U.S. Census Bureau's "Business Trends and Outlook Survey," the proportion of companies that have used AI in production in the past two weeks as an indicator of AI utilization has shown a significant slowdown in growth since June this year. In comparison, we believe that China's AI narrative elasticity has just begun to emerge.

2) If the AI trend shifts from the cloud side to the edge side, it could be a huge opportunity for the domestic application ecosystem. Recently, there have been frequent reports about OpenAI's layout in edge-side hardware. According to The Verge, Sameer Samat, head of Google's Android ecosystem, announced on September 25 that they plan to launch an "Android computer operating system" that combines Gemini and the Android system. After the release of the new Apple Intelligence in September, Apple is also accelerating the promotion of third-party software integration with Apple Intelligence. The various actions of major companies show clear signs of focusing on the edge side. Future edge devices will have at least two traffic entry points: AI Agents and application UI interfaces. As long as they can better adapt to AI Agents and be better called upon by Agents for content and functionality, some excellent niche applications have the opportunity to challenge the established application ecosystem barriers once again. This will bring commercial opportunities to a large number of small and medium developers, revitalizing the Chinese mobile internet and bringing more diverse applications and transformation scenarios, and even creating more potential job opportunities C-end applications are fertile ground for China to fully leverage its engineer dividend, and at the same time, China possesses the world's leading precision manufacturing capabilities. The era of AI Agents at the edge is coming, and it is entirely possible to replicate China's successful case of catching up in applications during the mobile internet era.

Resource security, corporate globalization, and technological competition correspond to the industry allocation framework of resource + globalization + new productive forces.

Resource security, Chinese enterprises going global, and technological competition are all important clues that will dominate the structural market trends for a considerable time in the future. These three clues correspond to the industry allocation framework of resource + globalization + new productive forces. The Fourth Plenary Session at the end of October and the APEC meeting are crucial, as they together form the cornerstone of Chinese enterprises' "globalization." In the face of the current market, we recommend maintaining composure, ignoring short-term fluctuations, and focusing on industries with real profit realization or strong industrial trends. Key trends to focus on include resources, consumer electronics, innovative pharmaceuticals, and gaming, corresponding to non-ferrous ETFs, VR ETFs (which have a higher component of the consumer electronics supply chain than consumer electronics ETFs), Hang Seng Innovative Pharmaceuticals ETF, and Gaming ETF; for allocation-type varieties, a left-side layout can be made in chemicals and military industry. At the same time, we emphasize paying attention to industries with sustained pricing power from a single supplying country, considering both supply and demand growth, and suggest focusing on areas such as rare earths, cobalt, tungsten, phosphorus chemicals, pesticides, fluorochemicals, and photovoltaic inverters.

Risk Factors

Increased friction in technology, trade, and finance between China and the U.S.; domestic policy strength, implementation effects, or economic recovery falling short of expectations; macro liquidity tightening beyond expectations both domestically and internationally; further escalation of conflicts in Ukraine and the Middle East; and slower-than-expected digestion of real estate inventory in China.

Author: Qiu Xiang, Liu Chuntong, et al., Source: CITIC Securities Research, Original Title: "Strategy Focus | Resource Security, Corporate Globalization, and Technological Competition"

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account individual users' specific investment goals, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk