CITIC Securities' Bao Chengchao: Domestic large-cap blue-chip valuations are at relatively low levels, while blue chips in the domestic demand and manufacturing sectors have the most ample room for recovery.

on November 3, according to People's Financial News, Bao Chengchao, Chief Strategist at CITIC Securities Research Institute, pointed out in his latest view that from a global comparison, the valuation levels of domestic large-cap blue-chip stocks are at a relatively low point. Among the four markets of the US, Japan, South Korea, and A-shares, A-shares remain the only market where the valuation premium for AI relative to non-AI still exceeds its historical median. As of October 22, 2026, the P/E ratio for AI versus non-AI in A-shares is 4.4 times, placing it at the 82nd percentile since 2016, while the same metric for the US, Japan, and South Korea has fallen to the 1st, 17th, and 24th percentiles, respectively.

The AI premium in overseas markets has largely been absorbed by the rise in non-AI valuations. The P/E multiples for leading non-AI non-financial companies in the US and Japan stand at 33.5 times and 23.0 times, respectively, ranking at the 98th and 95th historical percentiles. For A-share blue-chip stocks related to domestic demand and manufacturing, the overall P/E ratio is only 15.6 times, sitting at the 21st percentile historically. Bao Chengchao believes this misalignment indicates that large-cap blue-chip stocks in A-shares tied to domestic demand and manufacturing have relatively the most ample room for valuation recovery.

Bao Chengchao also stated that realizing this upside requires supportive macroeconomic conditions. Overseas, if the AI spending cycle gradually approaches an inflection point and begins to decline, long-term US Treasury yields may fall accordingly, providing marginal improvement to demand and valuation conditions for the global non-AI sector. Domestically, the coordinated direction of fiscal and monetary policies is clear, with expanding domestic demand placed as a priority, and there are increasing signals of marginal improvement in key domestic demand indicators. If the decline in overseas rates coincides with the phased recovery of the domestic economy, profit expectations and valuation constraints for A-share large-cap blue-chip stocks could see simultaneous restoration.