A-shares swept up by HALO trend

Reporter Hong Xiaotang

Over the past two years, the most dazzling narrative in global capital markets has undoubtedly been artificial intelligence (AI). From computing power to large models and AI applications, lightweight, high-growth tech companies have almost become the objects of frantic capital pursuit.

However, as 2026 approaches, market sentiment is subtly shifting. The AI frenzy is diverging, compounded by Middle Eastern geopolitical conflicts pushing up commodity prices and suppressing valuations of tech growth stocks, bringing “hard assets” with hedging properties onto the stage. In February 2026, Goldman Sachs released the HALO (Heavy Assets + Low Obsolescence) asset allocation framework. Unlike traditional value investing or pure high-dividend strategies, HALO’s core is rediscovering assets that are difficult to replace technologically and have tangible barriers to entry. Morgan Stanley has built a HALO asset basket (MSXXHALO), covering seven structural pillars: materials, utilities, railways, pipelines, waste management, defense, and signals.

This investment strategy, proposed by an international investment bank, quickly became a new favorite among capital.

According to economic observers, some institutional internal research meetings have focused on the fundamentals and investment opportunities of HALO targets in A-shares. Research reports with “HALO” in their titles have appeared frequently, and many market departments have followed up with popular science and investment education articles to spread awareness.

“Wall Street has a new term: What exactly is HALO?” “The HALO concept—if you don’t know, just search it—belongs to an untapped hidden track that hasn’t fully fermented yet.” “Smart money is all watching HALO.”… Such a novel term has also become a hot topic among A-share investors on social media platforms. They are concerned about whether their stocks can catch the HALO wave and whether they can ride the trend for a quick rise.

The HALO strategy has rapidly gained popularity in the A-share market, driving a valuation recovery in sectors like utilities, non-ferrous metals, and defense military industries. As of March 12, 2026, several cyclical sectors in the Shenwan primary industry index have gained over 15% year-to-date, contrasting sharply with the tech sector’s pullback.

Under this halo, is HALO sustainable in the A-share market? Behind the institutional chase for HALO trades, is it a reshaping of the global asset underlying logic, or just Wall Street rebranding traditional cyclical stocks with a “vintage” look?

Deconstructing HALO

Looking back to January, the A-share market was still immersed in exuberant risk appetite. Long-term narratives like brain-computer interfaces, AI applications, and commercial spaceflight were booming. The market was eager for “world-changing” tech stories, even to the point of some “track-only, valuation-agnostic” investment frenzy.

However, as Middle Eastern geopolitical conflicts escalated, stirring commodity markets, gold, crude oil, and other commodities experienced wide fluctuations and upward swings, and the AI story seemed to lose its momentum.

The market urgently needed a new mainline to channel funds.

At this moment, HALO emerged.

On February 24, 2026, Goldman Sachs released a global portfolio strategy report, officially proposing the HALO asset allocation framework. In the report, using the European market as a sample, Goldman Sachs found that the previously favored valuation premium on lightweight assets was retreating, while heavily asset-based portfolios, which had long been undervalued, continued to rise. Over the past few years, the valuation gap between the two had sharply narrowed.

Meanwhile, Morgan Stanley’s trading division believed that the market’s panic over AI disrupting traditional industries might have peaked. For investors still worried about AI impacts, tangible assets with high barriers to entry and low risk of obsolescence (i.e., HALO trades) now represent the best hedging strategy.

Senior researcher Zheng Sien from the Macro Research Group of China Europe Fund stated that rapid AI technological progress threatens to disrupt the business models of knowledge-intensive companies like software firms. The rise of HALO trades stems from market concerns about this risk. Compared to them, assets with heavy physical assets and low obsolescence—HALO assets—may benefit from more predictable future profits, thus attracting market capital.

Simply put, the HALO strategy involves investing in companies and sectors with high barriers to entry, stable business models, and low risk of technological disruption. Even if AI becomes extremely powerful, they still depend on these assets. The strategy emphasizes two simultaneous features: very high entry barriers and very low substitution risk.

For example, when global tech giants are burning electricity to train large models, power equipment becomes a critical infrastructure; when countries compete for AI chips, non-ferrous metals like copper, aluminum, and tungsten become essential. The smarter AI gets, the deeper its reliance on physical resources.

China United Fund, combining Morgan Stanley’s compiled HALO index (code: MSXXHALO) and Goldman Sachs’ research, summarized several core sectors:

• AI’s “selling shovels” and energy core: including nuclear power, natural gas generation, power grids, and water utilities. As AI data centers’ energy consumption surges, stable power supply becomes a scarce resource. These companies have stable cash flows and high regulatory barriers, almost unaffected by technological obsolescence.

• Humanity’s “excretion and transportation” systems: waste management, railways, oil and gas pipelines. These sectors have natural monopoly rights and perpetual demand. AI can optimize logistics routes, but physical goods still require real infrastructure; AI cannot eliminate human-generated physical waste.

• “Shield” under security concerns: defense and military industries, and some high-end manufacturing (semiconductor equipment, industrial mother machines). These involve national security and complex physical supply chains, with high costs of trial and error, forming a high wall that AI cannot cross in the short term.

Wanguo Fund summarizes this as a “counter-narrative”: it’s not denying technological revolution but seeking sectors with “resilience against disruption” or that can benefit from spillovers of technology, thus achieving stable asset allocation amid “creative destruction.”

Looking at the performance of related assets in the A-share market, Wind data shows that as of the close on March 12, 2026, the Shenwan primary industries of basic petrochemicals, non-ferrous metals, electrical equipment, and utilities all gained over 15% this year, leading the Shenwan first-level industry index, contrasting sharply with the Shanghai Composite’s 4.04%, Shenzhen Component’s 6.28%, and ChiNext’s 3.57% year-to-date gains.

Clash

Can HALO truly become a new mainline for the future? There is some cognitive divergence among market participants.

Several interviewed institutions and market insiders believe that the rise of HALO trades is not only due to risk hedging but also a fundamental shift. Over the past decade, global capital has overly obsessed with internet innovation, neglecting investments in mining, power grids, and industrial capacity. Now, reshoring supply chains driven by de-globalization, re-industrialization waves, and AI infrastructure booms are creating huge “capital expenditure hunger.”

These insiders see this supply-demand mismatch as structural. Coupled with high administrative and environmental approval thresholds, existing physical assets have become scarce. This has led to valuation uplift in cyclical sectors in the A-share market.

However, a strategy analyst from a Beijing public fund pointed out that many funds buy utilities and energy stocks mainly for their high dividends and defensive qualities. When the market is turbulent and growth stocks are diverging, funds just find an excuse to band together. The HALO strategy is just giving this collective a more fashionable “tech-resistant” guise.

According to this strategist, resource and chemical profits remain highly tied to macroeconomic cycles. If the global economy, especially China and the US, underperform expectations, demand may decline, and “resisting AI disruption” might not prevent commodity prices from falling. Buying cyclical stocks at high levels could lead to a “Davis double kill” (both price and earnings decline).

Zheng Sien also mentioned that traditional coal-fired power units, despite their heavy asset nature, face new challenges over the long term due to continuous improvements in power generation technology and stricter global carbon emission standards.

Has the Logic Changed?

Many institutional insiders believe that this year’s capital market investment logic is not simply a switch from growth to value but a transitional awkward period where technological breakthroughs and applications are not yet fully connected.

Regarding why HALO assets stand out now, the aforementioned strategist analyzed a key industry cycle background: AI’s fundamental technology has already broken through, but its application has yet to generate widespread profitable business models. During this “old tree blooming new flowers, new shoots not yet grown” window, certainty is the highest form of faith. Buying HALO assets allows investors to earn traditional high dividends while also capturing the elastic potential of a super-cycle driven by AI infrastructure.

China United Fund further states that the rise of HALO investments essentially reflects a re-pricing of asset values in the AI era. It is not a short-term hype but a long-term defensive and offensive logic under the backdrop of AI disruption, AI investment, and geopolitical reshuffling. The more AI develops, the more it depends on tangible physical assets, and the strategic and investment value of HALO assets will continue to emerge.

However, Wanguo Fund warns of a risk often masked by optimism. It notes that prices of some bulk commodities and intermediate goods are already at historical highs, and high prices often come with high volatility. Investors should watch for mismatches between price prosperity and actual performance realization. Additionally, long-term technological paradigm upgrades may impact the underlying logic of some HALO assets, requiring ongoing monitoring of “gray rhino” effects from technological evolution.

So, how to position HALO trades? CITIC Prudential Fund suggests avoiding “blind following,” focusing on valuation rationality, industry prosperity, and policy guidance.

Specifically: First, consider A-share characteristics, avoid simply copying US logic, and adjust based on policy regulation and domestic demand recovery; second, watch for sector volatility, avoid chasing high, as HALO assets are mostly cyclical stocks; third, maintain balanced allocation, avoiding over-concentration; fourth, monitor policy and geopolitical risks, as assets like energy and non-ferrous metals are sensitive to policies (e.g., environmental, energy) and geopolitical conflicts, requiring timely adjustments.

A public fund research insider in Shanghai said that once the Federal Reserve begins an unexpectedly aggressive rate cut cycle, the discount rate pressure on long-duration assets will sharply decline; more importantly, if AI’s application side truly explodes with significant cash flows, demonstrating a clear expansion path, then smart capital will quickly withdraw and reallocate to tech growth themes with exponential potential.