CICC: Iran conflict accelerates Middle Eastern funds' increased allocation to Chinese assets

[Caixin] Since Israel and the United States launched a military strike against Iran on February 28, 2026, tensions in the Middle East have escalated, and Asian stock markets have fluctuated. The Korea KOSPI index plummeted 12% on March 4 amid risk aversion, marking the largest single-day decline in history, then surged 11% the next day after the market opened. However, Miao Yanliang, Senior Managing Director and Chief Strategist at CICC, pointed out that from a medium- to long-term perspective, against the backdrop of the reorganization of the international monetary order, the Middle East conflict will accelerate the diversification of global asset allocation and promote increased investment in Asian assets, especially China (including Mainland China and Hong Kong).

In Miao Yanliang’s view, the rise in risk aversion leading to the sell-off of global risk assets is a short-term shock, affecting US stocks, Hong Kong stocks, and Japanese and Korean markets. In the medium to long term, the global reorganization of monetary order due to distrust in the US dollar system will accelerate, especially as the Middle East previously held a wait-and-see attitude toward Chinese assets. The war has further made them realize the dangers of putting all eggs in one basket, serving as a catalyst for increased allocation to Chinese assets.