After Sharp Appreciation, HALO Assets May Face Divergence

Ask AI · How can AI technology reshape the investment logic of HALO strategies?

21st Century Business Herald Reporter Yi Yanjun

Since March, the rotation of A-shares sectors has accelerated, with technology growth maintaining high-level fluctuations. HALO assets (companies characterized by heavy assets and low obsolescence) have further attracted capital.

According to Wind data, as of March 16, out of 31 Shenwan first-level industry indices, 7 have risen since March. Among them, coal, electrical equipment, and utilities indices increased by 6.86%, 4.67%, and 4.37%, respectively, performing best within the period.

Looking over a longer timeframe, from the start of the year to now, coal, petroleum and petrochemicals, basic chemicals, and electrical equipment indices have risen by 23.47%, 22%, 16.63%, and 14.68%, leading all sectors.

In specific segments, Wind’s electrical grid and power generation equipment indices hit record highs on March 11 and March 13.

After a rapid surge, institutions are beginning to assess the sustainability of the HALO rally.

Some believe that 2026 is neither a technology-dominant cycle nor a cycle-dominant technology period; the “new and old coexisting” scenario is more rational and pragmatic compared to HALO. Investors should be cautious of the limitations of HALO strategies.

HALO Trading Is Booming

HALO is an abbreviation of the English phrase “Heavy Assets, Low Obsolescence,” meaning “heavy assets with low obsolescence.”

Since 2026, concerns about AI innovation or disruptive business models of knowledge-intensive companies have increased, coupled with rising global resource prices, leading to rapid popularity of HALO trading overseas.

As an investment strategy, the core logic of HALO trading is to find and invest in physical assets that AI cannot replace and that are highly dependent on, thus hedging against uncertainties from technological iteration.

Breaking down HALO assets, senior strategist Wang Yang of China Merchants Fund explained, “Heavy assets” refer to business models built on substantial tangible capital, with high barriers to replication. Their moat comes not only from large capital investments but also from long construction cycles, strict environmental and regulatory oversight, and complex engineering. For example, building a nuclear power plant or a transnational oil and gas pipeline makes it nearly impossible for competitors to replicate in the short term.

“Low obsolescence” means the assets’ economic value can span multiple technological cycles and are not easily overturned by AI or other new technologies. These assets meet rigid societal needs, such as power transmission, waste management, and basic material supply, with physical forms and core functions remaining stable for decades.

In the A-share market, since the beginning of the year, capital has also been flowing into HALO assets.

Wind data shows that, as of March 16, 10 first-level Shenwan industry indices have increased by over 10% since the start of the year. Among them, coal, petroleum and petrochemicals, basic chemicals, and electrical equipment indices performed well, ranking second to fifth in the 31 indices’ gain list.

Meanwhile, indices for environmental protection, utilities, and non-ferrous metals rose by 12.70%, 12.58%, and 10.96%, ranking seventh, eighth, and tenth among all indices.

“When a sector’s technological barriers are leveled by AI, its long-term profitability is questioned. Capital is re-evaluating what truly constitutes a moat—assets that are hard to build quickly, difficult for AI to replace, and indispensable to daily life and industry,” said a senior figure at Galaxy Fund. This is the essence of HALO—not simply “buy heavy assets,” but “buy hard assets that AI cannot replace.”

However, some believe that the popularity of HALO trading is driven by resource price increases.

Lin Rongxiong, chief strategist at Guotou Securities, pointed out in a recent report that the surge in HALO trading is not primarily due to AI technological disruptive innovation but rather the impact of rising prices. Global resource price hikes have stabilized PPI, leading to differentiation between tech and cyclical stocks, and providing more excess return space for commodities with rising prices.

Mid-term Logic and Allocation Directions

After a rapid rise earlier, the HALO rally may enter a phase of differentiation.

“Currently, influenced by domestic risk appetite, HALO assets are valued at historically high levels. Some industries are still in capacity expansion cycles, and industry prosperity remains on the left side of the cycle. As overall market risk appetite declines, valuations may face digestion pressure,” said Zheng Si’en, senior researcher at China Europe Fund’s macro research team.

Jin Ying Fund also noted that, due to the escalation of the US-Iran conflict, upstream cyclical assets’ stock prices have been overextended in the short term. However, market risk appetite improvement and the upcoming Q1-Q2 earnings season could benefit assets related to AI.

From a medium-term perspective, “HALO trading reflects market pricing of AI concerns (e.g., by 2028). These worries may not materialize within 2026, but cyclical manufacturing assets with performance support will gradually differentiate, with the market focusing on targets that can deliver short-term results,” the analyst added.

Additionally, some institutions suggest that the effectiveness of the HALO strategy is maximized only during certain periods.

Wang Yang believes that “HALO” is not a universal truth; its effectiveness is closely tied to specific industry cycle stages.

He explained that, currently, AI technology has achieved breakthroughs but has not yet fully dominated the economy. Traditional industries are experiencing a “rebirth” due to new demands. This transitional phase—where new technological breakthroughs and emerging industries are not yet dominant—is considered the optimal period for HALO strategies. During this time, HALO assets can enjoy high dividends for defense, revaluation premiums from shifting from “low-dividend, low-volatility” to “dividend-growth,” and performance elasticity driven by new AI demands.

For future A-share allocations, HALO remains a key theme, but investors should carefully identify truly valuable assets.

Wang Yang recommends focusing on three areas: first, power equipment and grids—AI computing power demand is exponentially increasing, making power grid upgrades and power supply security global priorities. Second, key strategic resources (such as copper and certain rare metals)—core raw materials for AI hardware and global electrification, with supply rigidity and emerging demand supporting prices. Third, high-end manufacturing and export-oriented industrial chains with global advantages, including engineering machinery and specialized equipment.

Lin Rongxiong also believes that 2026 is neither a technology-dominant nor a cycle-dominant period; the “new and old coexisting” scenario is more rational and pragmatic than HALO. He emphasizes that it’s not suitable to bet heavily on one side or switch repeatedly at this stage; portfolio management is the key to success.

He summarized in a report that the core of “new and old coexisting” is short-term positioning in the “Four Pillars”: resource-based non-ferrous metals and cyclical chemicals, AI applications and power equipment, and export-oriented engineering machinery and specialized equipment. The main focus in allocation is on “four rebalancings”: first, rebalancing between new and old; second, AI technology moving downstream; third, exports moving to mid- and upstream; fourth, resource commodities returning to their fundamental attributes, with a decline in financial attributes.

Regarding investment risks, Wang Yang advises caution about the limitations of HALO strategies. Many HALO assets (like resource commodities) are highly correlated with economic cycles. If global growth underperforms expectations, demand declines could impact earnings. Moreover, if the Federal Reserve continues easing, some funds may flow back into growth stocks, exerting pressure on HALO strategies.

He also noted that not all “heavy assets” have “low obsolescence.” Be wary of industries in overcapacity cycles with deteriorating competitive landscapes—they may be “heavy” but lack moats.

CITIC Securities’ research suggests that HALO trading mainly reflects stage-based style rotation rather than a new long-term growth paradigm. When AI has no clear new direction, HALO is worth watching; once AI expansion becomes clearer, funds will shift back to high-growth assets.

The CITIC team believes that purely defensive assets based on survival certainty are unlikely to form a long-term main line. Assets with sustained excess return potential should be at key nodes of AI expansion, deeply linked to resource bottlenecks or technological upgrades, and exhibit profit elasticity.