“Generally speaking, my investment style is to pursue steady returns and adhere to the concept of partial absolute returns. I believe that good relative returns will be created in the medium and long term. On the premise of finding desirable stocks, I tend to maintain a high equity position.” Shen Wei, head of CPIC asset research department, said.
Shen Wei graduated from Wuhan University majoring in finance and has 14 years of equity investment and research experience. In 2013, he joined The Pacific Securities Co.Ltd(601099) Asset Management Co., Ltd. as vice president of research department, covering the research of Finance and automobile industry. In 2017, he was transferred to equity investment department as equity investment manager, executive director in 2021 and head of research department.
Shen Wei’s portfolio management emphasizes risk control and pullback. At present, the total equity portfolio directly managed is about 3 billion yuan, including The Pacific Securities Co.Ltd(601099) excellent new trend products, The Pacific Securities Co.Ltd(601099) excellent Shanghai, Hong Kong and Shenzhen new power products, and internal value growth strategy portfolio, which have achieved good excess returns so far.
Shen Wei said that he needs to take full advantage of the volatility of the market this year, but he also needs to create high-quality stock prices and face the fluctuations of the market this year. “After the early market correction, the overall valuation risk of A-Shares has been released in an orderly manner. From the perspective of long-term capital, at this time, we should look for industries with long-term growth logic from the perspective of economic transformation and industrial upgrading, and tap companies with core competitiveness and stability of medium-term and short-term performance.” Shen Wei said.
market fluctuations create buying opportunities
brokerage China reporter: please talk about the investment style and method in combination with the nature of the funds you manage.
Shen Wei: the funds I currently manage are mainly divided into two categories: one part is the funds in the system, mainly from the principals within the group, such as life insurance, property insurance and insurance funds of the group; The other part comes from external institutional customers. In the past, most of the funds of insurance asset management were funds in the system, but in recent years, we have also achieved great results in the expansion of third-party asset management business. Through the establishment of market-oriented assessment mechanism, we have managed more and more third-party funds.
Institutional customers, especially insurance customers, often require both relative return and absolute return. When the market is good, the client hopes to obtain a better relative benchmark excess return, and when the market is bad, he also hopes to have a certain absolute return.
Generally speaking, my investment style is to pursue steady return, uphold the concept of partial absolute return, and strive for the best possible return under the condition of controlling pullback and volatility. I believe it will also create good relative return in the medium and long term. On the premise of judging that there is no systematic risk in the market and finding desirable stocks, they tend to maintain a high equity position.
in terms of investment methods, the first is the combination of top-down and bottom-up allocation and stock selection strategy, which arranges reasonable positions and industry allocation through top-down asset allocation and industry comparison model. At the same time, it is also necessary to tap the alpha of individual stocks from bottom to top, put quality first and price first, and hope to be a good company without excessive premium; The second is to adopt appropriate dispersion and dynamic equilibrium to control the pullback, hoping that the sources of portfolio income are relatively diversified; Third, under the current scale and volume, the combination can maintain a certain degree of flexibility
brokerage China reporter: how to formulate strategies and carry out investment for different products?
Shen Wei: for absolute income oriented products, the strategy is to strive for the best possible return under the condition of controlling the maximum pullback and fluctuation. Absolute return strategy is an investment method, which does not mean that there will be no loss in any short-term portfolio, but the low pullback feature will provide good absolute and relative returns in the medium and long term.
The absolute return product strategy needs to make a good balance between controlling pullback and improving portfolio return: first, according to the top-down asset allocation model, analyze the main contradictions of economic development and reasonably arrange the allocation of portfolio positions and stocks; Second, combine the meso industry allocation model to judge the industry space, boom location, profit quality, etc., so as to determine the relative value of the industry, and make style allocation in combination with different macro and policy environments; Third, we focus on bottom-up stock selection to create alpha income. We pay attention to the business attributes, governance ability, business trend, operation quality, valuation and dividend potential of the company, and pay attention to in-depth research on fundamentals. In the long run, value investment should return to the value creation of high-quality enterprises and rely on the compound interest effect brought by the sustainable growth of enterprises.
At the operation level of absolute return products, I still maintain a high equity position according to the contract requirements. In the absence of systemic risk, we can always rely on the structural market to obtain income, and we can use the negative correlation between assets to reduce volatility. When judging that there are systemic risks in the market, position timing will be carried out.
The main goal of relative revenue products is to overcome the benchmark specified in the market or contract, and strive for a good position in the ranking of similar products. I think that under a relatively long-term assessment system, relative income and absolute income are unified. My investment style and method are still consistent. For products with relative returns, I mainly control the risk of the overall portfolio through the risk return ratio of stock selection, balanced style and reducing sector concentration, and contribute better excess returns through bottom-up stock mining.
brokerage China reporter: last year and since this year, the equity market has fluctuated greatly. What measures have you taken to deal with the account you manage?
Shen Wei: first of all, keep awe of the market, predict the market carefully, and strategic response is better than prediction; Second, adhere to their own investment ideas and methods, do not rely on a single style and theme, and avoid excessive industry concentration; Third, pay attention to the risk return ratio and quality priority in stock selection, but also pay attention to the weight of valuation. Always adhere to prudent risk appetite and avoid unreasonable risk exposure.
For example, in 2021, the market structure was divided, and the valuation gap between emerging and traditional industries further widened. According to the market situation at that time, we made timely response at the level of product operation. Specifically, we maintained a high equity position in 2021, controlled the risk of the overall portfolio through style balance and reducing the concentration of sectors, and made a large excess contribution to the portfolio for pro cyclical industries, small and medium-sized market capitalization with high boom and undervalued value and the allocation of lithium resources sector.
At the beginning of this year, we maintained a relatively cautious attitude towards the market. Considering the constraints of overseas interest rate increase and contraction on the high valuation sector and the expectation of China’s stable growth policy, we appropriately adjusted our positions at the beginning of this year, increased the allocation proportion of undervalued traditional economic sectors, especially the upstream resource sector, and controlled the withdrawal of the portfolio to a certain extent. Since March, with the intensification of the conflict between Russia and Ukraine, the risk of global inflation and the suppression of demand by the development of China’s epidemic, the sharp decline of market risk appetite has still exceeded expectations, which has brought some challenges to the management of absolute return portfolio.
After the sharp correction of the market, we judge that the overall valuation risk of the market has been released in an orderly manner. At present, the valuations of most industries are in the historical middle and low quantile. From the perspective of long-term capital, at this time, we are more from the perspective of economic transformation and industrial upgrading to find industries that still have long-term growth logic, and to tap companies that have core competitiveness and can take into account the stability of medium and short-term performance. The short-term bad in a long-term logical good will often provide rare buying points. Instead, we will take advantage of the market fluctuations to actively layout when we can find a desirable investment target.
We have always adhered to the Taibao asset investment philosophy of “value investment, long-term investment and stable investment”. We always need to fear the market and accept fluctuations, but at the same time, we will make full use of the opportunities created by market fluctuations to buy stocks with high quality and low price.
long term optimistic about the trend of China’s equity market
brokerage China reporter: how to judge the trend of this year’s and medium and long-term equity market? How to view the impact of the international environment on China’s economy and stock market?
Shen Wei: in the medium and long term, we are optimistic about the trend of China’s equity market, the long-term doctrine and strategic determination upheld by the Chinese government, and the prospect of China’s economic transformation and industrial upgrading.
At present, A-Shares and H shares are relatively cheap as a whole. The implied risk premiums of gem index, dividend index and CSI 500 are in the high digits since 2012; The comparison between the dividend yield of SSE 50 and the yield of 10-year Treasury bonds reveals that the cost performance of stocks and bonds is also in a high quantile since 2012, and stocks are obviously cheaper than bonds. In the long run, residents’ wealth transfer effect will also become the largest increment of micro liquidity in the equity market.
The impact of the international environment on China’s economy and stock market is mainly considered from three aspects: first, the impact on the economy and corporate profits. Global stagflation will affect the profits of Chinese enterprises from both sides of cost and demand, because China is in the middle of the division of labor in the international industrial chain. As the largest manufacturing country, it may face an adverse combination of rising cost and slowing demand. Second, from the perspective of policy and liquidity, although the tightening of the Federal Reserve will not affect the direction of China’s monetary policy, it will restrict the space for China’s monetary policy easing. Third, changes in the international situation will also greatly affect the risk appetite of the market.
we believe that the current pessimistic expectations about the contraction of the Federal Reserve, global stagflation and the war between Russia and Ukraine have been reflected in asset prices, which does not constitute a continuous suppression of a shares. Then, with the implementation of China’s steady growth policy, economic fundamentals and corporate profits are expected to stabilize and pick up in the second half of the year, which will support the performance of the equity market
focus on four investment areas
brokerage China reporter: what investment opportunities, investment risks and how to deal with them this year?
Shen Wei: 2022 focuses on four main investment areas:
First, the direction of dividend value. High dividend assets are mostly distributed in traditional industries, financial real estate, upstream energy materials, utilities and some consumption. They have certain Pro cyclical attributes and value style, which will benefit from steady growth. It is expected to form a superposition of bottom-up dividend on fixed assets.
The second is the scarce resources and energy in the stagflation environment. The essence of this round of inflation in energy and resource products is a reflection of the medium-term capacity supply bottleneck and the long-term oversupply of money. Over the past decade, the cash flow of Listed Companies in the global cycle industry has improved, but their willingness to carry out capital has weakened. Under the background of energy transformation and double carbon goal, the supply constraints of traditional resources and energy industries will exist for a long time, so as to improve the overall profitability and dividend ability. After the profitability of some traditional industries improves, they begin to increase capital expenditure for low-carbon transformation and industrial transformation.
Third, we have long focused on the growth direction represented by hard technology and new energy. In the downward period of the economic growth center, there is still a scarcity premium for growth. As hard technology, lithium battery, photovoltaic, semiconductor, automotive intelligence and military industry are still in the upward period of medium cycle boom, and will reach a new balance after adjustment. However, we need to eliminate the false and preserve the true, find the most deterministic link of the industrial chain, and tap the alpha opportunities of individual stocks from bottom to top.
Fourth, reverse the plight of consumption and medicine and pay attention to long-term opportunities.
Investment risks also need attention. For example, the marginal contraction of US dollar liquidity brings the risk of greater volatility to the global financial market, the risk that the global energy transformation + monetary easing + epidemic and political events may bring the risk of upstream sustained inflation, and the risk that China’s steady growth policy is less than expected.
brokerage China reporter: how do you view Hong Kong stock investment opportunities?
Shen Wei: since 2022, under the influence of the tightening of US dollar liquidity, the impact of the conflict between Russia and Ukraine and the Chinese epidemic, and the threat of delisting of Chinese stocks, the vulnerability of Hong Kong stocks as an offshore market is obvious. At present, the risk premium of Hang Seng Index has been at a high level in history and the odds are very high.
We believe that after the valuation of the Hong Kong stock market is excessively depressed, there will be considerable repair opportunities: there is a possibility of marginal improvement in the policies of the Internet and real estate sectors, which is conducive to the repair of risk appetite; The mainland’s steady growth policy is also conducive to the restoration of profits in traditional sectors.
at present, the premium of ah shares is at an all-time high. We are optimistic about the undervalued and high dividend direction of Hong Kong shares and the repair of the Internet and some consumption; In addition, the peg of Hong Kong stock technology sector is lower than that of mainland and US stocks, and there are opportunities to be explored in the direction of growing new energy, intelligence and green electricity
