Economic Observation Network reporter Zou Yongqin In the face of the complex and changeable market environment in 2023, how should he view the macroeconomic situation in the fourth quarter? What is the investment value of Huawei's industry chain, which is in full swing recently? The relevant trends in the field of scientific and technological innovation derived from this, how should investors think about the layout? At the Bosera Fund Fourth Quarter Investment Sharing Salon on October 20, a group of experts represented by Yu Shanhui, a full-time member of the Investment Decision Committee of Bosera Fund, conducted a detailed discussion on this.
On the same day, coinciding with the fact that the stock index in the A-share market once again lost the 3,000-point mark, the future of the broader market also became a focus topic in the salon that day. In this regard, Yu Shanhui said that whether it will break 2800 points after falling below 3000 points is difficult to predict, because all the bottoms are not a specific point, let alone studied in advance, but only later to know that this is the bottom.
"I can only say that this stage is a bottom area, because whether from the cost performance or valuation level, or from various perspectives, the conclusion is the same, that is, A-shares are currently very cost-effective, and they are indeed very cheap." He said.
Weak economic recovery
Data released by the National Bureau of Statistics on October 18 showed that China's GDP in the first three quarters of this year increased by 5.2% year-on-year. So, what will happen to the macroeconomic trend in the fourth quarter?
In this regard, Yu Shanhui believes that it is first necessary to understand the three characteristics of the current era.
"The first is that the era of low inflation and high growth is slowly passing." Yu Shanhui pointed out that in the past 40 years, along with the reform and opening up, China's economy has shared the happiest stage of low inflation and high growth brought about by the global division of labor. But now, the low-cost factor side that supports this stage is slowly disappearing, followed by factor prices going up, then China's economy will gradually show a pattern of "growth center downward and inflation center upward", and implying the rebalancing of the international trade situation.
"The second characteristic is that the domestic investment rate is downward." Yu Shanhui said that in the past few decades, through the continuous promotion of commercial housing reform, the entire chain of the real estate industry has become the most important factor driving China's economic growth in the past 20 years. But since seven years ago, China has launched a reform policy of "housing instead of speculation", "which is very reasonable in terms of the policy itself, because when 60%-70% of the wealth of mainland residents is related to houses, it indicates that this thing has contained a huge bubble." But from another point of view, from housing and housing to real estate clearance, it will inevitably be accompanied by economic changes, and a major feature of economic changes is that the domestic investment rate will go down (because real estate supports a lot of investment)."
In Yu Shanhui's view, the third characteristic is that in the post-real estate era of "real estate downward", the entire consumption momentum of China's economy has weakened, and the economy will further shift gears. In the period of economic shift and economic rebalancing, it often implies a certain restructuring of social order.
Based on the above three characteristics, Yu Shanhui believes that China's economy is slowly entering a process of self-repair from the scarring effect caused by the epidemic. The Chinese people have a strong desire to get rich, everyone does not want to be poor, and their own resilience has always been there. So, from August, some signs of recovery can be clearly seen, "Overall, the current earnings have improved, but in the absence of demand-side grip, inventories and PPI are still suppressing Q3-Q4 earnings, and the repair is expected to be relatively slow."
A-share crisis and opportunity
Although the domestic economy showed signs of recovery, the trend of A-shares was not optimistic, and on the day of the salon, the Shanghai Composite Index once again fell below the 3,000-point mark. So, where will A-shares go in the fourth quarter or even in the future?
Yu Shanhui said that from a historical and cyclical perspective, based on the comparative data of major asset returns and economic growth in developed countries over the past 150 years, it can be found that the annual average return on assets in major developed economies is 6%, while the annual average of economic growth is 3%.
He believes that three preliminary conclusions can be drawn from this: "First, the price of assets is always fluctuating, if you want to get a higher return, then only the long latitude of time can cross the cycle; Second, the return on all assets is derived from economic growth; Third, times of crisis often mean the best opportunities."
He further said that from the historical data of developed countries over the past 150 years, it can be seen that every time the level of asset returns lags far behind the level of economic growth, it is a stage low point of asset prices. Coincidentally, this time is often accompanied by various problems, such as World War I, World War II, oil crisis, financial crisis and so on.
"Because when you think about things in a pessimistic atmosphere, all the factors you see are pessimistic, even the most positive changes will be ignored, but looking back at that moment years later, maybe that's the best time." Today, we are in the context of the turbulent international situation and the pressure of domestic transformation, it seems that each of us is seeing pessimism, on the other hand, does this mean that a new opportunity is coming? ”
Yu Shanhui also said that when analyzing the market, the general logical order is to judge the policy bottom first, then the economic bottom, then the profit bottom, and finally determine whether the market has reached the bottom.
"The '27 July' meeting set the tone to activate the capital market, indicating that the capital market has been included in the important consideration of the top management. There are many important meetings to be held in the fourth quarter, such as the Economic Work Conference, the Politburo Meeting, the Financial Work Conference, the Third Plenary Session, etc., which may bring some changes and interpretations, but we believe that the policy stance in the fourth quarter should be a continuation of the third quarter in the general direction. In addition, please keep in mind that from the historical experience of A-shares, investment success must follow the policy."
He believes that from the bottom of the economy, the domestic economy is obviously in a stabilizing situation. Among them, from the perspective of inflation, there is currently no performance of inflation, and from the perspective of liquidity, it has been a relatively loose state.
"From a financial point of view, we have been initiating an important thing that we have to do at this stage, that is, the issuance of bonds by local governments, which is undoubtedly conducive to the medium- and long-term healthy development of the mainland economy." Of course, it remains to be seen whether this time will be able to cross the past perfectly."
Yu Shanhui also said that whether assets are worth allocating is nothing more than a matter of cost performance, "We think that A shares are indeed cheap enough now, if you have to ask whether it will break 2800 points after losing 3000 points, this is difficult to predict, but what I know is that all the bottoms are not a specific point, nor by 'seeing', but later to know that this is the bottom." I can only say that this stage is a bottom area, because whether from the cost performance or valuation level, or from various perspectives, the conclusion is the same, that is, A-shares are currently very cost-effective, and they are indeed very cheap."
Yu Shanhui further gave an example that the current valuation of the CSI 300 is only 11 times, while the S&P 500 is close to 30 times; The valuation of the A-share science and technology innovation board is about 30 times, while the valuation level of the NASDAQ market, which represents technology, is as high as about 50 times.
"So I think once our economy stabilizes, once we don't have to face so many troubled factors, the opportunity will come." So at this time, you might as well be a little optimistic about assets. In my impression, 998 in 2005 was very similar to the current situation, and many years later you will find that point is the lowest point; In 2007-2008, when the stock index fell all the way from 6124 points to more than 1600 points, the market was also pessimistic, but the result was a rapid reversal." He said.
Bullish on the technology sector
More specifically, Yu Shanhui believes that the current A-share allocation can be divided into two ends: one around the pro-cyclical period of high dividends, and the other around growth under the weak economic recovery; "Especially around the layout of Huawei's future industry chain and the breakthrough of technology, I think it is worth everyone's attention. Because as long as the application of science and technology is applied by the whole country, there is no big problem in this matter."
Xiao Ruijin, deputy investment director and fund manager of Bosera Fund's Equity Investment Department, is also highly optimistic about Huawei's industry chain and the investment opportunities in China's scientific and technological innovation field, and believes that from the "Meng Wanzhou incident" to the release of Mate 60 Pro, it shows that after five years, the domestic semiconductor industry can make breakthroughs in advanced processes under extreme pressure, behind which is the systematic engineering of EDA tools, equipment, materials, processes and the efforts of the entire industry chain. It indicates that the war-ready counteroffensive of China's technology industry has begun."
Xiao Ruijin further said that now is the time to strategically bullish China's technology industry, and investors can grasp this turning point from three levels:
The first layer of logic is the return of the consumer electronics business to drive the industrial chain, including the assembly, components, equipment, etc. in the mobile phone industry chain;
The second layer of logic is the driving effect of the introduction of new technologies on the industrial chain, including satellite communications, artificial intelligence chips and servers, intelligent driving and fast charging;
The third layer of logic is Huawei's new mobile phone to the localization of semiconductors and spillover effect, "before semiconductor localization to throw a lot of money into it may not have much return, this mobile phone next year will probably have close to 200 billion revenue, such a large revenue volume will greatly improve the investment coverage of the entire chip localization to achieve a good closed loop."