HALO Trading Strategy: The Dominant Global Investment Trend

1. What is HALO Trading?

HALO Trading is an acronym for 'Heavy Assets' and 'Low Obsolescence.' First proposed and popularized by Wall Street investment banks in 2026, it is an investment strategy that focuses on enterprises and sectors with high-barrier physical assets, stable business models, and low vulnerability to technological disruption (particularly AI technology).

Its core characteristics can be summarized in two key points: 1) Heavy Assets: Enterprises build competitive barriers relying on physical assets (such as mines, power grids, industrial equipment, and transportation infrastructure). Such assets feature high replication costs, long construction cycles, and are often constrained by regulations or resource scarcity, creating significant barriers to entry. 2) Low Obsolescence: Business demand is highly inelastic, minimally impacted by technological disruption, and resilient through economic cycles, generating consistent and stable cash flows. Typical sectors include energy resources, utilities, core infrastructure, and the national defense and military industry.

From an asset perspective, HALO Trading primarily covers three core sectors:

• Energy and Commodity Assets: Including oil and gas extraction, mineral development, and coal. These are anchored by resource reserves and physical facilities, with rigid and irreplaceable demand.

• Infrastructure and Utilities: Including railways, ports, power grids, water services, and waste treatment. These assets possess natural monopoly characteristics and perpetual rigid demand, as physical operations remain difficult for AI to replace.

• High-end Manufacturing and National Defense Assets: Including semiconductor equipment, industrial mother machines, and national defense and military industry. These involve complex physical supply chains or national security interests, featuring high entry barriers and prohibitive costs for technological trial and error.

2. Core Reasons for HALO Trading’s Recent Rise as a Market Hotspot

The rise of HALO Trading is not driven by a single factor, but by the resonance of the AI technology cycle, macroeconomic conditions, industrial supply and demand dynamics, and capital demands. Specifically, there are four key drivers:

A) Dual Demands For 'Hedging and Necessity' Amidst AI Technological Iteration

Mitigating AI substitution risks: As AI technology advances rapidly, labor-intensive light asset industries—such as software, consulting, and wealth management—face the risk of business model disruption, leading to heightened market concerns regarding their valuations. Meanwhile, HALO Assets, by virtue of their reliance on tangible assets and rigid demand, remain virtually immune to the direct disruptive impact of AI, positioning them as a 'safe haven' for capital to hedge against technological displacement risks.

AI drives incremental demand: The industrialization of AI—such as the development of computing power centers and smart terminal manufacturing—has significantly amplified the rigid demand for HALO Assets. Computing operations necessitate a stable power supply, chip production is dependent on non-ferrous metal raw materials, and logistics are inherently tied to physical infrastructure. This creates a positive cycle where 'the more AI advances, the greater its reliance on hard assets,' providing HALO Assets with a unique combination of defensive stability and growth potential.

B) Catalysts from Macroeconomic Conditions and Supply Chain Restructuring

In the current high-interest-rate environment, the valuations of asset-light technology stocks—which rely on the discounting of future earnings—are suppressed. Conversely, HALO Assets typically feature stable cash flow and high dividend yields, offering superior valuation profiles that better align with current capital risk appetites. Furthermore, intensifying global geopolitical conflicts have driven up commodity prices, while countries accelerate supply chain restructuring. The increased strategic scarcity of physical production capacity and infrastructure has further strengthened the value premium of HALO Assets.

C) Supply-Demand Mismatch in the Transition Phase of the Industrial Cycle

The current market is in a transition phase where "AI technology has achieved breakthroughs but not yet become the dominant driver of industrialization". Profit models for asset-light tech stocks remain unproven, whereas traditional heavy-asset industries—such as chemicals, building materials, and mining—have experienced protracted capacity clearance, resulting in greater supply-side rigidity. Concurrently, the wave of 're-industrialization' driven by 'de-globalization' and the boom in AI infrastructure have catalyzed a surge in 'capital expenditure hunger' for physical assets, resulting in structural supply-demand mismatches and unlocking profit elasticity for HALO Assets.

D) Shift In Capital Allocation Priorities and Market Sentiment

In the Chinese stock market, valuations for growth sectors such as AI and commercial aerospace have reached historical highs, limiting the room for new market opportunities. A 'heavy on reality, light on narrative' approach has become the dominant trend, as the low-volatility, high-certainty nature of HALO Assets aligns well with capital demands. Furthermore, HALO-related industries, such as mining and manufacturing, account for a high proportion of operating revenue in the A-share market, and most enterprises have a higher tangible asset ratio than their U.S. counterparts. Global investors have identified a wealth of undervalued HALO Assets in A-shares, driving sustained capital inflows into these sectors (notably in petroleum, petrochemicals, coal, and non-ferrous metals, which have recorded significant gains year-to-date).

3. The Sustainability Of HALO Trading?

We believe HALO trading will show strong continuity in the short term (6-12 months), enter a phase of differentiation and repricing in the medium term (1-3 years), and its long-term sustainability (more than 3 years) will depend on the continuous verification of its core logic.

Short Term (6-12 months): Strong Continuity

Three key factors will underpin its persistence: the scarcity of HALO assets’ "defensive + growth" attributes during the AI industrialization transition, capital demand for manufacturing inventory replenishment and risk hedging, and the safety margin of low valuations combined with global policies on "re-industrialization" and "supply chain autonomy and control".

Medium-Term (1-3 Years): Intensified Divergence, Shifting From "General Rally" To "Selective Investment"

If AI industrialization accelerates (e.g., large-scale profitability in application scenarios), market capital will shift back to high-growth tech stocks. The valuation re-rating of HALO Assets will slow down, shifting them from 'core portfolio holding' to 'complementary assets,' with only sub-sectors deeply integrated with AI infrastructure (e.g., power grid equipment and critical minerals) maintaining the potential for excess returns. If AI industrialization falls short of expectations and the economy experiences a weak recovery, traditional cyclical HALO Assets that rely solely on price increases will fluctuate in line with the broader economy. Pseudo-HALO assets (heavy assets with substitution risks) will be subject to repricing.

Long-term (3+ years): Unlikely to Become an Independent Mainstream Trend

Verification of the depth of integration between AI and physical assets, as well as the continuity of supply chain restructuring, is required. If AI continues to penetrate industries such as manufacturing, energy, and infrastructure, establishing a long-term positive feedback loop characterized by 'increasing reliance on hard assets as AI evolves', the demand logic for HALO Assets will strengthen further. If AI technology experiences a disruptive breakthrough (e.g., the displacement of physical demand by the virtual economy), the long-term value of HALO Assets will be diminished. If de-globalization and geopolitical conflicts persist as long-term trends, nations' demand for reserves of physical production capacity and strategic resources will remain constant, ensuring the long-term strategic premium of HALO Assets. If the global economic and trade environment stabilizes, leading to supply chain reintegration and the easing of supply constraints, the scarcity value of HALO Assets will decline.

Only companies capable of converting 'heavy assets barriers' into 'growth elasticity' through technological advancement and global expansion—such as high-end manufacturing firms with global competitiveness or heavy-asset enterprises within the overseas expansion supply chain—can effectively navigate market cycles to achieve long-term, sustainable valuation re-rating.

For investors, there is no need to blindly chase all targets labeled "HALO". Instead, focus on core sectors that combine AI infrastructure rigid demand, supply rigidity, and global competitiveness. Furthermore, dynamically track the progress of AI industrialization, macroeconomic cycles, and changes in capital preferences to avoid allocation risks caused by over-reliance on a single investment logic.