"Sharpening a sword for a lifetime!" Exclusive interview with Huang Yanming. The next focus areas for A-shares are these two directions!

In an exchange with a reporter from China Securities Journal, Huang Yanming shared his latest outlook and observations on A-shares, reflected on his over thirty years of investment research career, and forecasted the future development direction of the sell-side industry.

Exciting insights:

1. The current A-share market is a “confidence bull,” driven mainly by increased expectations of national governance and technological leadership boosting the economy. The relocation of residents’ deposits is a result, not a cause.

2. By 2026, the A-share market will be characterized by “sideways consolidation with slight strengthening.” The goal should be to pursue a long, slow, healthy bull market, while remaining cautious of rapid, frenzied rises and sharp declines. Setting overly high index targets is not advisable.

3. The “dumbbell-shaped” pattern in A-shares over the past three years has basically ended. Investment opportunities are shifting from the extremes of “high-growth tech + low-volatility high-dividend” to the middle. The next phase will focus on mid-cap blue chips, especially in cyclical and manufacturing sectors.

4. Opportunities in cyclical industries are not in the real estate chain but in three key areas related to national strategy: chemicals, metals, and agriculture.

5. AI is the core direction of technological development, with long-term prospects being optimistic. However, in the short term, it is entering a period of expectation verification, with sector consolidation and the need for careful stock selection.

6. I aim to hone a single sword in my life—perfecting securities research. The industry of securities research is a lifelong learning process; one can continually gain wisdom. Investment returns may fluctuate, but the acquisition of wisdom only increases.

Optimistic about a healthy bull market in A-shares, focusing on cyclical and manufacturing sectors

China Securities Journal: Since September 24, 2024, the market has been steadily improving. In your view, what are the core factors driving this upward trend?

Huang Yanming: There are two main factors: first, the rising expectations of national governance; second, the strengthening outlook of technological leadership driving the economy.

Some believe that the current rally is driven by residents relocating deposits, but I see deposit relocation as a result, not a cause, of the bull market. The root of this rally is not monetary policy or liquidity alone but expectations—specifically, confidence driven by improved governance and technological leadership.

The improvement in governance is reflected in three areas: first, significant diplomatic achievements, with China holding an advantageous position in China-U.S. and related international interactions; second, notable progress in national defense and military capabilities; third, export and import trade defied trends to grow against the odds, with last year’s trade surplus reaching about one trillion dollars, demonstrating economic resilience.

Another major driver is the increasingly strong expectation that technology will lead the economy. If in 2019 many doubted whether China’s economy could shake off dependence on real estate and be led by technology, today that confidence has greatly increased. This is the result of joint efforts by tech workers, innovative enterprises, and the capital market.

Therefore, the current market rise is fundamentally a collective effort of the Chinese people under central leadership, a bull market that belongs to us.

China Securities Journal: How do you forecast the index performance of A-shares this year?

Huang Yanming: Our basic view is that the overall market will trend sideways with slight strengthening, and we expect and favor a long, slow, healthy bull.

In April 2025, I proposed the view of “sideways consolidation, gradually strengthening, becoming stronger,” which has been somewhat validated by subsequent market movements. Currently, the index hovers around 4100 points, and the momentum to push higher has weakened compared to before. The core drivers—governance and technological leadership—have largely been reflected in the rise from 3000 to 4000 points. For the index to continue upward, new momentum is needed—specifically, the rising needs of the real economy to realize investors’ improved economic expectations.

Previously, the “soul” (expectations) led the way; now, the “footsteps” (the economy) need to catch up. We are in a phase where “soul” waits for “footsteps.” The interplay and balance between these forces will determine the market rhythm. Therefore, in 2026, A-shares are expected to experience sideways consolidation and support-building.

Although China’s economic data seem stable at a macro level, profound changes are brewing—shifting from real estate to technology-driven growth, optimizing export structures, and benefiting from the Belt and Road Initiative. As economic quality continues to improve, we expect the market to “slightly strengthen,” but caution investors against setting overly high index targets, and remind them to learn from past crashes following rapid rises, maintaining the principles of long, slow, and healthy growth.

China Securities Journal: During this slow bull phase, which industries do you see as promising investment opportunities?

Huang Yanming: Market risk appetite is converging from both ends toward the middle. We focus on mid-cap blue chips, mainly in cyclical and manufacturing sectors.

First, cyclical industries—these are not traditional real estate chains but commodities and global pricing industries closely related to national strategy and overall national strength. Specifically, three sub-sectors: first, chemicals—geopolitical tensions may tighten global supply, and some domestic raw materials have seen no new capacity investment due to oversupply in recent years. Coupled with rising demand in Southeast Asia and the Middle East, both domestic and foreign demand support the chemical industry’s prosperity; second, metals—rare earths, specialty metals, and strategic metals have performed well and still hold investment value; third, agriculture—prices have been in a downward cycle over the past two to three years but are expected to bottom out and rebound by 2026, making planting and breeding sectors worth watching.

Second, manufacturing. China is now a manufacturing powerhouse, with core industries including machinery, new energy, humanoid robots, military equipment, and chip manufacturing.

While consumer sectors are somewhat riskier and valuations have been high in recent years, they are unlikely to be market hotspots in the near term. Investment focus should shift to the next 3 to 6 months toward cyclical and manufacturing sectors. From the industry chain perspective, technology, manufacturing, and cyclical industries form a complete chain aligned with national strategies.

Overall, long-term prospects in technology are optimistic, but short-term adjustments and increasing internal differentiation are expected; manufacturing should focus on advanced manufacturing; cyclical sectors should target commodities with international pricing power. This framework will be the main investment opportunities in the next phase.

Long-term opportunities in AI are clear; risk appetite is converging toward mid-cap blue chips

China Securities Journal: AI has been one of the core themes in the market over the past two years. After significant price increases, concerns about bubbles have arisen. How should we evaluate AI investment opportunities at this point?

Huang Yanming: AI will play a huge role in transforming human productivity, especially in improving efficiency. Some ask whether AI will replace analysts; my view is that AI might replace research assistants, but the work of top analysts cannot be replaced. Our work involves both knowledge and wisdom—AI can replace procedural knowledge but cannot replace higher-level insight. AI has knowledge but lacks wisdom; computers can perform calculations and store memories but do not have awareness.

Regarding AI investment, first, in the long run, AI remains a key direction of technological development, and 2026 will still be an important period for analysts to focus on. Second, current AI sector valuations have already reflected expectations sufficiently. However, the notion that AI stocks are in a bubble is not yet justified.

Stock price movements are driven by two forces: expectations and trading. Rising expectations push prices up, reflecting value investing and improving market efficiency to allocate social resources properly. A bubble occurs when stock prices fully reflect expectations and are driven higher through leverage or other trading means, detaching from fundamentals and worsening market structure. Looking at AI performance from 2024 to now, the rise has mainly been driven by expectations, not excessive leverage, so significant bubble characteristics are not evident.

In the next phase, the market will enter a period of expectation validation and correction, with AI sectors consolidating and slightly strengthening, and large fluctuations unlikely. Investors should carefully select stocks. All industries go through a process of dispersing and then consolidating, so investors need to continually assess whether their AI holdings can truly become winners in the long run.

Looking ahead 3 to 6 months, market style will shift; the “dumbbell” structure of the past three years will change, with opportunities concentrating in mid-cap blue chips. Over a longer horizon, investment opportunities in A-shares will still revolve around technology.

China Securities Journal: The current bull market features both “confidence bull” and “technology bull,” with market sentiment fluctuating and reflecting changes in risk appetite. How do you see the evolution of future risk appetite?

Huang Yanming: In recent years, A-shares have exhibited a “dumbbell” pattern—two ends moving in opposite directions—closely related to the international macro environment. External risk events cause risk appetite to diverge: risk-averse investors tend to increase holdings of low-volatility, high-dividend safe assets; risk-tolerant investors chase high-growth targets like tech.

Looking back, after March 2023, the market initially surged on ChatGPT, optical modules, and other tech themes; early 2024 shifted toward coal, electricity, and other low-volatility dividend sectors; after September 24, the focus returned to technology; mid-2025 saw strong performance in financials, followed by renewed activity in AI themes. Over the past three years, the market has oscillated between “high-growth tech” and “low-volatility high-dividend” extremes.

However, this pattern has been nearing its end since late 2025. External events are catalysts for short-term fluctuations, but the fundamental support for the bull market is the enhancement of national strength. After three years of “diverging ends,” the current market is at a turning point, with risk appetite gradually converging toward the middle.

Consequently, the “low-volatility, high-dividend” trend has ended. Small-cap stocks with no earnings support and concept tech stocks are cooling off. The next phase of investment will favor mid-cap blue chips—moderate market cap, stable earnings, and less thematic hype. These stocks, which have seen little speculative chasing in recent years, will become the focus. The first quarter of this year was a key window for style transition; investors should seize this opportunity.

China Securities Journal: Market analysts often attribute stock market rises and falls to monetary supply, believing that the current bull market was driven by residents relocating deposits. However, your research framework rarely emphasizes monetary or liquidity factors. Can you explain why?

Huang Yanming: Many investors analyze the stock market primarily from the perspective of monetary liquidity, but in reality, the main driver of stock price movements is expectations—changes in outlook. Liquidity factors are secondary. The core driver of this rally is the improved expectations of national governance and technological leadership.

While monetary factors do influence stock prices, they should not be the primary focus. From a monetary banking perspective, paper money is a symbol of value, and stock prices are also symbols of value—there’s no fundamental difference. Explaining stock prices solely through money is like measuring one ruler with another; it’s a symbol-to-symbol explanation that offers limited insight into the essence.

Researching stock price changes should focus on how political, economic, technological progress, and corporate management fundamentals influence expectations at the margin. Currently, there is no large-scale movement of residents’ deposits into the market; such inflows should happen gradually and prudently, accompanied by investor risk awareness education. We advocate rational and value investing, strengthening investor education to prevent the public from blindly entering the market without risk capacity. This is also a social responsibility of securities practitioners.

Devoting a lifetime to perfect securities research

China Securities Journal: Looking back over your more than thirty years in securities research, what has sustained your deep engagement in this industry?

Huang Yanming: Since 1994, I have been in the securities industry for over 31 years, mainly focused on securities research. Most colleagues who started at the same time have moved on to other fields. My persistence stems from a personal commitment: to hone a single sword in this life—perfecting securities research. My goal has always been to understand the laws governing market operation.

Why do stock prices rise and fall? This is the core question of investment research. There is no standard answer in textbooks, and the real world is complex. I seek to penetrate appearances and explore the essence of things. Over the past three decades, this desire to uncover wisdom in financial markets has supported my unwavering dedication to securities research.

The mission of Dongfang Securities Research Institute is “Embrace simplicity, uphold truth, accumulate depth to forge excellence.” “Embrace simplicity” means that the essence of things lies not in complex phenomena but in the simplest truths. The analyst’s task is to simplify complexity and seek the true nature of things. “Accumulating depth to forge excellence” means that in the process of seeking truth, one must return to reality, repeatedly practice, solve problems, and ultimately become accomplished. The insights gained should be shared with society, allowing investors to enjoy the beauty of investment and contributing to economic prosperity.

If there is a next life, I might choose a different field of interest, but in this life, I only want to perfect my craft in securities research.

China Securities Journal: You once said that research is a process of “cultivating the mind.” In the current era of AI and digitalization deeply integrating into analysts’ daily work, what do you see as the most core and irreplaceable value of analysts?

Huang Yanming: AI can assist with many tasks but has limitations. Securities research requires both knowledge and wisdom. Knowledge is information that can be learned and recorded; AI excels at collecting, organizing, and calculating knowledge, capable of efficiently performing research assistant roles and even providing basic investment consulting.

Wisdom, however, cannot be expressed solely through language or simple learning. It is gained through cultivating the mind, awakening, and repeated reflection. Computers can acquire knowledge but cannot achieve insight or enlightenment. Market judgment, industry comparison, thematic planning, and asset allocation—all ultimately depend on human insight and intuition.

Therefore, AI can replace many low-level, procedural research tasks, but core decision-making and judgment must rely on humans. At the same time, AI development will create new job opportunities, and we need to prepare for that.

China Securities Journal: The reform of mutual fund fee rates has profoundly impacted the securities research industry. Looking ahead, how do you see the industry evolving?

Huang Yanming: The reduction of mutual fund commission rates has significantly shrunk the revenue that brokerages earn from mutual funds, forcing research institutes to transform strategically. The transformation involves moving beyond solely serving mutual funds to reintegrate with the three core businesses of brokerages: investment banking, institutional services, and wealth management.

In the past, many research institutes focused mainly on mutual fund services, neglecting support for investment banking and wealth management. In fact, institutional clients are not limited to mutual funds, and services should extend beyond research. The fee reform will push research institutes to provide comprehensive services across the entire institutional business, including supporting IPO pricing, M&A, restructuring, and more. They should also empower wealth management, including training for financial advisors, asset allocation research, and fund product analysis.

In the future, research institutes will deeply embed within the three main business lines of securities firms, diversifying revenue streams. Their client base will include enterprises, institutions, and individual investors. Organizational structures will expand into think tanks, securities research, and wealth research, achieving multi-disciplinary collaboration. The distinction between internal and external services will blur, promoting industry healthy development.