Yao Hongyao, head of Aberdeen China stock investment, is a senior general in the field of overseas Chinese stock investment. He has more than 20 years of investment experience and manages a total fund of more than 30 billion yuan. The person in charge of a cooperation channel believes that he has a distinctive style, does not drift, and constantly iterates the knowledge system.
The position confirms the above evaluation to a certain extent.
For example, the position data from Morningstar shows that he has been involved in a tax-free leader since 2019, and has not wavered after the outbreak in 2020, and finally doubled the increase. For another example, although his involvement in new energy vehicles and new energy related companies was not the first, he bought and held them for a long time after thinking clearly, and gained a lot of gains.
Yao Hongyao has expressed on different occasions that the five main lines of his investment in China are: high-quality consumption, digitization, environmental protection, medical and health care, wealth management, etc. His portfolio is consistent with the above investment line. In terms of specific company selection, his preferred business model has been verified by the market. As a stock picker with high reliability, he usually intervenes in the middle and later stages of the company’s development and has certain requirements for the safety margin of valuation. However, in recent years, Yao Hongyao has continuously expanded the scope of investment and increased the layout of new energy and new energy electric vehicles.
From the perspective of position style, he rarely chooses the time. For promising companies, once they start, they will firmly hold it. Unless there are major changes in the fundamentals of the company, they will not easily “give up”. There is a temperament and style of “great skill, no work, heavy sword, no front”.
Since 2022, affected by US inflation and the geopolitical situation in Russia and Ukraine, the global stock market has fluctuated, and the pullback of A-Shares and Hong Kong shares is also obvious. In an exclusive interview with China Fund News, Yao Hongyao said that more policies are expected to support growth in 2022, and the valuation of A-Shares is low. If we refer to the history of a shares, the A-share market may still perform strongly this year.
Yao Hongyao is currently the head of China equity investment at Aberdeen. He joined Aberdeen when Aberdeen Asset Management acquired Murray Johnstone in 2000. He was seconded to the Global Emerging Markets team in London for two years, responsible for analyzing and studying enterprises in Europe, Africa, the Middle East and Latin America, and then returned to the Asian equity team in Singapore in March 2004. In March 2007, he was transferred to Hong Kong, China to lead the China stock research team.
He holds a BA (Hons) in accounting and finance from the University of Manchester in the UK and a MSc in financial mathematics from Warwick Business School in the UK, as well as a Chartered Financial Analyst (CFA).
Aberdeen, formerly known as Aberdeen standard investment management, is the brand of investment business under standard life Aberdeen PLC. The group was merged by standard life group and Aberdeen Asset Management Group and established in 2017. It was renamed Aberdeen group in July 2021. With assets under management of more than £ 464 billion, it is one of the largest investment groups in the UK.
In addition, Aberdeen group is one of the first global asset management institutions to layout the Asian market. In 1992, the company set up its Asian headquarters in Singapore. As early as 2015, Aberdeen standard investment management (Shanghai) Co., Ltd., a wholly-owned subsidiary of Aberdeen standard in Shanghai, was established. In 2017, it filed with China Securities Investment Fund Association and issued its first private placement fund in China – Aberdeen standard preferred stock No. 1 private placement fund in 2018.
policy continued to be favorable
A-Shares are expected to perform strongly this year
China Fund News: since the beginning of 2022, the A-share market has undergone several waves of adjustment. What do you think of the market adjustment? Should investors worry about it
Yao Hongyao: as of March 31 this year, the MSCI China Index has fallen by more than 12%. There has been some differentiation in the market – value stocks outperform growth stocks. With low growth and consumption expectations, investors chose to take profits from previous winners such as food and beverage, electronic products and new energy.
Although the latter risks still exist, the government will also take coordinated policy measures to support growth. In addition, it is worth noting that the current valuation of the A-share market is not high. As of March 31, the PE of MSCI China A-share index was 16 times (15.6 times for CSI 300), which is equivalent to the level in early 2020. In our memory, 2020 has finally become a very strong year for China’s A-share market.
China Fund News: there are five main lines in the medium and long-term layout of Aberdeen in China. Let’s look at each other. How did you feel about the valuation of high-end liquor stocks after the adjustment of the beginning of the year? Compared with three years ago, has the certainty of Baijiu stock profit changed?
Yao Hongyao: , we think that investors sold Baijiu shares in 2021 without any difference. For fear of generalisation, they may worry about the spill over of other industries. We believe that the regulatory risk of individual companies is low because the Baijiu market is highly competitive and consumers can choose a wide range of prices. Therefore, there is no monopoly problem in Baijiu. We believe that even if there are certain industry regulatory requirements, it may be beneficial to the existing high-quality manufacturers.
China Fund News: how to look at the problem of transaction congestion. The new energy vehicle industry chain, Baijiu related stocks gathered a lot of funds. Are you worried about funds piling up to amplify Market Volatility
Yao Hongyao: China dominates the global manufacturing capacity of renewable energy and storage, including 90% of Cecep Solar Energy Co.Ltd(000591) and 75% of battery capacity. This requires the policy to be consistent not only with China’s decarbonization goal, but also with the decarbonization goal of the rest of the world. The decarbonization economy requires significant investment in renewable energy and storage, so it is reasonable to allocate capital to this area. In the long run, China will benefit. Although the green technology industry has attracted a lot of funds in recent years, the current valuation is still reasonable in view of the long road of growth and recent price adjustment.
Hong Kong shares need patience to release value
China Fund News: what do you think of the investment opportunities of Hong Kong stocks in 2022? Hang Seng technology is currently at a low valuation. Has the Internet leader fallen out of the safety margin
Yao Hongyao: in view of the sharp price adjustment in the past year or so, China’s Internet industry has begun to show value.
However, industry uncertainty still exists, which may continue to affect market sentiment in the short to medium term. Patience may be required before the risk is released.
China Fund News: will the US inflation be high and the Fed enter the interest rate hike cycle have an spillover impact on China? Which sectors of China have a greater impact
Yao Hongyao: although inflationary pressure still exists in many major economies and monetary tightening in the United States is imminent, this is not the case in China. In fact, China’s inflation has been controlled, the inflationary pressure is small, and the monetary policy is becoming more relaxed. This reflects the efforts of policymakers to support growth.
Areas such as traditional and high-tech infrastructure will also receive financial support. We see long-term opportunities in various market segments, including high-quality companies in consumer, digital, green technology, health and wealth management, with great growth potential. In addition, the company has been telling us that they are more confident in improving the profit margin in 2022, especially in the second half of the year, because the inflationary pressure in China is lower than that a year ago, so their cost pressure will be relieved. This is a good thing for a bottom-up investment strategy.
focus on high-end consumption
China Fund News: from the economic data, the consumption recovery in China’s economic recovery is relatively slow. Why? How does the slow recovery of consumption affect high-end consumption
Yao Hongyao: the weak growth of retail sales is partly due to epidemic prevention and control measures, such as rolling area blockade. In addition, the overall weak economic growth prospects also have an impact. In other words, the consumer industry is gradually innovating and adapting to new business models to meet challenges. In the long run, we believe that many consumer related brands will perform well, as China will continue to strive to establish a more consumer-centered and balanced economic model. Our focus on high-end consumption is also consistent with the broader goal of building a moderately prosperous society in all respects by 2035. We think we should be ready for the sustained growth of the middle class now.
China Fund News: what do you think of the investment opportunities in the real estate sector this year. Your portfolio seems to be less involved in real estate in the past two years. Recently, there has been some relaxation in real estate financing. Are there any opportunities for some wrongly killed companies to rebound
Yao Hongyao: in terms of portfolio positioning, we reduced our holdings in Chinese real estate developers. Our absolute exposure to the real estate industry is also very low. We hold developers with high quality and strong management ability. We believe that they will become long-term beneficiaries of the reform of the real estate industry. In the short term, the market sentiment is still depressed, which forms resistance to the rebound of stock prices, and there is no convincing catalyst for the recovery of the real estate industry. However, some parts of China have targeted to relax mortgage loans, including reducing down payment and reducing loan interest rates. The value has begun to show. The trading price of a real estate stock we hold on the basis of forward P / E ratio is lower than its average level 10 years ago, which is a standard deviation position on the left of the average value 10 years ago. Its valuation is already very attractive. In view of this, we believe that the stock price has fully reflected the risk.
