Recently, at the special event in Hangzhou, Zhejiang Province of “fund serving Wanli bank in 2019 – China Construction Bank · China Securities News’ Taurus’ Fund Series Tour”, Zhang Yidong, global chief strategic analyst of China Industrial Securities Co.Ltd(601377) delivered a speech with the theme of “seeing the sun through the clouds”. He pointed out that as China’s economic development enters a new stage, under the background of continuous structural optimization and adjustment, enterprises with core competitiveness will stand out and the strong will be strong. In the face of the “golden pit” opportunity brought by short-term adjustment, it may be a good time to lay out core assets in the long term.
three points for investment breakthrough
Zhang Yidong said that in the context of the development of international competition, there are three main points that deserve attention: first, when Chinese enterprises enter a new stage of global layout, China’s economy must also pay attention to social equity and rules, and consumption and innovation are the inevitable choice of economic transformation.
Second, grasp the strategic opportunity period of China’s financial system reconstruction. The connotation of financial supply side reform moves from deleveraging to structural adjustment, further enhance the ability of financial services to the real economy, and promote the flow of resources to more efficient and more in line with the direction of economic development.
Third, we should improve the governance level and profitability of listed companies. Including paying attention to the micro and weakening the macro, China will increase differentiation in all fields, and the core assets will show a general trend of increasing competitiveness.
Zhang Yidong pointed out that leading companies in various fields will drive the efficiency of various industries and help the economy move towards the road of high-quality development. In recent years, China’s macroeconomic development has put more emphasis on steady growth. From a micro perspective, the strong are always strong. The roe of China’s high-quality companies and the growth rate of China’s GDP have begun to have an increasing reverse bell, and the economic efficiency of the total asset turnover rate is also improving. “Therefore, looking forward to the future of the capital market, we should dilute short-term periodic fluctuations and total data, and focus on the long-term structure and long-term micro.”
Zhang Yidong believes that from a micro perspective, first of all, look at the matching degree of cash flow and profit. The blue chip companies with healthy cash flow show that they have real competitiveness in the whole market; Secondly, look at ROIC (return on capital). The profitability of good companies is becoming stronger and stronger, and can surpass cyclical fluctuations; Finally, it depends on the performance and cost performance of the valuation. If the valuation of a good company is very expensive, it should not be configured.
Zhang Yidong believes that looking forward to the next two years, with China’s economic restructuring and reconstruction of the financial system, the credit transmission mechanism will begin to flow smoothly. In the future, China’s bull should be the core asset in a broader field, including technology, manufacturing, finance and consumer stocks this year. Companies with core competitiveness in various fields may stand out.
Zhang Yidong said that the change in the nature of investors’ funds in China’s capital market is facing a qualitative leap. On the one hand, China’s economic restructuring is driving the rise of institutional forces, especially the industrial capital in the traditional economic field without core competitiveness is gradually withdrawing from industry and handing over asset funds to professional asset managers. On the other hand, the general trend of overseas capital allocation of Chinese assets is in the ascendant. Under the background of overseas negative interest rates, China’s core assets, whether A-Shares or Hong Kong shares, have long-term allocation value.
the new bull market is the core asset bull market
Zhang Yidong pointed out that in the long run, China’s core assets have been in the “golden pit” with prominent allocation value. Especially from the comparison of various global assets, with the decline of global risk-free return, the cost performance of China’s core assets is higher.
Zhang Yidong pointed out that at present, under the background of the decline in the yield of 10-year Treasury bonds of the United States and the United Kingdom, the deepening of negative interest rates on the yield of long-term bonds of the euro zone and Japan, and the general interest rate cut of emerging countries to cope with the economic downturn, both the yield of 10-year Treasury bonds and the dividend yield of core assets in China have a strong attraction to the global allocation of funds.
The market also encountered short-term adjustment, and there was a certain crowding and differentiation within the core assets. How to deal with it? Zhang Yidong said that under the current background, there may be an opportunity for core assets to be smashed out of the “golden pit”. Considering that the economic environment in 2019 is more favorable and the withdrawal space is controllable, the judgment that “2019 is similar to 2005 and 2013, which is the starting point of the new bull market and the market n-type trend” is maintained, and the new bull market is the bull market of core assets.
At the same time, Zhang Yidong reminded investors to pay attention to the division of the nature of funds. The “bond like” blue chips with long-term capital allocation preference have good resistance to decline, and can be laid out in case of market panic. Secondly, the strong are divided, and the early strong sectors such as medicine, consumption and science and technology are further divided. We can use the semi annual newspaper performance period to select core assets with high cost performance to buy on bargain hunting. Prevent the “black swan” risk of pseudo core assets. In terms of relative income funds for short-term assessment, it is better to adjust positions for trading, select the most cost-effective core assets, prevent the fundamentals of “pseudo core assets” from hitting the mine, and prevent the short-term stampede risk under the crowded transaction of “holding together for warmth”.
On the main line of investment, Zhang Yidong believes that it is inseparable from the theme of “racing against time”. In the medium and short term, we should select relevant leaders in consumption and service industry, pay attention to the cost performance of profitability and valuation, and continue to dig gold in food and beverage, medicine, education, household appliances, social service industry, e-commerce and other emerging consumer services based on tax reduction, poverty alleviation, stable employment, stimulating domestic demand and relevant policies in the second half of the year. In the medium and long term, we should select the technology leader in the “short board” field and prevent the valuation bubble, focusing on the truly independent and controllable technological strength and profitability beyond policy support. In the long run, the “golden pit” will be used to lay out China’s “hardest core assets”, including brand consumer goods that are difficult to replace or cannot be copied, as well as high-quality leading enterprises with competitive advantages in “bond like” industries such as finance and airport.
(China Securities Journal)
