Core Insights - Goldman Sachs' strategy team emphasizes the importance of focusing on areas outside the US stock market, as the offshore Chinese market has broken through a year-long consolidation and reached a four-year high, driven by easing geopolitical concerns and the deepening of "anti-involution" policies [1][2] Market Breakthrough - The offshore Chinese market has reached a critical turning point, with the MSCI China Index hitting a four-year high and the CSI 300 Index also reaching a new annual peak; since the beginning of 2025, the MSCI China Index has accumulated a 25% increase, marking the second-best performance for the first seven months since 2010 [2] Driving Factors - Improved US-China trade relations have significantly boosted market risk appetite; strong capital inflows are evident with a surge in margin loans in Hong Kong and record inflows from southbound capital, indicating growing interest from overseas investors in Chinese stocks [3] - The deepening of "anti-involution" policies is reshaping industry dynamics, coupled with adjustments in earnings multiples, leading Goldman Sachs to raise its 12-month target for the MSCI China Index from 85 to 90 [3] Investor Trends - There is a notable shift in overseas investors' interest towards the Chinese market, with a significant increase in attention from US investors and a reduction in geopolitical concerns compared to the previous two years [4] - Investors are increasingly focused on the logic behind China's "supply-side reform 2.0" (anti-involution), with Goldman Sachs releasing a report to explain the long-term impacts of this policy on industry concentration and profit models [4] - Despite increased holdings of Chinese stocks by emerging market/Asia mutual funds, global actively managed funds' allocation to China remains near a cyclical low, indicating substantial future allocation potential [4] Sector Adjustments - Goldman Sachs has made key adjustments in sector allocations, focusing on policy sensitivity, valuation recovery, and earnings expectations; sectors such as insurance and materials are now overweight, while real estate and banking have been downgraded [5][6] - The insurance sector is particularly attractive with a projected 2025 P/E ratio of 7.6 and P/B ratio of 1.0, benefiting from a recovering stock market [5] - The materials sector is also upgraded to overweight due to its strong correlation with the "anti-involution" policy, which is expected to enhance profitability and industry concentration [5] Key Contradictions - A core contradiction exists in global asset allocation, with the strong performance of the US stock market potentially hindering some investors' allocation to China; however, China's independent logic, driven by "anti-involution" policies and capital inflows, highlights its long-term investment value [8] - Goldman Sachs suggests focusing on policy-sensitive sectors like insurance and materials, as well as undervalued recovery opportunities in certain consumer sectors [8] Summary - In the second half of 2025, global asset allocation should focus on differentiated logic, with the US market emphasizing earnings resilience and AI-driven opportunities, while the offshore Chinese market should anchor on policy reforms, capital inflows, and valuation recovery, favoring sectors like insurance and materials while avoiding high-involution and high-valuation pressure industries [11]

Group 1 - The core viewpoint emphasizes the effectiveness of focusing on areas outside the US stock market, particularly as the Chinese offshore market breaks through a year-long consolidation and reaches a four-year high, driven by easing geopolitical concerns and the deepening of "anti-involution" policies [1][2] - The MSCI China Index has risen 25% since the beginning of 2025, marking the second-best performance for the first seven months since 2010, alongside the Shanghai and Shenzhen 300 Index reaching new highs for the year [1][2] Group 2 - Key driving factors include improved US-China trade relations, a significant increase in market risk appetite, and a strong influx of capital into the Hong Kong market, with record inflows from southbound funds [2][3] - The "anti-involution" policy, which is a supply-side reform, is reshaping industry dynamics and has led to an upward adjustment of the MSCI China Index's 12-month target from 85 to 90 [2][3] Group 3 - There is a notable shift in investor interest towards China, with US investors showing increased attention and a significant reduction in geopolitical concerns compared to the previous two years [3][4] - Despite the increased interest, global actively managed funds' allocation to China remains near a cyclical low, indicating substantial future allocation potential [3][4] Group 4 - Sector adjustments have been made, with an overweight position in insurance and materials, while reducing exposure to real estate and banks [4][5] - The insurance sector is deemed attractive with a 2025 price-to-earnings ratio of 7.6 and a price-to-book ratio of 1.0, benefiting from a recovering stock market [4][5] - The materials sector is also upgraded to overweight due to its sensitivity to the "anti-involution" policy, which is closely linked to industry profitability and supply reform [4][5] Group 5 - Real estate has been downgraded from overweight to market weight, reflecting a shift in industry cycles and policy focus from demand stimulation to supply-side reform [5][6] - The banking sector has been adjusted to market weight, with a 2025 price-to-earnings ratio of 6.2 and a price-to-book ratio of 0.6, indicating limited short-term elasticity [5][6] Group 6 - The analysis highlights a core contradiction in global asset allocation, where the strong performance of the US stock market poses a challenge for investors considering China, despite the independent logic of China's market driven by "anti-involution" policies and capital inflows [10][11] - Goldman Sachs suggests focusing on policy-sensitive sectors like insurance and materials, as well as undervalued consumer sectors, while avoiding high-involution and high-valuation pressure industries [12][13] Group 7 - The overall strategy for global asset allocation in the second half of 2025 should focus on differentiated logic, emphasizing the resilience of US corporate earnings and structural opportunities driven by AI, while anchoring on policy reforms and capital inflows in the Chinese offshore market [13]