Chief of Dialogue | CITIC Securities Zhang Yulong: Halo Assets Are Not Safe-Haven Assets in the AI Era

China News Network (3月24日电) (Wei Wei) Halo assets are becoming one of the most talked-about topics in the 2026 capital markets. The concept originates from the U.S. investment bank Goldman Sachs, with heavy reliance on asset intensity, low obsolescence, and stable cash flows as its core characteristics. Once it was introduced, it immediately sparked a heated discussion, prompting investors to reassess the value of tangible, real-world hard assets.

In a recent interview with China News Network, Zhang Yulong, Chief Analyst for New Stock Strategies at CCBI Securities, delivered an in-depth interpretation of Halo assets’ core logic, investment value, and market prospects.

Zhang Yulong noted that Halo assets are defined from three angles: asset attributes, obsolescence rates, and the market competitive landscape. They include not only leaders in mature tracks, but also high-growth areas such as semiconductor manufacturing and cloud computing. The key to Halo assets is not whether they are new or old, but the strength of their competitive barriers and the quality of their cash flows.

Regarding the current capital market’s rush to pursue Halo assets, Zhang Yulong believes that in an environment where geopolitical conflicts continue and volatility in high-multiple growth stocks is increasing, Halo assets temporarily come out ahead due to their certainty and cash-flow advantages. However, investors must be alert to pseudo-Halo assets and the risk of excessively high valuations. For investors, it’s not necessarily true that just holding Halo assets will make money. Investment still needs to be grounded in fundamentals, and allocations should be made in a way that matches risk appetite and valuation levels, with risk control placed first.

Zhang Yulong, Chief Analyst for New Stock Strategies at CCBI Securities (photo provided by interviewee)

The following is the interview transcript (slightly edited):

China News Network: What exactly are Halo assets? How are they related to dividend assets?

Zhang Yulong: Halo assets come from the English abbreviations of “Heavy Assets” (heavy assets) and “Low Obsolescence” (low obsolescence). This type of asset has three core characteristics: first, large asset scale—these companies have usually already formed industry oligopolies or even monopolies, with very high barriers to entry; second, slower industry iteration—stable supply-and-demand dynamics make it difficult for new technologies or new business models to quickly overturn the status quo; third, stronger cash-flow performance—many costs show up in the form of depreciation, which is a non-cash cost from an accounting perspective.

Halo assets are not a new concept in the A-share market. Although Goldman Sachs introduced it earlier this year, in China’s A-share market people have historically been more accustomed to calling them “dividend assets,” “low-volatility dividend assets,” or “free-cash-flow-type assets.” Especially during the volatile period from 2022 to 2024, the capital market pursued certainty even more, and Halo assets perfectly fit that risk preference.

Now, as global geopolitical conflicts intensify and macroeconomic uncertainty grows, the conflict between the U.S. and Iran has become a main storyline in the recent capital markets, and overall market risk appetite has declined—so the advantages of this type of asset once again stand out, which is why they have made a comeback.

China News Network: Last year, people also often talked about “old-timer assets.” Do you think Halo assets can be equated with old-timer assets?

Zhang Yulong: That’s a huge misconception—these two absolutely cannot be simply equated. We can look at assets from two dimensions. One is the life cycle of a company or industry: “young-timer” (“young” growth stage, where penetration rates rise quickly and revenue and profit growth are fast) and “old-timer” (mature or declining stage, with stable supply-and-demand patterns and less broad growth prospects than in the earlier stage); the other is from the perspective of asset attributes, obsolescence rates, and the market competitive landscape—specifically, whether the asset is a Halo asset.

The two categories overlap with each other in some ways. Some “young-timer assets” are actually Halo assets as well. For example, semiconductor manufacturing and cloud computing: although they are in the early stages of high growth, because they require large-scale fixed-asset investment and R&D investment, the industry’s competitive landscape is concentrated and cash flows are also solid—fundamentally, they meet the characteristics of Halo assets.

Conversely, some “old-timer assets” are not Halo assets. For example, parts of some traditional heavy-asset industries: if demand keeps falling and competition worsens, although they are heavy-asset businesses, they lack stability and downside protection. They may even fall into a “low-valuation trap.” So the key is not whether it’s new or old, but the strength of its competitive barriers and the quality of its cash flows.

China News Network: In your view, what are the core drivers behind the current global surge in demand for Halo assets? Is it breakthroughs in AI technology?

Zhang Yulong: I believe the core driver is not the technology itself, but changes in the macro environment and geopolitics.

First is the demand for hedging. Against the backdrop of intensified geopolitical conflicts and deeper macroeconomic uncertainty, Halo assets’ characteristics—abundant cash flow, high dividends, and stability—match the capital market’s risk preferences.

Second is valuation for value. In the past few years, high-growth assets represented by artificial intelligence have had relatively high valuations, with pricing at historical highs. As market uncertainty increases and corporate performance enters a validation period, these highly valued assets are easily disturbed. By contrast, Halo assets typically have relatively lower valuations and more stable performance, so a clear style rotation tends to occur in the market.

Finally, the AI industry also indirectly drives this. AI development creates very high demand for computing power and high-quality electricity, which requires large-scale investment, and many raw materials have been developed for new uses. In recent years, investment in raw material industries has been relatively insufficient, and people have felt that their correlation with traditional industry cycles is not high and demand has been sluggish. Now, under supply-and-demand imbalance, this lets these assets go through a repricing process, so corresponding Halo assets naturally tend to perform better.

China News Network: Some say Halo assets are hedging targets in the AI era. Do you agree?

Zhang Yulong: You can’t say they are hedging targets. You can only say that under the current macro environment and market uncertainty, they have some hedging characteristics. If you extend the time horizon—for example, if the U.S.-Iran conflict eases, or if better products and technology iterations emerge—then the capital market would once again chase growth assets, and these characteristics of Halo assets would disappear.

Also, from a long-term perspective, some Halo assets may even fall into low-valuation traps. For instance, some industries may be heavy-asset and have a stable competitive landscape, but if demand keeps declining in the future, they actually lack valuation stability and hedging ability.

China News Network: As a major manufacturing country, what unique advantages does China have in the field of Halo assets?

Zhang Yulong: China is a country with manufacturing as its mainstay, and it has a large number of heavy-asset, strong-manufacturing companies. These enterprises not only have large investment scales and stable operations, but also have well-optimized supply chains over the long term, strong cost-control capabilities, and ongoing competitiveness across the globe.

Compared with Halo assets in other developed economies, China has stronger competitiveness in like-for-like industry comparisons. In the same category of Halo assets, China’s cost-control level is better than overseas. This cost advantage directly translates into higher-quality cash flows and asset quality, making Chinese companies more resilient in global competition.

China News Network: In the A-share market, which sectors align with Halo assets?

Zhang Yulong: Every sector has some Halo assets, spanning both traditional areas and emerging ones. For example, in traditional cyclicals, coal is a typical Halo asset: heavy assets, stable supply-and-demand structure, and the leaders also have very strong cash flows. In emerging growth areas, such as semiconductor manufacturing, cloud computing, and the satellite operations segment within commercial space, there are also Halo assets. Beyond that, sectors like telecom operators and power utilities—these are the types previously described as high-dividend and free-cash-flow-type assets; at their core, they are also Halo assets.

China News Network: With the proposal of the Halo asset concept, what impacts will it have on the A-share market’s long-term valuation framework and investors’ investment philosophy?

Zhang Yulong: I think the impact on the A-share market’s valuation framework is limited. Fundamentally, it is a form of thematic investing, and the A-share market has similar themes every year. This concept simply extracts and summarizes stocks in the current market that have certain advantageous characteristics—for example, what used to be called high-dividend assets is now called Halo assets. It’s only the name and phrasing that have changed. Ultimately, the value of assets still depends on their own quality and the cycle of industrial development.

For investors, it’s not that holding Halo assets will definitely make money, or that buying growth companies will definitely not make money. As for whether to allocate capital, investors need to define that based on their own risk preferences, not necessarily that they must allocate to Halo assets.

What needs attention is that Goldman Sachs has released a second report recommending shorting those pseudo-Halo assets that lack sustained earnings, have unstable profitability, and have continuously deteriorating cash flows. I think investment should be based on a company’s fundamentals and operating conditions, and has nothing to do with these so-called concepts.

China News Network: With the Middle East situation fluctuating repeatedly, international oil prices swinging significantly, inflation pressure and geopolitical uncertainty intertwined, will this affect the core logic of Halo assets?

Zhang Yulong: In the current environment of uncertainty, Halo assets tend to have a relative advantage. The key is whether this uncertainty is short-term or long-term. If it’s only a few weeks or a few months of short-term uncertainty, then the rally in Halo assets would most likely be fleeting. But if this uncertainty lasts longer and has larger impacts, then the rally in Halo assets would have staying power.

China News Network: Looking ahead to the subsequent market after 2026, how much longer can the heat around Halo assets last?

Zhang Yulong: I don’t have full confidence on whether the uncertainty in the future can be eliminated quickly, so I believe the popularity of Halo assets should last for a period of time. Specifically, it depends on how different conflicts evolve.

China News Network: So, does that mean Halo assets still have some allocation value right now?

Zhang Yulong: Currently, they do have allocation value, but it’s important to keep watching. After this period of price increases, are their valuations in an excessively high state? If valuations are too high, then they may no longer possess hedging attributes or the ability to outperform the market. Risk should be managed according to the actual situation before making investment plans. This year, risk control is the top priority.

China News Network: At present, what level are China’s domestic Halo assets at in terms of market size and valuation?

Zhang Yulong: Halo assets in different sectors have very different valuation levels. For example, baijiu/liquor is a typical Halo asset. The competitive landscape is stable, and currently valuations are relatively cheap, though the market still worries about future demand. For long-term investors, they can select top leaders and position accordingly, provided they hold for long enough.

For another example, Halo assets among technology stocks: some valuations are already very expensive, and this type is therefore recommended to be avoided. Also, last year’s best-performing base metals: the market priced them aggressively on a growth-stock logic. Now valuations are at historical highs. If market uncertainty ends up affecting final demand, these assets will face significant downside risk, so investors also need to be cautious.

China News Network: In your view, what is the biggest challenge facing industries related to Halo assets?

Zhang Yulong: The biggest challenges mainly come in two aspects. First, doubt about the stability of the supply-and-competition landscape. Some industries we think are Halo assets may actually not be, because the competitive landscape could suddenly undergo massive change, meaning the assumption that they are Halo assets would no longer hold. For example, some internet giants last year: people originally thought they were monopoly-type companies with high market barriers. But after the industry model changed, the barriers were no longer solid, and the corresponding Hang Seng Tech Index performed very poorly. This is an implicit risk of Halo assets.

Second is the obsolescence risk from technological iteration. Halo assets are heavy-asset with low obsolescence, but that doesn’t mean heavy assets are necessarily low obsolescence. Some heavy-asset industries may have their existing assets’ technologies continuously rendered obsolete due to technological iteration. Naturally, these assets would no longer be high-quality Halo assets. Therefore, when investing in these kinds of assets, everyone must be especially careful.

China News Network: Is it possible that at some point in the future, there will be a turning point where the investment logic of Halo assets changes and they are no longer pursued by capital?

Zhang Yulong: There are two key turning points. One is the end of war—for instance, if the U.S.-Iran conflict eases, the problem of high inflation that the market was worried about may end, and uncertainty would also dissipate. At that time, high-growth industries would again become the market’s main storyline. Second is the emergence of breakthrough new technologies and new products. Technology iteration would quickly switch market style, and capital would move back toward growth-oriented assets.

China News Network: Please summarize in one sentence: what is the core value of Halo assets in the current environment?

Zhang Yulong: In the current environment, Halo assets can provide strong certainty and high-quality free cash flow, while also having phased competitive landscape advantages that help investors gain a favorable position in an uncertain market environment. But more importantly, investors should maintain a calm mindset, do a good job of risk control, and make asset allocation and layout based on their own situation—this is the core of investing.

(China News Network APP)

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