In the first three quarters of this year, the fund ushered in the “harvest season”, all kinds of funds generally achieved positive returns, the performance of active stock base exceeded the market, and “it is better to buy funds than speculate in stocks” was deeply rooted in the hearts of the people.
What is the market trend in the fourth quarter? Is there a good opportunity for “core assets”? Is the follow-up power of technology stocks sufficient? With these questions, the reporter of China Fund News interviewed Li Huiyong, deputy general manager of Huabao fund, Li Quansheng, general manager of Equity Investment Department of Boshi fund, GUI Kai, manager of harvest emerging industry fund, Li Wei, deputy general manager of Strategic Investment Department of GF fund, Zou Xi, director of equity investment of RONGTONG fund, Wang Hengnan, manager of Nord fund, and Xingtao, manager of HSBC Jinxin consumer Dividend Fund, These fund managers who better seize market opportunities this year are more cautious about index investment opportunities in the fourth quarter. They can grasp the structural opportunities by judging that the market may be in a volatile trend; Prefer defensive sectors with low valuation and high growth fields related to technology such as 5g; It is expected that the valuation switching market will be staged again at the end of the year.
the overall market fluctuated in the fourth quarter
China Fund News reporter: how to look at the market pattern this year and whether the market can continue to perform well in the fourth quarter?
Li Huiyong: this year’s market can be regarded as a medium-level bull market. The reason why we can turn around from last year’s bear market is that first, the market oversold last year and the market has the internal power to repair the rebound; Second, liquidity remained relatively loose throughout the year; Third, the impact of the market on trade issues began to passivate; Fourth, the acceleration of reform and opening up, especially the improvement of the position of the capital market, the launch of the science and innovation board and the increase in the proportion of A-Shares in the world’s major indexes, have improved the market’s confidence in a shares. At present, in addition to the first factor, the latter three factors are still established, and the overall positive trend of A-Shares will continue.
Li Quansheng: the driving force for the rise of A-Shares this year mainly comes from the improvement of valuation rather than profit growth. The periodic cashing pressure of institutional profits in the fourth quarter is objective. From the perspective of longer time cycle and future allocation trend of residents’ assets, equity assets have better cost performance than real estate, which will also have an important impact on the stock market in a longer time in the future.
Li Wei: in the third quarter, the A-share style switched to growth. In the economic downturn cycle, loose policy brings loose liquidity; Market risk appetite is upward. Previously, the market’s expectation of loose liquidity was gradually fulfilled. In October, it may enter the empty window period of loose liquidity, and the main contradiction of the market returned to fundamentals. From a fundamental point of view, there was still downward pressure on the macro economy in the fourth quarter. It was difficult for the third quarterly report of listed companies to exceed expectations, and the overall market was expected to be volatile.
GUI Kai: China’s deleveraging slowdown and macro liquidity marginal easing are the core factors driving the market rise this year. The stocks of “core assets”, breeding, 5g industrial chain, independent and controllable technology companies also performed very well. The stocks with the best performance were driven by fundamentals, and enjoyed the double-click process of performance and valuation.
At present, the valuation differentiation of individual stocks is huge, but the overall valuation is not expensive. The inventory cycle in the fourth quarter is expected to promote the bottom recovery of enterprise profits, and the market will generally maintain a stable operation.
Xingtao: this year’s market presents obvious structural characteristics. We will pay close attention to the sustainability of differentiation, focus on sectors with stable profits, and timely judge whether there will be a valuation switching market in the fourth quarter.
China Fund News: what are the core factors affecting the stock market in the fourth quarter? Where is the biggest risk in the market?
Li Quansheng: the possibility of significant changes in market style in the fourth quarter is relatively large, mainly due to two aspects: first, the macro environment outside China faced by the stock market is further complex; Second, the core stock assets formed in the first three quarters of the stock market, the outstanding excess return on growth investment and other factors will face certain changes in the future.
GUI Kai: the core factor is that the expectation of relatively loose liquidity is not reversed, and the growth rate of corporate profits bottomed out in the third and fourth quarters, which is also the implicit expectation of the current market. The risk is that driven by the pig cycle, CPI may rise to 3%, raising concerns about inflation expectations. But the key still depends on the core CPI and PPI, which are still low. In addition, whether the traditional inventory cycle will fail under the background of real estate regulation is also a potential risk.
Li Wei: the main factors affecting market performance include fundamentals, market valuation, capital, etc. In the fourth quarter, the market expects that there will still be downward pressure on the economy, and the impact of the slowdown in real estate investment and the performance of import and export remain to be observed. From the perspective of valuation level, A-Shares fluctuated upward as a whole, and the valuation of mainstream indexes was in a neutral and low position. From the perspective of capital, monetary policy is expected to continue to be loose, and the continuous inflow of capital into the stock market will be a long-term trend.
The potential risks of the market in the fourth quarter may be reflected in two aspects: one is to find the bottom of economic shock; Second, upward inflation may restrict monetary policy.
Li Huiyong: the core factor affecting the market in the fourth quarter mainly lies in the changes in economic fundamentals. At present, both upward and downward risks are. The upward factors mainly depend on whether the issuance limit of local special bonds and bank credit are higher than expected; The downside risk is mainly the decline in export growth after the end of export. In addition to the downward pressure on the economy, the sharp upward inflation is also a great risk. The risk of inflation will restrict the operation space of monetary policy.
Wang Hengnan: there are two main core factors. One is liquidity. Whether to continue easing or inflation or tightening depends more on macroeconomic factors. The biggest risk may be valuation risk. At present, companies in the field of science and technology are generally expensive. If there is a downward switch in valuation, it is a risk.
Is Xingtao: we should not be inertia bearish on the economy in the fourth quarter, but pay more attention to the stabilization signal of the economy and enterprise profits. The market will be driven by the decline of risk premium, that is, under the background of stable profits and extremely low valuation, the market will be driven upward through reasonable repair of valuation. Greater opportunities come from the choice of structure and the make-up of some backward industries.
“core assets” heat or decline
China Fund News: this year, the performance of “core assets” is significantly better than its industry index, and many sectors have been in the state of institutional over allocation in recent three years. How to see the future trend of core assets? Will the fourth quarter reverse?
Li Quansheng: “core assets” may face some weakening in the fourth quarter. First, some industries and individual stocks in the “core assets” face a certain ceiling when their actual profit growth is lower than expected or the valuation level is too high; Second, based on the excessive differentiation of industries and individual stocks in the first three quarters, considering the need for institutions to make cross-year adjustment and allocation in advance in the fourth quarter, institutions will look for industries and individual stocks with better cost performance to increase allocation.
GUI Kai: China’s economy has entered the transition period, and the growth rate has dropped to a lower level, making high-quality leading companies with stable growth expectations more scarce. This is an important reason why such assets are oversubscribed by institutions. In the medium and long term, with the increasing standardization of China’s market, law and environmental protection environment, the competitive advantages of such companies will be more significant. Under the background of the institutionalization trend of A-share investors, “core assets” will still be the key investment choice of institutional investors. On the whole, there is no significant valuation bubble for such assets. Taking into account the year-end valuation switch, there is little probability of a big reversal.
Li Wei: at present, the macro economy is in the process of structural adjustment, transformation and upgrading. The profitability of cyclical assets with high correlation with the economic cycle is affected. The weak cycle assets represented by consumption and medicine maintain a high industry prosperity, stable demand and high growth certainty, which are highly recognized by investors. Core assets with strong fundamental certainty and expected performance next year may get the opportunity of valuation switching in the fourth quarter, and will still perform well.
Li Huiyong: the primary reason why core assets can continue to strengthen is that these companies have leading advantages in their respective industries, and the competition pattern of the industry is good. These companies can continue to obtain high roe. The secondary logic is that the continuous inflow of foreign capital leads to the change of A-share pricing system. From the background of China’s economy from high-speed growth to high-quality development, the future is an era of winner take all. From the perspective of highlighting the risks brought by economic structure adjustment, leading companies have stronger anti risk ability, which makes leading companies will be favored by funds. Therefore, in the period of high-quality development, core assets are the basic plate of allocation, and this logic will not change. Of course, investing in core assets is a methodology, not an industry, but a leader in the industry.
Zou Xi: the sustainability of the “core asset” effect depends on two points: whether China’s economy will re-enter the state of incremental economy and whether inflation will worsen. Before inflation deteriorates significantly, the state of low interest rate and low rate of return will remain, and the core asset effect will continue. In the next 2-3 years, the leading companies of cyclical investment products may reproduce the process of realizing and confirming the valuation transition of the leading companies of cyclical consumer products in the past few years, and become a new leader in core assets.
Wang Hengnan: in the long run, core assets are still worthy of firm optimism. At present, the Matthew effect of the economy is very strong, and most industries are in the stage of increasing concentration. In this process, the big and small leaders in the subdivided field of core assets will benefit from this economic environment. The general trend will not be reversed, and there may be valuation uncertainty, but the medium and long-term trend will not change easily.
Yes, Xingtao: in recent years, the large blue chip market has continued to outperform the small one. First, the leading companies in various industries have stable performance and relatively low valuation, highlighting their competitive advantages in the economic downturn cycle; Secondly, from the perspective of transaction structure, the proportion of institutional investors and overseas investors has increased since this year, which is conducive to the active trading of blue chips in the market; Moreover, from the perspective of issuance mechanism, the expansion of new shares accelerated, and the shell value of underperforming stocks gradually disappeared, causing systematic pressure on underperforming stocks and small cap stocks with more backdoor listings. The subsequent evolution of market style depends more on the prosperity and performance of the industry. There is still demand for valuation repair of blue chips in the market, and there may be stagflation in banks and other sectors; In terms of small cap, as the probability of the economic cycle bottoms out and picks up, high-quality small and medium-sized enterprises and companies in some emerging industries will also have greater performance elasticity and stock price elasticity.
technology stocks are partially overvalued at different stages
China Fund News: 5g has brought a wave of upsurge of technology stocks. At present, the overall relative valuation of TMT industry is near the historical average, but the relative valuation of semiconductor, electronic manufacturing, integrated circuit and other industries has reached the highest level in history. How to view the opportunities behind technology stocks and whether there is overheating at present?
Li Quansheng: short term technology stocks are overvalued at a certain stage, but this overvaluation is partial. In the future, there will be differentiation within the technology stocks. It is necessary to select individual stocks with more competitive advantages and development potential from the perspective of industrial chain investment, rather than simply evaluate the valuation level and future market performance of the whole industry.
Li Wei: with the implementation of 5g related applications, the prosperity of the whole industry, especially the semiconductor industry, will continue to improve in the future. In the medium and long term, we are optimistic about the demand for electronics in the 5g cycle and the domestic substitution opportunities brought by the transfer of Huawei’s industrial chain. It is expected that several sub industries in the electronics industry will benefit from localization and 5g in the future, with a high basic outlook.
GUI Kai: Science and technology is the primary productive force and an important support for China’s economic transformation and upgrading in the future. The current US sanctions on China Hi-Tech Group Co.Ltd(600730) technology enterprises have accelerated the process of import substitution in China’s industrial chain, so the rise of the above sectors is indeed driven by industrial logic. Technology bubble is a common phenomenon of technology stocks investment. Some technology stocks do exist overheating phenomenon, which requires investors to carefully screen.
Li Huiyong: with the continuous release of 5g mobile phones and the continuous fulfillment of 5g front-end equipment performance, technology stocks have ushered in the overall valuation improvement. There are indeed signs of overheating in the short term. There may be differentiation in the fourth quarter. Stocks with real performance are likely to fluctuate at a high level, and stocks with partial themes will fall significantly. Looking forward to the next three years, the technology investment trend driven by 5g has just begun. It is estimated that it will continue to deepen from the front-end equipment to 5g application level. Companies benefiting from the explosive development of the industry will usher in huge market space.
Wang Hengnan: there may be overheating in the short term, but if you see the valuation and performance in 2020 and 2021, the valuation of many companies may not be so expensive after performance growth. Therefore, the current overvalued value of technology stocks takes time to digest.
year end valuation switching market or staged
China Fund News: there will be a wave of valuation switching in the “stable” sector at the end of each year. Do you think it will be the same this year?
Li Quansheng: Historically, China’s stock market often has a certain style switching and valuation switching market in the fourth quarter, especially at the end of the year, which has phased opportunities for stable and sustainable growth industries. In terms of investment, we pay more attention to the following two dimensions. One is horizontal. Since this year (including longer cycles), industries with general market performance but stable fundamentals have better investment performance price ratio; One is vertical, and the industry and key companies facing further improvement in industry prosperity and profitability in the next quarter or two (or even 2-3 years).
GUI Kai: if the market environment is stable, it is possible for stagflation undervalued assets.
Li Wei: at the end of each year, there will be a wave of valuation switching market in industries with valuation advantages and determined growth, which is the result of the comprehensive influence of many factors: first, after the disclosure of the third quarterly report of listed companies, industries and companies with performance exceeding expectations have attracted Market attention, and the valuation of good companies has been improved; Second, near the end of the year, institutional investors will begin to layout investment opportunities for the new year, and will also focus on selecting varieties with determined growth and relatively reasonable valuation. Under the influence of these two factors, the varieties with determined performance growth and advantageous valuation are expected to usher in a wave of valuation switching market at the end of the year.
Li Huiyong: Valuation switching is based on the premise that investors’ expectations for the sector are not very high. The time point of valuation switching is generally from late October to November. At present, this situation is happening.
Wang Hengnan: the stable sector is characterized by high dividends and stable performance. There may be some stock price increases every year. Although the increase is limited, it is relatively stable. This trend may continue this year. A conservative portfolio can indeed appropriately increase the positions of such varieties.
Xingtao: the undervalued style in the fourth quarter may be relatively dominant, and it is more suitable for stock selection based on pb-roe strategy. The basis for judgment is: first, macro fundamentals and corporate profits are expected to show some stabilization signals in the fourth quarter, and the fundamentals of the “old economy” sector are expected to be more stable; 2、 Valuation differentiation is obvious, and incremental funds tend to flow to undervalued sectors with stable performance.
(China Fund News)
