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In Today’s Data Update

We are updating five sectors with BigOne Lab’s proprietary data as of May 2026 — including a first look at the 618 shopping festival pre-period:

• Laopu Gold (6181 HK) & gold jewelry: In April, we flagged the May promotional ramp as the key swing factor to watch amid Laopu’s April weakness. Laopu has corrected more than 40% from the peak in January. Could the promotion move the needle? And what’s the overall trend for the broader gold jewelry amid a weak gold price? We will share Laopu’s May sales trend and what’s happening on the secondary market.

• Luxury goods: The brand-level divergence we flagged in April has sharpened further in May. A handful of names are showing genuine improvement — including some that have been long-struggling. We also share how core European megabrands perform in today’s issue.

• POP MART (9992 HK): The month’s biggest talking point was the POP MART × McDonald’s collaboration — 400,000 units of Twinkle Twinkle mystery boxes were sold out in 15 minutes and triggered some of the most viral discussions we have seen since LABUBU’s global moment last year. We will share what this did (and did not do) to the monthly sales trajectory.

• Sportswear & footwear: After April’s broad-based recovery in online data, May brings a fresh read on offline store performance across brands, including Anta, Lululemon, and Nike, providing a useful ahead-of-earnings preview.

At BigOne Lab, we curate data highlights, analyze them, and deliver insights trusted by 100+ top institutional and corporate clients worldwide.

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1. Laopu Gold & Gold Jewelry

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China’s tech indices are outperforming many peers, including the Nasdaq 100, led by AI-infrastructure enthusiasm and the Chinese hardware supply-chain companies with real positions in the global AI buildout. From early 2025 to early June 2026, the STAR & ChiNext 50 rose about 138%, far ahead of the Nasdaq 100’s 46%, making it one of the clearest public-market expressions of China’s new technology cohort. This is not a broad-market story, and most offshore-listed internet giants familiar to global investors have been left out of the rally.

That may sound counterintuitive after years of drawdown and weak global confidence. But China’s core technology assets have quietly become some of the world’s strongest performers. The STAR & ChiNext 50 index tracks leading companies across Shanghai’s STAR Market and Shenzhen’s ChiNext board, and it has become the cleanest listed proxy for this shift.

Adding a broad A-share proxy makes the dispersion visible: the AI-infrastructure-heavy STAR & ChiNext 50 has led dramatically, while the broad China market has lagged far behind the AI basket.

Part of this is base effect after a long bear market that lasted until the September 24, 2024 policy pivot. But the deeper point is that China now has a large, liquid, investable universe exposed to AI infrastructure. That has begun to draw global attention. ProShares has recently filed for 2x leveraged products tied to some of the most representative A-share AI-infrastructure names, including Zhongji Innolight and Eoptolink. These companies may still be unfamiliar to many non-China investors, but inside China they have become market celebrities, closer in recognition to what SK Hynix represents in Korea’s AI supply-chain trade.

For many overseas investors, China tech still means Alibaba, Tencent, Baidu, Meituan, JD.com, and a few other offshore internet companies. That lens is increasingly stale. The listed offshore internet giants are, in many ways, AI laggards: their revenue structures remain heavily exposed to weak domestic consumption, large-company bureaucracy has slowed AI execution, and the most aggressive Chinese hyperscaler, ByteDance, is still private. (More articles will be coming on how domestic investors view the star names of Alibaba and Tencent.)

This creates a perception gap. Most foreign investors still look at the familiar ADR basket and see uneven AI monetization. Domestic A-share investors are looking instead at upstream hardware, semiconductor localization, optical modules, PCB, MLCC, power infrastructure, and other supply-chain chokepoints.

At the center of that spotlight is the STAR & ChiNext 50. The index selects leading companies from Shanghai’s STAR Market and Shenzhen’s ChiNext board, two venues designed around China’s innovation economy, growth companies, and strategic emerging industries. It is therefore a useful public-market proxy for China’s listed hard-tech complex: not the whole A-share market, but a concentrated basket of the companies investors are using to express AI-infrastructure and advanced-manufacturing exposure.

The result is also highly uneven. China’s AI-infrastructure leaders have pulled far ahead of the broad A-share market. In that sense, China is developing its own version of technology-weight-led index performance: a concentrated group of large AI beneficiaries is carrying the headline story, even as the broader market remains far less exciting.

Index Anatomy: The real China tech basket is hard-tech, not offshore-listed internet giants

The STAR & ChiNext 50 is now overwhelmingly a hard-tech benchmark rather than an offshore-listed internet proxy, a traditional manufacturing basket, or a green-energy index.

The China-specific Shenwan sector classification makes the structure clear: the two largest AI-related buckets are Semiconductors at 33.56% and Communications Equipment at 31.16%. Together, they account for roughly 65% of the STAR & ChiNext 50, making them the index’s dominant components. They have also performed far better than most other sectors, which is why the benchmark behaves less like a broad manufacturing basket and more like a concentrated AI-infrastructure index.

The more China-specific Shenwan lens makes the structure visible: semiconductors and communications equipment are the two largest AI-relevant buckets.

The second implication is more important for this cycle: many A-share upstream hard-tech companies are not merely meme concept stocks. They are direct beneficiaries of the global AI capex cycle. Optical transceivers and optical-component suppliers sell into the high-speed data-center interconnect chain. AI processor, CPU/DCU, and memory-interface companies sit closer to the compute and server architecture layer. PCB, CCL, power, and cooling suppliers are tied to the physical buildout of AI clusters.

In practical terms, these companies are exposed to the same spending wave driven by Nvidia, global hyperscalers, and the AI-server supply chain. Many Chinese technology companies are not only suppliers to domestic internet platforms; in selected links, they are also direct suppliers, qualified vendors, or first-tier suppliers to global AI leaders. The exact route differs by company, but the economics are linked to the same bottleneck the global AI sector is tackling: moving, processing, powering, and cooling far more data inside AI data centers.

This is why the market-cap expansion has been so dramatic. From the first trading day of 2025 to early June 2026, Zhongji Innolight, a leading supplier of high-speed optical modules for AI data centers, rose from roughly $20 billion to $211 billion in market capitalization, a 10.4-fold increase. Eoptolink, another major optical transceiver supplier for high-speed data-center networks, expanded from roughly $12 billion to $114 billion, a 9.6-fold increase. TFC Communication, a supplier of optical components, subassemblies, and packaging for AI computing centers, moved from roughly $7 billion to $55 billion, a 7.5-fold increase.

On the semiconductor side, Montage Technology, a memory-interface and interconnect-chip supplier leveraged to AI servers, expanded from roughly $11 billion to $47 billion in market capitalization, about a 4.2-fold increase. Cambricon, a domestic AI-accelerator chip company, increased from roughly $40 billion to $126 billion, while Hygon, a domestic CPU/DCU processor supplier for servers and high-performance computing, rose from roughly $48 billion to $98 billion. These are not micro-cap meme stock moves. They are large market-value re-ratings in companies that occupy important positions across the AI infrastructure stack.

The selected optical communications and semiconductor names are now large enough to absorb institutional capital and influence benchmark composition.

In aggregate, these six selected AI-infrastructure leaders now represent roughly $650 billion of market value, or about 3.3% of the full A-share market capitalization based on the June 4, 2026 Tushare daily-basic data and the article’s USD/CNY conversion. The full STAR & ChiNext 50 constituent basket was about $1.8 trillion, or 9.3% of the total A-share market value, meaning these six AI names alone accounted for roughly 36% of the basket. That is already large enough to matter at any benchmark level, and large enough to change how investors experience China technology beta. This is what makes the cycle different from the usual A-share theme pattern: it is not only a thin group of speculative thematic stocks rising sharply from tiny bases, but a rally in large, index-relevant companies.

That makes the structure look closer to the U.S. market’s Mag 7 experience than to old-style A-share theme speculation. The leadership is narrow, the winners are increasingly heavy in the benchmark, and index performance is being pulled by a small number of companies that sit at the center of the AI infrastructure stack. The result is a structural shift in what “China equity beta” can mean: a China benchmark is no longer only banks, liquor, property, and consumer internet. Increasingly, it carries the weight of AI hardware, data-center infrastructure, and semiconductor localization.

But Is There a Bubble? An A-share-Specific Framework

After the sharp rally of the past year and a half, many of these stocks have already moved into demanding valuation territory. Yet this cycle is not a pure meme trade. Many of the leading companies have visible earnings growth, real order momentum, and a credible role in the global AI supply chain. That is why the debate is difficult: investors worry that the bubble may eventually break, but they also recognize that the earnings base is much more solid than in a typical speculative theme.

That tension creates the need for a framework that fits A-shares’ own market character. A simple valuation screen is not enough, because A-share markets often value the highest believable endpoint rather than the current earnings base.

This is especially true for heavyweight leaders: the market does not always wait to re-rate them step by step through quarterly earnings delivery. I call this a ceiling-valuation approach: first ask how high the imagined ceiling is, then ask how much of that ceiling has already been capitalized into today’s market value. Chinese investors rarely hesitate to preempt the future; when the narrative is strong enough, they can buy aggressively and push valuations to extreme levels before the earnings arrive. In other words, they often pursue growth at the cost of certainty. The same logic also helps explain why the offshore ADR internet basket can suffer from lower valuations: many domestic investors no longer believe Alibaba and Tencent have the same explosive growth ceiling.

This is the core mechanism. When a theme becomes dominant, prices do not wait for profit realization. The market discounts the most optimistic version of the future to the present, so high PE multiples can appear before the earnings arrive, because expectations have already moved first. The uncomfortable part is that the later earnings-delivery phase may be the period when the stock derates and digests the old expectation. Even if actual profits beat the old forecast, the share price can still fall if the market’s view of the future ceiling deteriorates.

That brings us to the key question: how far into the AI expectation cycle is A-share today?

Benchmark: The 2021 new-energy peak is the stress line

To measure the current state of A-share AI expectations, we use a deliberately simple benchmark for reference: the peak of China’s 2021 new-energy cycle, meaning the A-share boom in electric vehicles, solar, wind, storage, and related renewable-energy supply chains.

That was the closest and most relevant historical precedent. It was also a dream-driven industrial narrative, with enormous future addressable markets, manufacturing scale, global demand potential, and a group of companies that began to show explosive profit growth. Coincidentally, energy and information are often treated conceptually as two pillars of technological progress. That makes the 2021 new-energy boom and today’s AI-infrastructure cycle somewhat comparable as market narratives.

At the 2021 peak, we ask two questions about a representative basket of new-energy leaders. First, what were analysts expecting these companies to earn two years later, in 2023? Second, if those 2023 earnings expectations were realized, what forward PE did the 2021 market capitalization imply?

These two indicators capture the core of the bubble. The first measures the required earnings leap: how fast profits needed to compound from 2021 to 2023 to reach the expected 2023 profit pool. The second measures valuation stress: even if the optimistic 2023 earnings were achieved, how expensive the stocks were at the 2021 peak.

This is what the market often treats as a ceiling: a future profit and valuation level that feels reachable, but high enough to carry the dream. It is somewhat similar to the terminal value in a DCF, except it avoids the complexity and false precision of choosing a discount rate. The point is to use a simple ceiling valuation that many speculators, especially retail investors, can understand, repeat, and sell to others. What about the future beyond two years? It is full of too much uncertainty. The framework deliberately leaves it aside.

The benchmark numbers were striking: for this representative group of core new-energy companies, the implied earnings CAGR was 46.6%, and the aggregate forward PE multiple at the 2021 peak was 51.4x. In other words, at the top of the new-energy cycle, the market believed leading new-energy companies could compound profits at 46.6% annually, and even if they achieved that profit base, the stocks were still trading at 51.4x forward earnings.

That is an extremely optimistic benchmark. We set that historical peak at 100%, then ask how much of that benchmark today’s AI upstream and related A-share themes have already reached.

A rough U.S. reference helps frame the scale. Today, the large-cap U.S. AI and technology complex still screens below the 2021 new-energy peak on this simple two-factor yardstick. Using the Mag 7 as an aggregate proxy, expected FY2025-FY2026 net-income growth is roughly 31% and FY2026E PE is roughly 28x. That does not mean U.S. tech is cheap, and it does not mean the comparison is one-for-one. It simply shows how extreme the 2021 A-share new-energy peak was. The relevant comparison here is between that historical new-energy peak and the current U.S. large-cap AI/tech setup: the A-share bubble benchmark was a far more aggressive combination of earnings expectations and valuation stress.

The shaded area marks the 2021 peak zone used to anchor the benchmark. Dots show each stock’s 2021 adjusted-close peak.

The new-energy cycle gives a useful warning. In hindsight, the leading new-energy companies actually delivered 2023 net profits that exceeded the expectations embedded at the 2021 peak. Yet the bubble still broke, because the future ceiling fell for the reasons below. This is the key lesson: in an A-share expectation cycle, the ceiling of belief can matter more than earnings delivery itself.

The stocks did not fall after 2021 because the companies failed to earn money. They fell because the expectation ceiling broke. Domestic demand expectations weakened after the disruptions of 2022. The Russia-Ukraine war and the deterioration in China-foreign relations damaged the global-demand narrative, and the new energy’s imagination space had depended heavily on overseas demand. As overseas policymakers grew more worried about China’s overcapacity and export pressure, restrictions on Chinese new-energy exports also became part of the valuation reset. Most importantly, domestic capacity expanded aggressively. Capital flooded into the industry, local governments competed for projects, and supply growth created brutal price competition.

The lesson is uncomfortable but important: profit delivery does not guarantee stock performance if the market has already priced the ceiling. Once investors begin to fear demand impairment, geopolitical blockage, or supply-side overexpansion, a great industry can become a poor stock-market trade.

Where A-share AI sits today

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Baiguan Pro features short and timely commentaries on important market anomalies and events that are worth your attention. Today, our team’s Aaron breaks down this cash-burning and outlines why these cash cows might be intentionally understating their true profitability.

One Micron Can Buy Virtually the Entire Chinese Internet Sector

What’s Behind the Giants’ Bizarre Cash-Burn?

Let’s log this historic milestone: Micron’s market cap now roughly equals Tencent+Alibaba+JD+ Meituan+Pinduoduo + Kuaishou combined.

This year, Chinese internet stocks have been trapped in extreme pessimism. With Q1 earnings wrapped up, market sentiment has hit a freezing point. The contrast over the past month is jarring: US semiconductor stocks are skyrocketing, while US-listed Chinese tech giants continue to plunge.

Michael Burry’s bullish call on Chinese assets about a month ago seems to have been a bit premature.

Capital markets have priced Chinese big tech into complete distortion. The fact that a single memory chip maker like Micron (MU) is worth nearly the entire cohort of China’s digital pioneers is mind-boggling. These are massive commercial empires, yet combined, they equal just one US hardware player.

Today, I’m not here to critique Burry or dissect Q1 prints. Instead, I want to highlight a glaring anomaly

——Chinese tech giants are aggressively burning cash on puzzling initiatives. Their explanations often sound like mere excuses to spend money, yielding zero visible returns.

• US Tech Giants: Capital Expenditures (CapEx) are hitting historic highs, but management presents a clear underlying logic and a visible roadmap for expected ROI.

• Chinese Tech Giants: Their cash-burn feels literal—like setting capital on fire. It vanishes instantly, leaving investors completely in the dark.

If only one company did this, you could blame bad strategy. But when virtually every industry leader does it simultaneously, can we simply write it off as “industry competition”?

In a near-zero-growth sector like e-commerce, the marginal utility of destructive hyper-competition is rock-bottom. Furthermore, there is a clear secular growth driver available—Artificial Intelligence (AI). There is no logical reason to keep cannibalizing each other in legacy businesses.

If a public market investor sitting behind a monitor can figure this out, are we to believe these elite management teams are completely oblivious?

Let’s Look at Some Facts

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Each month, we pair macro data and BigOne Lab’s proprietary indices with a structured, directional read on where Chinese assets stand and what we’re doing about it.

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Macro & Sentiment Check

Our macro indices suggest that the market has entered a consolidation phase after the strong breakout testing seen earlier in the spring.

1. China Resident Risk Appetite Index (CRRAI)

Following March’s push toward neutral territory (-0.08), the April 2026 CRRAI composite reading recorded a tactical pullback to -0.19. The index remains materially above the late-2025 floor, but April did not confirm a clean break into neutral territory.

The recovery is still visible, but uneven: Capital Market Sentiment (+0.67) and Household Leverage & Credit Dynamics (+0.05) both remained in positive territory. This indicates that retail market psychology and balance-sheet momentum have not collapsed.

The primary weakness stems from the Fundamental Bedrock dimension, which slipped to -0.57. This is the most important constraint because it represents the household sector’s perceived safety margin through property prices, transaction activity, employment, and unemployment conditions. When this dimension is negative, speculative equity-market strength transmits less effectively into durable household risk-taking.

Macro Liquidity & Business Confidence also remained below neutral at -0.69. The practical implication is that the recovery needs broader confirmation.

2. Institutional vs. Retail Sentiment

Individual retail investors in China remain steady but calm. While retail investors are actively participating, the market is not currently overheating into irrational optimism.

Big banks and international funds have become noticeably more optimistic about Chinese equities. After dipping slightly in April, institutional sentiment jumped sharply in late May, climbing to 0.59.

Our Views This Month

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Is the delivery war drawing to an end?

From 2025 to the present, China’s on-demand delivery market has been shaped by an intense subsidy battle—primarily between Meituan and Alibaba’s Taobao Flash Purchase (淘宝闪购). By using proprietary data on top 5 tea and coffee brands from BigOne Lab, Baiguan’s data analytics arm, this analysis examines how the dynamics of the “third-party delivery” (3PD) market are shifting, and why the war appears to be drawing to a close.

1. 3PD Growth Still Outpaces Overall—But the Gap Is Narrowing

The five brands we have chosen for this analysis are Luckin Coffee, Mixue, Guming, Starbucks, and Chagee.

From January 2025 to April 2026, the five brands’ 3PD channel YoY growth consistently outperformed their overall brand growth, proving that subsidized delivery has been a key growth engine.

However, the gap peaked during the peak subsidy months of June through September 2025 and has since been steadily narrowing. By early 2026, the gap between 3PD and overall growth rates had narrowed significantly, suggesting that the subsidy-driven boost was fading.

2. 3PD Share of Sales Is Declining

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On April 1, we officially launched Baiguan Pro, our professional-tier subscription designed for investors seeking deeper, more specific coverage of Chinese equities. Baiguan Pro delivers the Baiguan team’s monthly outlook on overall Chinese equity assets, our quarterly focus on themes and sectors, richer company-level analysis, and follow-ups on the ideas and companies previously presented in the newsletter.

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In Today’s Data Update

We are updating four sectors that we recently wrote about in the Baiguan newsletter, or mentioned as ideas to watch in Baiguan pro content, with BigOne Lab’s proprietary data as of April 2026:

• Sportswear & footwear: Q1 saw a broad-based recovery across athleisure, running, and outdoor, and we will break down the winners and losers. Notably, Lululemon was probed for potential toxic chemicals in its fabric and made Chinese social media headlines, and we will share whether this is an early sign of a sales impact.

• Gold jewelry: March marked a sharp reversal for Laopu after a blockbuster Q1, with gold price volatility weighing on price-sensitive buyers. With promotional activity ramping into May, the key question is whether April’s data shows stabilization, further softness, or something else investors should be paying attention to.

• Luxury goods: Q1 hinted at a gradual stabilization in Chinese luxury demand, but brand-level dispersion has been the dominant theme. We will share insights about which segments are sustaining momentum into April, and which megabrands are losing ground.

• Pop Mart: March already showed cooling in IP heat as the Sanrio collaboration came in below expectations. We will provide updates on April’s new product launches and on secondary market price trends.

At BigOne Lab, we curate data highlights, analyze them, and deliver insights trusted by 100+ top institutional and corporate clients worldwide.

🔒 The following content is available to Baiguan Pro subscribers.

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1. Sportswear & footwear

Bottom line: April marks a clear sector-wide reacceleration, with outdoor emerging as the headline growth story alongside continued strength in athleisure and a broad-based recovery across running and integrated brands.

According to our online sales table across major e-commerce platforms:

Outdoor: The standout — acceleration across the board

Outdoor remains the cleanest high-conviction trend in our sportswear data, with virtually every brand we track posting sequential acceleration in April. By category, outdoor apparel and outdoor footwear posted +57% and +47% YoY, respectively (vs. +28% / +41% in March).

Arc’teryx continued its strong run at +39% (vs. +33% in March and +20% in Q1), Kolon delivered +72% (vs. +57%), and Descente accelerated to +48% (vs. +21%). Among more value-tier outdoor players, Camel posted +41% (vs. +10%), Kailas +37% (vs. 0%), and Pelliot +26% (vs. +20%).

Integrated brands: improvement almost everywhere, with Li-Ning the exception

Among domestic integrated brands, most names improved: Anta +2% (vs. +1% in March), FILA +21% (vs. +7%). Li-Ning was the outlier, slipping to -5% (vs. +5% in March). Across the group, the improvement is driven primarily by volume; ASPs remain in single-digit YoY decline.

International integrated brands saw broad-based acceleration similarly. Nike returned to double-digit growth at +12% (vs. flat in March), helped by a strong reception of the new Pegasus and improved casual footwear.

Athleisure: Lululemon still Strong

Lululemon delivered +39% YoY in April — the late-April social media controversy about the toxic chemicals in the fabric has not yet visibly impacted the data, though we will watch May closely.

Running shoes: growth returns

Running brands rebounded in April after a softer March. On Running continued to outperform at +35% (vs. +17%).

2. Laopu Gold & gold jewelry

Bottom line: Laopu Gold’s April weakness continued at a pace similar to March, amid broader weakness in gold jewelry as the gold price rally reverses the trend seen in previous months.

Based on our offline payment data, Laopu Gold’s mainland China store sales (excluding SKP locations, on a region-adjusted basis) fell 23% YoY in April, broadly in line with March’s decline. The traffic story is what stands out: customer count was down 21% YoY, and order volume was down 32% YoY, pointing to clearly weaker buyer interest rather than a pure ticket-size issue. The May store-promotion ramp will be the key swing factor to watch.

Our social listening and daily transaction data suggest that gold price volatility has had a meaningful dampening effect on price-sensitive consumers, and that Laopu’s April promotional activity was insufficient to reignite their interest.

From our channel checks, May is expected to bring a broader promotional ramp across regions, with Shanghai and Guangdong rolling out ‘RMB 100 off per RMB 1,000 spent’ campaigns. We will be watching closely for the sequential lift this delivers.

Broader jewelry remains under pressure: Chow Tai Seng is the standout

With Laopu dragging on the category, total offline sales across the four gold jewelry brands we track grew +4% YoY in April (vs. +17% in March). Chow Tai Seng was the clear outperformer at +27% (vs. +24% in March) — the only brand to accelerate.

The high-end branded jewelry sub-segment remains under pressure on an underlying-demand basis. After a strong March (when a low prior-year base flattered comps), Bulgari turned negative to -10% in April (vs. +25% in March) as that base effect rolled off. Tiffany’s weakness extended to -15% (vs. -12% in March).

3. Luxury brands

Bottom line: Based on our offline payment data, the overall luxury market grew at a similar pace in April to March, but within-brand dispersion remained sharp. American/accessible luxury continues to be the standout, the high-end held its pace, and a subset of European brands deteriorated further.

Accessible & American luxury: sustained outperformance

Coach delivered another strong month at +34% YoY (vs. +32% in March), and Ralph Lauren maintained its torrid pace at +60% (vs. +61%). Both brands have now sustained high-growth trajectories for several consecutive months, and the consistency of the read across our data suggests these are durable share gains rather than promotional pulls.

Resilient high end: Hermès delivered +9% YoY in April (vs. +8% in March) — the most consistent performer in our luxury data, holding firmly in high-single-digit growth.

Still under pressure and worsening: Louis Vuitton deteriorated to -10% YoY in April (vs. -2% in March) — a notable sequential step down. YSL fell sharply to -23% (vs. -6%), and Richemont Group also slipped further to -7% (vs. -3%).

4. Pop Mart

Bottom line: BigOne Lab estimates April offline sales grew +37% YoY — a meaningful step down from March’s +58% — as a lukewarm new-product slate ran into a tough prior-year base (April 2025 featured Twinkle Twinkle Gen-2 and LABUBU Gen-3). Q2 base pressure persists for the rest of the quarter.

The headline April IP launches — the LABUBU x FIFA collaboration and ‘Flying LABUBU’ series, both plush pendants — underperformed March’s Sanrio collaboration. The mid-month *Twinkle Twinkle ‘Moon Gelato’ ****series *****release saw no notable launch-day spike in our daily sales data.

Secondary market: IP heat cooling

LABUBU Gens 1–4 are at a 30% discount to retail; Twinkle Twinkle Gens 1, 2, and 4 are at a 20% discount. Looking at Twinkle Twinkle’s series: ‘Sweet Dream Forecast’ and ‘Crush on You‘ trade roughly flat to retail. The new ‘Moon Gelato‘ commands a 12% premium — well below the 60% premium ‘Crush on You‘ commanded at its own launch.

Pucky’s ‘Knock Knock‘ series, Hirono’s ‘Road Journal’, and CRYBABY’s ‘Vacation Mode On‘ are the most resilient, trading within 10% of their retail prices.

Plush pendants: a margin offset

April saw 8 figurine blind boxes (+1 YoY), 3 plush blind boxes (+1 YoY), and a record-high 13 plush pendants. With plush pendant ASPs running 50–100% above standard plush products, the mix shift is a likely margin tailwind — an offset worth weighing against the softer revenue print.

Disclaimer: All content in Baiguan Pro is for informational purposes only and reflects directional views based on publicly available information and Baiguan’s proprietary data. Nothing here constitutes investment advice or a recommendation to buy or sell any security. Please conduct your own investment research before making any investment decisions.

Related Reads

Why investing for income is a good strategy now

A decade ago, this would have been a very different conversation. Chinese equities were sold as growth. The idea of buying stocks for income — just for the yield — wasn't the consensus pitch.

Back then, the baseline expectation was to chase strategies or products yielding somewhere north of 10%. For decades, China’s rapid economic expansion created enormous opportunities to cash in on the secondary market—particularly in the high-flying internet names. In that environment, investing for dividends felt a bit "boring" compared to the hyper-growth happening elsewhere. Plus, the risk-free rate was generous enough that seeking out dividend stocks wasn't an imperative.

That has changed. We are now seeing a convergence of several factors at once:

China’s economy has entered a lower-growth, stabilization phase. In this environment, companies that reliably return capital are worth more than they used to be — the market is gradually pricing that shift.

Meanwhile, the domestic rate backdrop has tilted sharply: China’s 10-year government bond yield has fallen below 2%, a level that was almost unimaginable five years ago. At that rate, a basket of A-shares yielding 4–7% in combined dividend and buyback yield carries a meaningful spread. That’s not lost on domestic institutional investors or on insurance companies structurally seeking income.

Third — and this is the part that probably goes under the radar for most international investors — regulation has mandated it.

As early as 2008, the CSRC mandated that listed companies seeking equity refinancing must have distributed at least 30% of average annual profits as cash dividends over the preceding three years. In December 2023, the CSRC revised its Guideline No. 3 on cash dividends, strengthening disclosure requirements for non-dividend-paying companies, simplifying interim dividend procedures, and encouraging higher payout frequency. In 2024, it went further: the November Guidelines for Listed Companies No. 10 — Market Value Management explicitly charged company boards with actively managing their market capitalization, through dividends, buybacks, investor relations, and M&A. Capital return is now a governance expectation, not a voluntary option.

The results are showing up in the data. Listed onshore Chinese companies (A-shares) paid a record 2.64 trillion yuan in dividends in 2025, surpassing the previous record of 2.4 trillion yuan set in 2024 [*]. Share buybacks have also seen a massive structural leap. In 2025, 1,495 A-share companies initiated share buyback programs, with the cumulative value reaching 142.84 billion yuan.

More importantly, the nature of these buybacks has fundamentally shifted. Moving away from traditional repurchases for employee stock ownership plans, cancellation-oriented buybacks (aimed at reducing share capital) increased markedly. In 2025, over 40% of all buyback plans were intended for full or partial cancellation, up from 38.33% in 2024 (wind).

The policy tailwind has only grown stronger. The 300 billion yuan re-lending facility launched by the PBOC in October 2024 was further optimized in May 2025. It is now part of a combined 800 billion yuan pool (shared with the Securities, Funds, and Insurance companies Swap Facility), specifically designed to provide high-velocity liquidity for buybacks and major shareholder stake increases [*].

This is a coordinated policy push, not a corporate governance fad. The combination of regulatory mandate, suppressed domestic rates, and a conscious SOE pivot toward shareholder return has created a structural backdrop that simply didn't exist in prior China market cycles.

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The quasi floor: A mechanism worth understanding

Here’s something we don’t see getting nearly enough attention in international coverage of China equities.

Under CSRC rules finalized in May 2024 — the Interim Measures for the Administration of Shareholders’ Reductions in Holdings — controlling shareholders and de facto controllers of listed companies are prohibited from reducing their holdings via secondary market transactions if any of the following apply:

• The stock price has fallen below its IPO price

• The stock price has fallen below net asset value per share

• The company has not met dividend standards — specifically, cumulative cash dividends over the prior three years amount to less than 30% of average annual net profit

This creates what we’d call a quasi price floor. Not a hard floor — the state isn’t pledging to buy at a specific level. But a real incentive structure: a controlling shareholder who wants the optionality to monetize their position needs the company’s stock to stay above IPO price and NAV, and, most importantly, needs the company to maintain its dividend. That incentive doesn’t go away.

The practical effect is subtle but real. Companies with genuine cash generation are increasingly motivated to maintain and grow dividends — not purely because regulators want them to, but because their controlling shareholders’ own exit flexibility depends on it.

Instruments to invest in Chinese dividend stocks

In the domestic A-share market, the CSI Dividend Index (000922) serves as the foundational benchmark. By tracking 100 of the most consistent dividend payers—those with at least three consecutive years of distributions—and weighting them by yield, it provides the most direct exposure to the theme. It is the baseline for the "income trade," currently yielding roughly 5.2%.

For the Hong Kong market, Global X Hang Seng High Dividend Yield ETF (03110.HK) is a good direct exposure, now yielding around 5.5%-6.5%.

What’s wrong with the existing benchmarks?

To be fair, these benchmark indices are solid instruments for broad exposure to the theme. Looking at the price history over the past decade, they have generally delivered price returns on par with the CSI 300, with dividends adding an additional layer of outperformance. In a persistent low-rate environment, these remain reasonable tools for asset allocation and income generation.

However, they do carry structural shortcomings that investors should consider:

1. Sector concentration

The CSI Dividend Index is structurally heavy in banks, coal, and energy. These sectors dominate on raw yield metrics: state banks provide consistent payouts, and coal companies have generated enormous cash throughout the recent commodity cycle. But a basket where banks alone can exceed 30% is not a diversified income strategy. Telecom, utilities, industrials, and selected consumer names all have robust dividend-paying businesses that often get systematically underweighted in these frameworks.

2. Over-reliance on “trailing yield” as a screening criterion

A high trailing dividend yield can signal three very different realities: a genuinely high-performing business, a collapsing share price, or a one-off special dividend that won’t recur. Index methodologies (such as the CSI Dividend Index) that place primary weight on trailing yield often fail to distinguish between them.

3. Absence of financial quality filters

Some companies sustain dividends by borrowing—a practice that is a risk, not a feature. Methodologies that don't filter for fundamental indicators—such as free cash flow quality, ROE, or earnings durability—effectively hide balance-sheet risk under an "income" label.

These issues are partially mitigated by more advanced index variants. The CSI Dividend Low Volatility Index (930955), for example, filters for stocks that pair high payouts with low price volatility, acting as a defensive anchor during market turbulence. For investors wary of "value traps," the CSI All Shares Dividend Quality Index (932315) overlays financial health indicators—such as net profit growth and ROE—alongside yields. This ensures that distributions are backed by genuine fundamental strength rather than depleting cash reserves. (This methodology results in much more diversified sector concentration; currently, Food & Beverages, Non-ferrous Metals (15.97%), and Autos occupy the top positions.)

4. Buybacks are excluded entirely

Perhaps the most significant flaw is that buybacks are excluded entirely from all major indices. While this is understandable given that the relevant policy changes are recent, we believe a "mindset shift" is now required: moving from a "dividend-only" view to a Total Shareholder Return (TSR) view.

Buybacks are now a core component of how Chinese companies return value. Indices that screen only for cash dividends miss this shift completely. A company running an aggressive buyback program—which supports the share price and increases earnings per share (EPS)—could be ignored by the index entirely. In the current regime, the old methodology is only looking at half the picture.

For instance, as China’s internet giants transition from hyper-growth stories to mature, cash-generative companies, they have increasingly leaned on buybacks as their primary tool for returning value. Tencent, for example, has committed to a massive share repurchase program in recent years; while its cash dividend yield typically hovers at a modest 1.5% to 2%, its "buyback yield" provides a much more substantial contribution to total shareholder return.

A-share screening: total shareholder yield

To get a more comprehensive picture of what companies are actually returning to shareholders in the A-share market, we conducted a systematic screening exercise. Rather than relying solely on trailing dividend yield — which is how most mainstream dividend indices rank their constituents — we incorporated buyback activity alongside dividends to arrive at a more complete measure of total shareholder yield.

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Last month, we launched Baiguan Pro—our monthly view on Chinese assets, themes, and sectors we are closely following, as well as insights from our own data at BigOne Lab.

Each month, we pair macro data and BigOne Lab’s proprietary indices with a structured, directional read on where Chinese assets stand and what we’re doing about it.

If you haven’t upgraded yet: we’re offering a free upgrade to the Baiguan Pro tier for all existing paid subscribers through the end of Q2. Just reply to this email with the address associated with your subscription.

This Month: Our View on Chinese Assets

Our directional view on China equity allocation remains consistent with last month. Importantly, our proprietary China Resident Risk Appetite Index (CRRAI) shows continued improvement in Chinese households’ risk appetite.

In the March 2026 reading, the CRRAI composite index recorded -0.08, a further recovery from -0.17 in February. This marks several consecutive months of improvement in resident risk appetite, which is now just a fraction away from the 0-line (the historical mean/neutral level).

Recent data also shows that foreign institutional investors’ confidence in allocating capital to Chinese assets has entered a phase of stabilization following the volatility seen in late 2025. While the Sentiment Index for A&H Shares retreated slightly from its March peak of approximately 0.54, it continues to hold steady above the 0.50 neutral threshold, ending April near 0.51.

These data points back up our confidence in Chinese assets.

A-shares still preferred over HK. Three specific reasons: (1) the national team floor mechanism is a genuinely unusual feature with no real global analog; (2) in an elevated geopolitical risk environment, A-shares’ domestic-anchored dynamics offer more insulation from global risk-off moves; (3) the composition of A-shares — AI and tech supply chain, heavy industrials, domestic manufacturers — is a better fit for the China themes we find most compelling right now versus HK.

That said, our team has been increasing exposure to Hong Kong-listed assets.

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On April 1, we officially launched Baiguan Pro, our professional-tier subscription designed for investors seeking deeper, more specific coverage of Chinese equities. Baiguan Pro delivers the Baiguan team’s monthly outlook on overall Chinese equity assets, our quarterly focus on themes and sectors, richer company-level analysis, and follow-ups on the ideas and companies previously presented in the newsletter.

If you missed our launch piece, you can read it:

As a thank-you to our existing paid subscribers, we are offering a complimentary upgrade to Baiguan Pro (offer ends on June 30, 2026). If you’d like to take us up on that, simply reply to this email — we’ll get you sorted.

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In Today’s Data Update

We are updating four sectors that we recently wrote about in the Baiguan newsletter, with BigOne Lab’s proprietary data as of March 2026:

• Sportswear & Footwear: We previously highlighted how the rise of the “athleisure” trend and robust discretionary spending on sports and health in China are driving organic growth.

• Luxury Goods — We previously noted that luxury goods are seeing a gradual comeback in China as sentiment improves among middle-class and affluent consumers. In particular, Laopu Gold and the broader gold jewelry sector deserve close attention.

• Pop Mart — We previously detailed why we believe the IP sector is one of the best business segments in China and discussed Pop Mart’s valuation.

At BigOne Lab, we curate data highlights, analyze them, and deliver insights trusted by 100+ top institutional and corporate clients worldwide.

🔒 The following content is available to Baiguan Pro subscribers.

1. Sportswear & Footwear | March 2026

Bottom line: March growth moderated from the elevated January–February base, but Q1 as a whole delivered meaningful sequential acceleration versus Q4 — particularly for integrated brands and running shoes.

January–February’s strong performance was shaped by a confluence of one-offs: delayed winter demand from a warm December, the Chinese New Year week pull-forward, and Winter Olympics-related brand exposure. As those tailwinds faded, March growth naturally cooled. But stepping back to Q1 as a whole, the sequential improvement over Q4 is real across the board:

FILA’s acceleration to +16% is the standout. Nike remains the outlier — Q1’s -16% shows no meaningful improvement over Q4’s -18%, consistent with continued weakness at the distributor and retail level.

Performance Apparel: Divergence Opening Up

March brought a visible slowdown for Amer Sports: +20% YoY, down from +29% in January–February, with Q1 at +27% versus Q4’s +37%. Descente (+29% in March, broadly in line with Q4’s +31%) and Lululemon (+22%, versus Q4’s +26%) are both holding pace well.

Running Shoes: The Standout Growth Story

Running shoes remain the cleanest high-conviction trend in our sportswear data. Despite a modest March moderation, Q1 figures are striking:

On Running and HOKA both accelerated in Q1 — this is not a base-effect story, it reflects genuine share gains in a Chinese running shoe market that continues to trade up.

2. Laopu Gold & Gold Jewelry | March 2026

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Some of the best investment opportunities of the last several decades came from identifying big paradigm shifts.

The rise of the internet fundamentally changed how people find information (Google), buy stuff (Amazon and Alibaba), and interact with each other (Facebook and Tencent). The rise of mobile internet made Apple into a truly generational company. The demand for a decentralized store of value led to the creation of Bitcoin. The shift from internal combustion engines to electric vehicles and batteries turned Tesla, BYD, and CATL into the industrial behemoths that they are today. The rise of GLP-1 medications made Eli Lilly the world’s first trillion-dollar pharmaceutical company. And do not forget: the intelligence revolution underway right now has made Nvidia the first 4-trillion-dollar company in human history.

By definition, great structural changes take time to take shape. These trillion-dollar changes, affecting the lives of billions of people, do not happen in an instant. Also, by definition, truly great changes happen only rarely.

This means that if you are patient and spend enough time thinking about it, you can identify big opportunities ahead and have enough time to study it and watch it unfold. This is happy news for long-term investors.

Baiguan is a China-focused newsletter and research service. But we have a global perspective, and we are excited about major technological and industrial shifts that affect EVERYONE. After identifying one such shift, we examine which specific companies or industries in China will benefit the most from it.

When we look ahead, we see one area that’s on the cusp of a big fundamental shift again. It’s not an entirely new sector, but its true potential has yet to be realized. It’s the future when we will have fully autonomous smart driving systems.

Sizing the opportunity

Intuitively, having the world run by driverless vehicles sounds BIG. But how big?

In the US alone, roughly 3 trillion miles are driven by passenger vehicles each year. The average cost of ownership in the US is often cited at $0.7- $0.8 per mile, while current ride-hailing costs are typically $2 per mile. This translates into a total addressable market of $2-$6 trillion. (Note that we do not try to forecast the reduction in costs in a fully autonomous world, nor do we forecast the increase in rides either. This is a thought experiment with the intention to visualize the scale of opportunity, not about doing an accurate projection.)

The opportunity in China is also huge. China currently has approximately 366 million registered private passenger vehicles, and various studies indicate that these vehicles average 10,000 kilometers (roughly 6,200 miles) annually. That translates to 2.27 trillion miles driven per year, which is already comparable to the level in the US.

Our own back-of-the-envelope calculation puts the average cost of ownership in China at ~$0.45/mile, while ride-hailing costs are much lower than in the US, at ~$0.6-0.7/mile. Overall, the total addressable market for China’s robotaxi is around $1.2 trillion - $1.6 trillion.

It’s noticeable that the TAM for robotaxis in China looks smaller than in the US, reflecting lower car ownership per capita and lower labor costs. However, both of these factors have strong secular tailwinds that will help them grow faster in China, making it possible for the final market size in China to be larger than the US.

And for this exercise, we haven’t even factored in the size of the opportunity for the rest of the world, which is conceivably larger than US + China combined.

We are almost ready - technologically, economically, and culturally

All of this market-sizing exercise won’t mean a thing if the underlying tech isn’t ready. But what we observe is that the technology is no longer just on paper; it is now in daily operations and is fast approaching maturity worldwide.

In the US, Waymo is currently running at a run rate of 500,000 paid rides per week across more than 10 US cities. And estimates put Waymo’s market share in San Francisco’s operating zone, one of its earliest, already surpassing Lyft's.

When consumers actually experience a mature robotaxi service, the feedback is overwhelmingly positive. According to Waymo’s own rider surveys, an impressive 93% of their customers reported satisfaction with their rides, often citing the smooth driving style and the privacy of an empty cabin as key benefits. More tellingly, reports have surfaced of Uber users actively canceling rides when assigned a human driver if a Waymo vehicle is available as an alternative in cities where the service is integrated.

In China, the scale of deployment is equally aggressive, if not more. Baidu’s Apollo Go, one of the country’s largest operators, recently reported a peak of over 300,000 fully driverless weekly rides in Q4 2025, surpassing 20 million cumulative rides globally across 26 cities, and the company has announced it achieved per-vehicle profitability there late last year. Meanwhile, competitors like Pony.ai and WeRide have both pushed their global fleets past the 1,000-vehicle mark, with Pony.ai targeting over 3,000 robotaxis across 20 cities by the end of 2026.

A growing body of data also suggests that Chinese consumers are increasingly open to, and in some cases prefer, autonomous driving over human-driven vehicles. In China, the acceptance rate is particularly high. A 2025 McKinsey survey found that Chinese consumers show a significantly higher willingness to pay for autonomous features than their Western counterparts, with many citing safety and convenience as the primary drivers. Furthermore, a report by Rest of World highlighted that an overwhelming 85% of Chinese consumers expressed comfort with the idea of riding in a fully autonomous vehicle, a stark contrast to the persistent skepticism often seen in the US.

Our personal experiences point in the same direction. When test-riding Pony.ai’s robotaxis in Pudong, Shanghai, in preparation for a part of the upcoming Baiguan China Tour, we found the experience exceeded our expectations. The driverless vehicles are both fast and smooth in complicated situations. We left with the sense that we would prefer riding in a robotaxi to riding with human drivers. (You can also check out Amber’s experience with Baidu Apollo Go in Wuhan last year.)

Robotaxi just feels inevitable.

The main bottleneck

A May 2025 report by Goldman Sachs forecast that China’s robotaxi fleet would grow more than tenfold from approximately 4,000 vehicles in 2025 to roughly 500,000 by 2030. Looking further ahead. They also projected that the fleet could grow to 1.9 million vehicles by 2035, achieving a 25% penetration of the entire ride-hailing market.

These figures sound impressive. However, we couldn’t help but wonder, should it not be happening faster? 500,000 vehicles in 5 years sounds very conservative, given it’s a tiny fraction (~0.1%) of all passenger vehicles running on the road in China today, and the fact that technology seems almost ready now.

We believe two crucial factors are holding back the industry from realizing its full potential in China, and they are two sides of the same coin: low labor costs and labor-related political concerns.

Chinese regulations regarding robotaxis have shown two faces at once. On the one hand, local governments across the country are aggressively approving pilot zones. Baidu Apollo Go alone has entered around ~20 cities in China by the end of 2025.

Yet at the same time, all of the pilot zones are exactly what their names suggest: pilot zones, areas with light traffic and far away from population centers. In Baidu’s stronghold city of Wuhan, for example, after years of expansion, the pilot zone still covers only the area surrounding the main population center. In Shanghai, most pilot zones are located in the suburbs, which take at least 1 or 2 hours to reach from the city center.

This contrasts sharply with the US, where Waymo already covers the entire Bay Area, from San Francisco to San Jose.

We believe road-safety concerns related to China’s much more complex road environment can only partially explain the gap here.

When we look at the robotaxi in China, we cannot ignore the huge elephant in the room: China currently has an unemployment issue. There is currently an oversupply of low-skill labor. This affects the robotaxi market from two vectors.

First of all, at ~$0.7/mile, China’s ride-hailing cost is low, making robotaxi services a less compelling economic choice than they are in the US. On the other hand, the Chinese government sees social stability as a top policy priority, so allowing driverless services to grow unchecked will add further fuel to the more pressing fire. In the meantime, Beijing does not want to fall behind the US in this strategic sector. Therefore, it is juggling between policy priorities here by allowing more and more “pilots” in a low-key manner, without pulling the real trigger.

This labor and policy bottleneck is what we think would hold China back from realizing the full potential of robotaxi in the next few years. Within the next 5 years, we do not expect explosive growth in this sector. But as China’s population is on a guaranteed path of aging, we could see a drastic switch towards autonomous and an explosive inflection point, possibly in the 5-10 year timeframe.

We thus remind you that you should not expect this research piece to yield a near-term result, but rather to prepare you psychologically for one of the biggest long-term trends.

Four main areas to watch

With the context set, evaluating how to capitalize on this trend requires analyzing four distinct investment directions:

• L4 companies (Pony.ai, Baidu, etc.)

• OEMs (Xpeng, Nio, etc.)

• ride-hailing platforms (Didi, Gaode, etc.)

• picks-and-shovels component providers (Hesai, Horizon Robotics, etc)

We do not like all of them. In fact, many of them may become value traps despite the immense opportunity in this sector. In the section below reserved for Baiguan Pro subscribers, we will dive deeper.

[Once again, for existing Baiguan paid subscribers: We are offering you a free upgrade, giving you full access to all Baiguan Pro content. To upgrade, please REPLY to this email with the email address associated with your paid subscription, or send an email to baiguan@bigonelab.com. We are processing these upgrades manually through the end of the second quarter (June 30).

Please note that if you opt-in to the Baiguan Pro tier, your subscription will renew at the new rate if auto-renewal is enabled.]

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We have something new to share.

We’re launching Baiguan Pro this April.

Here’s why, and what’s inside the first issue.

Why we built this

Have you ever read a Baiguan piece introducing a phenomenal company — be it Pop Mart, Laopu Gold, others, and thought — Okay, I hope I can know how this company performs from now on. Or, have you ever read a piece about China’s service sector, experiential spending, or robotaxi industry, and wondered, but what is the Baiguan team actually doing with this?

We get these questions a lot.

Over three years of writing the newsletter, we’ve noticed our readers split into two groups. One group loves the broader China observations — the cultural context, the business stories, the macro backdrop. But there’s another group that keeps asking a more specific question: I’m bullish on China after reading you. Now what do I actually do? (There are overlaps, of course.)

Baiguan Pro is for the second group.

Here’s what we’ve realized: we’ve flagged a lot of companies, sectors, and themes in the newsletter, and readers have told us they want the follow-through. Not just the observation, but the investment thinking behind it.

We also sit on a lot of data. Baiguan has some of the best ground-level macro, consumer, and sentiment data on China out there. But data alone doesn’t tell you what to do. In Baiguan Pro, we’ll pair our data with a more structured, directional view — what we’re watching, and why.

One more thing that shapes how we think: everyone on the Baiguan team manages their own global, multi-asset portfolios. We’re not single-country analysts. That means when we look at China, we’re always looking at it in context — what else is on the table, what the opportunity cost is, how an international allocator actually thinks about an allocation decision. That global frame is built into how we write Baiguan Pro.

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What to expect

Baiguan Pro has a consistent content structure, so you always know what’s coming:

Monthly View on Chinese Assets — Each month, we pull together macro data, BigOne Lab (Baiguan’s parent company)’s proprietary data and indices, and the relevant policy backdrop to give you a structured read on where Chinese assets stand. The goal is to cut through noise and give you a directional view, backed by data.

Quarterly Theme Focus List — Every quarter, we identify the sectors, themes, and idiosyncratic opportunities we think are worth paying attention to for the next three months. This isn’t a buy list — we flag both opportunities and risks, both longs and shorts. We flag what’s interesting and why, and we’re equally willing to tell you when something looks stretched or when the consensus narrative seems wrong.

Follow-Up & Deep Dives — For themes on our quarterly list, we follow through: deep dives into industries or companies, BigOne Lab’s own data on specific trends, and the occasional company or story that’s just too “meme” to ignore.

Baiguan Data Highlights — Data insights feeds from BigOne Lab’s industry analyst team, shared with our institutional clients.

Occasional Commentary — When something happens in the market that actually matters, we’ll write about it. Brief, direct, no fluff.

Baiguan Pro is available as an upgrade via Baiguan Professional Tier (Founding Member).

For existing Baiguan free subscribers: nothing changes with your current subscription. We’ll continue covering China broadly in the newsletter — context, culture, business, macro — and we plan to expand that coverage further over time.

For existing Baiguan paid subscribers: We are offering an upgrade to the Professional tier, giving you full access to all Baiguan Pro content. To upgrade, please REPLY to this email with the email address associated with your paid subscription. We are processing these upgrades manually through the end of the second quarter (June 30). (Please note that if you opt-in to the Baiguan Pro tier, your subscription will renew at the new rate if auto-renewal is enabled.)

This Month: Our View on Chinese Assets

First, we believe China is meaningfully underweight in ACWI relative to its economic footprint, and we think that gap has overshot. The discount is understandable historically, but the risk/reward of adding from here is better than consensus implies.

We prefer A-shares over HK, currently — Three specific reasons: (1) the national team floor mechanism is a genuinely unusual feature with no real global analog; (2) in an elevated geopolitical risk environment (Iran conflict backdrop), A-shares’ domestic-anchored dynamics make them more uncorrelated with global risk-off moves; (3) the composition of A-shares — AI/tech supply chain, heavy industrials, domestic manufacturers etc. — is a better fit for the China themes we find most interesting right now versus the HK.

Our team’s directional view on China equity allocation is currently overweight relative to the MSCI All Country World Index (ACWI) index.

A few specifics driving that view:

Chinese equities (and broader markets) have had a choppy start to 2026. After a meaningful recovery in late 2024 and into 2025, driven by policy support and a wave of improving sentiment, the market is now in a more discerning phase — one where fundamentals are doing more of the work. Last year’s recovery captured much of the easy re-rating.

Fundamentals — we are seeing an improving trajectory. Our proprietary China Resident Risk Appetite Index (CRRAI) showed improvement in January and February.

* CRRAI quantifies Chinese household financial confidence and risk-taking appetite, and consists of the following components.

• Macro & Business Confidence (15%): Tracks liquidity and growth using M1-M2 spreads, government bond yields, and PMI data.

• Household Leverage & Credit (35%): Measures willingness to borrow, mortgage/consumer loan growth, and deposit trends.

• Real Economy Foundations (35%): Monitors asset values and income security through second-hand housing prices, transaction volume, and employment.

• Capital Market Sentiment (15%): Captures “animal spirits” via financing ratios, valuations (P/E), trading intensity, and new account openings.

All indicators Z-score standardized against the 2014–2026 history.

Valuation — not expensive, not a screaming buy. China is not uniformly cheap anymore after the recovery since 2025, but it still offers reasonable value.

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Sentiment

1. Retail Sentiment Index

Data is sourced from China’s major retail stock communities, with high-frequency, full-spectrum tracking of individual investors’ sentiment toward specific Chinese assets and the broader market. The sentiment index is constructed by fitting post-level semantic analysis, discussion volume, posting frequency, and directional (bullish/bearish) tone.

Historical analysis shows that every time the index reaches a standard-deviation extreme, the market has subsequently experienced a mean-reverting correction—either cooling from excessive optimism or warming from excessive pessimism.

Since the onset of the US-Iran conflict through early March, A-shares have demonstrated notable resilience relative to other emerging markets. Retail sentiment indicators are now flashing clear signs of a rebound. Drilling into the sub-components, investor enthusiasm for hard technology, upstream resources, and cyclical sectors has risen sharply during the period. At the same time, previously underperforming segments have shown no further deterioration; the positive and negative forces have largely offset each other, resulting in an overall improvement in market sentiment.

2. Retail Sensitivity to Sino-US Relations

Since the second U.S.-China tariff conflict of 2025, A-shares have traded steadily with limited volatility. On the sentiment side, retail investors’ sensitivity has been markedly lower than during the April tariff clash. Despite extensive media coverage, individual investors’ attention in the stock market has not escalated into extremes. More recently, the expected Xi-Trump summit has triggered a modest sentiment rebound, though the magnitude remains notably restrained.

3. Institutional Sentiment Index

Data is sourced from research reports from a selection of top global investment banks. The tracking monitors their analyses of capital flows into Chinese assets, macro policy outlooks, sector-level developments, and individual stock perspectives, while identifying shifts in cross-border asset allocation toward China, directional sentiment (bullish/bearish), and overall market confidence levels.

Recent data shows that foreign institutional investors’ confidence in allocating capital to Chinese assets has risen sharply. Sector and stock-specific outlooks are gradually improving, and views on China’s macroeconomic stability remain solidly positive.

Wildcards: The escalation of the Iran conflict has rattled Asian markets, but not all of Asia is equally exposed. China actually sits in a more defensive position, holding large strategic and commercial oil reserves that help cushion short-term disruptions. It has also spent years diversifying its supply toward Russia and Central Asia.

In contrast, Japan relies on the Middle East for roughly 90% of its crude oil imports. South Korea sources about 70% of its crude from the region and routes over 95% of that through the Strait of Hormuz.

We think A-shares carry a structural cushion that most markets lack: the “national team” actively intervenes when needed, reducing correlation to external shocks in ways that are hard to replicate elsewhere in the region.

Despite its cushions, a sustained surge in oil prices will inevitably weigh on China’s economic fundamentals and industrial margins. Global hyper-inflation will erode household spending power worldwide. Even if China remains stable domestically, its export engine will stall as demand from its primary global customers collapses.

Therefore, while China currently appears more resilient than its neighbors, a significant escalation—specifically the introduction of ground troops or the transition into a protracted war—would fundamentally sour our short-term outlook on the Chinese market.

Q2 Themes We’re Watching

These are the areas we plan to cover in depth over the course of Q2.

Shareholder return & dividends

Chinese companies — particularly SOEs and large-caps — have meaningfully accelerated buybacks and dividends over the past 18 months. This is a structural shift, not a one-off. In an environment where earnings growth can be uncertain, capital returns provide a floor. To be frank, Chinese equities are less about high-flying growth or “moonshot” stories like U.S. tech. Much of the investment value — and a large portion of the economy — is concentrated in dividend-paying large-cap companies. In the current rate environment, yield becomes even more relevant.

However, many popular dividend indices are heavily tilted toward banks and energy companies, which carry increasing risks after the rally.

We’re building a more balanced, focused list of names where the yield is real, the balance sheet supports continuation, and the stock isn’t already priced for it.

Robotaxi

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