Guo Xiaowen, fund manager of China Post Fund Company
Wu Hao, fund manager of CITIC Prudential fund company
The continued convergence of valuation gap increases the allocation of undervalued industries benefiting from economic recovery
Since the third quarter, the Shanghai Composite Index has fluctuated around 3300 points. The overall market is mainly volatile, and the game between plates is accelerated. Looking forward to the fourth quarter, Wang Jun, research director of Boshi fund research department, said that the market probability rate continued to maintain the range fluctuation trend. In the first half of the year, the large valuation differences among the A-share internal industries may continue to correct, and the style may tend to be balanced.
To increase the allocation value of the industry, reduce the allocation value of the industry. Specifically optimistic about the configuration of new energy, industrial metals and chemical industry, and will select the companies with long-term competitiveness.
The estimation difference continues to converge
Looking for investment opportunities in undervalued industries
In the first half of this year, the A-share market showed a situation of top heavy and light foot. The top heavy means that the valuation of many industries, such as medicine, food and beverage, and science and technology industries, has reached a historical high level; while the foot light refers to many traditional industries, especially those related to economic growth, whose valuation is at a historical low level. The industry valuation differentiation reached an extreme level, and investors sentiment towards the overvalued industry increased.
And since the third quarter, some of the larger plate growth in the early period of a certain degree of correction. In recent years, overseas outbreaks have been repeated, and uncertain factors are also highlighted, and the market risk preference shows a certain decline. The author believes that the fourth quarter market is still a range of shocks, the situation of large valuation differences before will continue to converge, more willing to look for investment opportunities in these undervalued industries.
In terms of fundamentals, the global macro-economy is in the process of gradual recovery. The profits of some industries which were greatly affected by the epidemic before can be better restored, which may be a better direction. Secondly, during the outbreak of the epidemic, many central banks and governments have launched more favorable monetary and fiscal policies to stimulate. With the recovery of the economy, monetary policy will gradually return to normal, and the time of the most loose liquidity has passed. Although there are still uncertainties overseas, the general direction of domestic economic recovery remains unchanged. Under the prudent monetary policy orientation, the time when domestic liquidity is the most relaxed has passed.
Driven by these two fundamental factors, one is that the economic situation will become better and better, and the other is that monetary policy will become more and more normalized. We should focus more on profit growth and industries related to the real economy. Therefore, in the fourth quarter, more opportunities should come from these undervalued industries. For example, some traditional manufacturing industries related to the economy may have some investment opportunities. In addition, in the process of normalization of monetary policy, our credit spread is narrowing along with the recovery of the economy. Correspondingly, in the future, some high dividend stocks will perform relatively well, especially some listed companies.
Be cautious in the fourth quarter
Optimistic about new energy, large chemical industry and other industries
Looking forward to the fourth quarter, we are cautious about A-shares and expect more volatility, but the decline is limited. Economic recovery makes the overall profit of A-share in the recovery. The liquidity margin can not be more relaxed, so that the improvement of the overall market valuation level is restrained.
In terms of allocation, it is suggested to reduce the allocation of overvalued industries and increase the allocation of undervalued industries benefiting from economic recovery. The current overvalued pharmaceutical, technology and consumer listed companies themselves imply higher growth expectations or lower risk-free interest rates. In the process of economic recovery, the risk-free interest rate is difficult to fall, and the performance of most companies in these industries is difficult to exceed expectations. We are optimistic about the configuration of new energy, industrial metals and chemical industry, and select the companies with long-term competitiveness.
In terms of new energy, there are already strong Chinese companies in the relevant supply chain. In other words, without Chinese companies, electric vehicles in the world will not be able to run. After the outbreak of the epidemic, whether in China or Germany, the financial stimulus has a more important tilt to the new energy vehicles in the industrial policy. This is a policy guarantee, or an important guarantee of sales volume.
In addition, at present, the valuation of the whole new energy vehicle industry chain is reasonable, and in the past year or more, there have been more opportunities for the improvement of the competitive structure in the industry, and the overall rate of return in many links has gradually increased. So we are optimistic about the direction of new energy vehicles.
In addition, under the background and logic of upgrading the manufacturing industry, especially with regard to large chemical industry, we also agree with this direction. There are two reasons why they can steadily improve their business scale and market share by virtue of their large scale of business and market share in China.
On the other hand, we need breakthroughs in semiconductor materials and other materials, and the key to this breakthrough is in the basic chemical industry. We need to be able to do better in basic chemical raw materials, and we need more investment in R & D to do better. Therefore, the whole domestic chemical industry and the whole new material industry will have great opportunities in the future. Maybe the whole world needs to reevaluate Chinas heavy chemical industry. It is difficult to find enterprises with higher production efficiency and higher level of return than these heavy chemical plants.
Adhere to the investment philosophy of good quality and low price
If I use four words to summarize my investment philosophy, that is, good quality and low price, Wumart simply means to find good companies. I think good companies refer to those companies that can continuously create value for the society, or can continuously create returns for shareholders. These good companies can be found in industries with growth in total volume and industries with improved competitive structure; the core issue of low price is to find good companies The question refers to that what you buy in the process of investment must not be very expensive. If you buy too much, it will affect the long-term earnings. However, to judge whether a company is cheap, we need to combine the objective and subjective dimensions. The objective standard means that if the overall profitability of a company is still improving, it should enjoy a higher valuation or the whole macro environment To support the higher valuation of the whole stock, the subjective standard is to see the combination of expected return and risk of investors themselves
In the medium and long term, I am still optimistic about the A-share market. First of all, many A-share plate, industry valuation is still not expensive. Secondly, the quality of listed companies of the whole A-share market is getting higher and higher. Thirdly, the regulatory authorities actively promote the entry of medium and long-term investors into the market, which is conducive to the healthy development of the market. With the recovery of the economy, I will still choose the right investment target according to the standard of good quality and low price.
[personal introduction] Mr. Wang Jun, master. In 2008, he graduated from Shanghai Jiaotong University and joined Boshi Fund Management Co., Ltd. He has 12 years of experience in securities industry and is now the research director and fund manager of the research department.
Investing is like waiting for an oil painting to dry
An Yun, deputy general manager of Changxin fund
How to deal with the high water level? Four factors should be unified in asset management products: customer expectation, product strategy, fund manager style and product assessment. Based on this, the product can be divided into absolute income concept and relative income concept.
However, volatility and earnings are a pair of contradictions. In the past practice, we found that if we can resist certain fluctuations, the earnings of many high-quality companies may be higher. There are cycles and fluctuations in the market and the operation of the company, but the fluctuation is not equal to the risk. Many holding positions in high-quality companies seem to fluctuate slightly, but in fact, the risk is not big. Especially if we consider the passage of time, the risk is smaller. In this market situation, absolute income concept products are still recommended to reduce their positions, while relative income concept products continue to hold high-quality companies to ride through fluctuations.
Samuelson once said that investment is like a painter waiting for the paint to dry, or a gardener waiting for the flowers to bloom. Although the results are expected, the process is very boring. What we should do carefully is to ensure that good flowers are planted in good soil, maintain them, and wait patiently.
Looking forward to the next half a year, I think the market rate will probably reach a new high.
Second, it is observed that leading companies in many industries reaped a certain market share when the epidemic situation was more serious in the first half of the year. On the one hand, because these leading companies have better cash flow, they can not only survive the downturn of the industry, but also have the opportunity to take more shares. On the other hand, because of the epidemic situation, many offline marketing activities can not be carried out, which objectively strengthens the product dynamic marketing of leading companies. If we can increase the share in the downturn of the industry, when the industry recovers, the flexibility of these leading companies will increase, and the income and profits will also go up to a higher level. In the long run, we especially value the companies that have shown superior quality in the touchstone of the epidemic situation.
It is obvious that different companies have different responses to the same external shocks. A small number of companies have shown a good ability to cope with emergencies and carry out the implementation of this response, so as to minimize the damage and increase the share after the end of the epidemic. Such companies are worthy of in-depth study and long-term follow-up.
(author: Deputy General Manager of Changxin fund, manager of Changxin domestic demand growth mixed fund)
A shares after the structural market or will continue
Guo Xiaowen, fund manager of China Post Fund Company
This year is a year of fluctuations in the A-share market: from the beginning of the year when the domestic epidemic situation and the impact of foreign markets made a sharp correction; in the second quarter, with the alleviation of the epidemic situation and the release of water from the global central bank, the market rebounded rapidly at the end of June and early July. After that, the market entered a short-term spontaneous adjustment stage, superimposed with the intensified Sino US friction, foreign capital outflow, US stock adjustment and domestic macro liquidity Multiple factors such as international tightening further impact the market risk preference and enlarge the market volatility.
This year is also a year for A-share investors, especially institutional investors. The structural bull market dominated by heavy institutional consumption and technology has significantly strengthened the excess returns of institutions. So far this year, the China Securities Fund Index has risen 13.90%. Among them, the stock fund index and the mixed fund index increased by 27.11% and 30.81% respectively, far exceeding the 7.35% increase of the Shanghai Composite Index in the same period.
Excellent earnings performance for this years A-share investment has brought a high popularity. From January to July, a total of 10.42 million natural person investors were added to the market, including 2.244 million new natural person investors in July, a new high since June 2015. At the same time, the issuance scale of partial public offering funds has exceeded one trillion yuan since the beginning of the year, of which the issuance scale in July exceeded 300 billion yuan, the highest single month issuance record.
First of all, about Sino US friction. On the one hand, the markets panic about the escalation of Sino US friction has been reflected in the fall of positions in semiconductor, communication and other sectors, which are most affected. On the other hand, the market is generally pessimistic about the Sino US friction. When the market has prepared for the worst, the impact of subsequent external risks on the A-share market will also be passivated.
Secondly, about the outflow of foreign capital. This is mainly due to the obvious outflow of trading orders, and the long-term inflow of allocated funds has continued, with an inflow of nearly 200 billion since the beginning of the year.
Third, the adjustment of US stocks. The fundamental reason for the recent decline in US stocks, especially technology stocks, is still the spontaneous adjustment to the huge rise since the epidemic. Under the current extremely loose liquidity support of the Federal Reserve, there is no short-term risk of US stock crash.
Liquidity easing will continue, optimistic about the fourth quarter market
For consumption, the current market is mainly concerned about its high valuation. But as the A share market has the highest degree of institutionalization and internationalization, compared with the overseas consumption leader, the valuation of the A share consumption plate is still relatively reasonable, far from the valuation bubble stage.
For technology, the recent market panic about external risks has been concentrated on the decline of positions in related sectors. At the same time, the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China will be held in October, and the 14th five year plan will be issued. Domestic industrial policies will also continue to release and form a catalyst for the science and technology sector. In addition, a new round of science and technology cycle represented by 5g is starting, which will also accelerate the improvement of science and technology sector. In the long run, the protracted war on science and technology between China and the United States has begun, and this round of science and technology market will shoulder the historical mission and become the main line of the market in the medium and long term.
For the undervalued procyclical financial cycle plate which is highly concerned by the market in the near future, we should grasp the short-term alpha opportunity, but it is difficult to form a systematic market when the monetary policy will not release water and the economy continues to recover weakly.
Focus on three prosperous industries: new energy, military industry and securities companies
It is suggested to focus on domestic substitutes and related targets of science and technology innovation board, and pay attention to new energy, military industry and securities companies from the perspective of prosperity.
In terms of new energy, first of all, for new energy vehicles, the domestic sales of new energy vehicles have begun to recover month by month in recent years, and the industrial chain has rebounded month by month, which has become an effective focus for stable growth. At the same time, European new energy vehicle consumption growth is strong this year. Although the epidemic situation has been repeated recently, it is under control. With the improvement of the epidemic situation and sustained economic recovery, it is expected to return to high growth, thus ushering in domestic and foreign sales resonance. Secondly, in terms of photovoltaic, domestic bidding projects were launched, and the bidding scale reached 25.97gw, exceeding the market expectation. The price of superimposed photovoltaic industry chain rises steadily, reflecting the demand boom, and the industry demand recovers. The annual photovoltaic installed capacity is expected to exceed the expectation.
In terms of military industry, the recent Sino Indian border issue and the Taiwan issue have continued to catalyze. In the medium and long term, it is the main battlefield of the game between big powers and an important guarantee for Chinas rise. It is expected that the 14th five year plan weapons and equipment will enter the period of large-scale construction, and military enterprises will move forward from steady growth to high-speed growth.
In terms of securities companies, the current market adjustment is approaching the end, and the follow-up market is expected to gradually recover, driving the profits and valuation of securities companies to achieve Davis double-click, and the securities companies have greatly benefited from this round of financial reform.
The logic of market rise switching from liquidity to fundamentals
Wu Hao, fund manager of CITIC Prudential
Back to the end of 2019, the market environment we are facing is that Chinas nominal GDP growth has experienced a downward trend for 11 quarters, and the inventory cycle has come to the bottom area. Although the periodic pressure of pig inflation is still in place, the Federal Reserve has cut interest rates three times, and China has more room for monetary policy. From the information transmitted by the central economic work conference, the market has a relatively strong integrity In order to achieve the growth expectation of well-off society, the new and old infrastructure construction as the main means and the weak recovery of Chinas economy have been widely recognized by investors.
However, the new outbreak in early 2020 has completely changed the actual economic and policy operation. For China, the real GDP in the first quarter fell by 6.8% year-on-year in the first quarter. As a response to monetary policy, the market interest rate dropped sharply. Dr007 once fell below 1%, and the yield of 10-year Treasury bonds once fell below 2.5%, breaking the low point of the financial crisis in 2008. For overseas major economies, the impact of the epidemic situation was delayed by one month, but the impact was stronger and more persistent, In the second quarter, the real GDP of the United States decreased by 9.1% year-on-year, while that of the European Union decreased by 14.9%. Due to factors such as large-scale grounding of international flights, international crude oil prices plummeted. Ice oil distribution fell by 48% in March, which led to negative feedback of asset prices and liquidity. The Federal Reserve was forced to significantly reduce interest rates to 0 interest rates and provide unlimited US dollar liquidity to the market.
The common impact of the epidemic on the whole world is that the liquidity environment is abundant. The different impact is that due to the different outbreak time and response measures between China and foreign countries, the major economies at home and abroad showed obvious contrast in the second quarter. Compared with the double-digit decline of overseas developed economies, Chinas real GDP has achieved a year-on-year growth of 3.2%, which on the one hand makes the difference in assets The A-share equity assets are more attractive to global investors. On the other hand, it is also reflected in the global competitiveness and share improvement of micro A-share companies.
Therefore, this years A-share market experienced the impact of the Spring Festival epidemic and the overseas epidemic and liquidity shock in March, which reflected the economic recovery after the epidemic, the relative fundamentals better than overseas assets and the abundant liquidity environment. At the same time, these factors also affect the structural opportunities of the market.
First of all, the epidemic directly drives the demand for anti epidemic materials at home and abroad, ranging from masks and gloves to medical equipment, diagnostic reagents, vaccines and blood products. The revenue and profits of related companies have been directly driven by the epidemic. At the same time, the consumption scene has shifted from off-line to indoor and online, while the income growth of companies related to frozen food and online entertainment does not need to be put into operation The profit has been more flexible.
Secondly, the economic contrast between China and foreign countries caused by the epidemic has also brought a kind of investment opportunities for increasing global share. For example, cro plate of pharmaceutical industry, consumer electronics sector of electronic industry, and some midstream manufacturing industries with relatively high export share have benefited from the contraction of overseas supply and relatively rigid demand, resulting in high growth of company revenue. These direct or indirect pull on the fundamentals of Companies in related industries are transformed into better stock price performance.
In this year, we actively participated in the latter two types of opportunities, and arranged some high-quality companies with domestic and foreign competitiveness in consumer electronics, new energy vehicles, cloud computing and automotive electronics. For example, Baosteel software and Desai Xiwei, the key positions of CITIC Prudentials new blue chip at the end of the second quarter, were the second and third largest cumulative growth rate of Shenwan computer industry this year. What they have in common is what they have in common All industries have great development space, and the ranking of this space is very high from the perspective of the whole market. These companies have relatively strong competitive advantages, and their position in the industry is relatively stable. Of course, the abundant liquidity environment this year has also improved the valuation elasticity of such assets.
Looking forward to the fourth quarter and next year, we believe that with the promotion of global vaccine research and development, the related impact of the epidemic will gradually fade away, economic growth and policy mix will return to normal. As market interest rates return to the central level, the elasticity of valuation driven by liquidity will decline, and the relative valuation level will be determined more by the fundamental difference itself.
We will also pay more attention to the industrys own industry cycle and policy cycle support, the business climate can maintain or continue to improve the subdivision direction, especially in late October, the Fifth Plenary Session of the CPC Central Committee is expected to release Chinas 14th five year plan, which will have an important impact on equity investment. In addition to traditional strategic emerging industries such as cloud computing, semiconductors and new energy, we will also pay attention to the military Industry, securities companies and other industries remained concerned.
[personal introduction] Wu Hao, deputy director of fund research, CITIC Prudential fund research, fund manager of new blue chip and Shengshi Blue Chip Fund of CITIC Prudential; with masters degree, CFA, 13 securities and fund, he joined CITIC Prudential fund in 2010; he has a steady style, adheres to value growth, takes long-term and stable performance as the investment goal, and is good at selecting companies with competitive advantages in good industries.
Looking for new direction with old eyes
Huang Lihua, director of active equity, HSBC Jinxin fund
With 90 days left in 2020, I find a lot of people already anxious. However, different from the past, people are anxious about when 2020 will be over when the black swan incident is frequent.
Looking back at the first nine months of this year, we have experienced a series of black swan events, such as the outbreak of the new crown epidemic, the intensified game among big powers, and the overall slowdown of global economic growth. Both the economy and the market are facing great uncertainty. But it is precisely this uncertainty that has created the main line of the market since 2020.
Looking for certainty in uncertainty
Especially for high-quality enterprises with strong mid-term performance certainty and good long-term investment logic, if the valuation is not too high, its return to risk ratio is quite attractive. In the first half of the year, the relatively poor performance of the sectors abandoned by investors is also the big finance industry which is greatly affected by the epidemic and has high performance uncertainty.
However, as a few industries are held together by investors and individual stock valuations remain high, the cost performance ratio of these industries and companies with high fundamental certainty is rapidly decreasing. How to find cheaper certainty in the market has become the top priority of our investment in the fourth quarter.
If we pull the perspective back, not limited to individual stocks and plates, then there are many things with high certainty in the fourth quarter.
Secondly, as one of the countries with the most successful epidemic control and the best economic recovery in the world, RMB assets are very attractive to overseas investors. Whats more, horizontally, A-share valuation is still in a low position in major global markets. Therefore, we will probably see overseas funds continue to increase the allocation of A-share assets in the fourth quarter.
In addition, as the boot of the U.S. election gradually falls, the probability rate of various peripheral risks we are facing will usher in marginal improvement. This will effectively enhance the risk preference of domestic and international investors for a shares.
Finally, with the sustained recovery of Chinas economy, we can see the performance of some leading companies in Pro cyclical industries continue to stabilize and repair in the fourth quarter and next year.
Undervalued blue chip and pro cyclical plate are more cost-effective choices
If we follow the above certainty to explore, we can find that the investment opportunities in the fourth quarter are quite rich. In particular, with the continuous improvement of earnings, the blue chip stocks, especially the cycle leader, whose valuation is still at a low level, are very attractive. Similar to the high-quality leaders in financial, real estate, machinery, chemical industry, household appliances, building materials, transportation and other cyclical plates, we feel that they are all expected to usher in investment opportunities in the fourth quarter.
On the one hand, this kind of highly cyclical industry was greatly impacted by the epidemic in the first half of the year. Many companies with weak competitiveness or small scale have been or are being eliminated. High quality listed companies are expected to improve their market share and profitability in their respective segments in the future, so as to bring good returns to investors.
On the other hand, at present, many valuations of these enterprises are still attractive, and some high-quality enterprises have good long-term growth. We will also actively look for companies with better future performance, better growth potential and long-term core competitiveness, and make layout and investment.
Investors give us their money in the hope that we can help them avoid uncertainty and constantly look for certain investment opportunities in the market. And HSBC Jinxin fund will always adhere to value investment, buy long-term competitive advantage companies at reasonable or undervalued prices, actively manage portfolio risks, and strive to create sustainable excess returns for investors.
We believe that on the basis of active and in-depth research on the fundamentals of individual stocks and adhering to a systematic and scientific investment framework and risk control process, it is expected to create relatively stable and sustainable performance returns for investors in the long run.
[personal introduction] Huang Lihua, director of active equity of HSBC Jinxin fund, fund manager of HSBC Jinxin Large Cap Fund, is a postgraduate. He was once the investment manager of earnestpartners, the investment manager of Anxin Securities Co., Ltd., the fund manager of Anxin Fund Management Co., Ltd., the investment manager of China Merchants Securities Asset Management Co., Ltd., and the fund manager of Beijing Panfeng investment management partnership (CITIC Industrial Fund secondary market investment platform). He joined HSBC Jinxin Fund Management Co., Ltd. in June 2020. He is the director of active equity of HSBC Jinxin fund and the fund manager of HSBC Jinxin Large Cap Fund.
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