Wang Yu + Li Meicen: The market is volatile at a low level, what is the investment value of the Science and Technology Innovation Board?

Edited: Ye Feng

Live Guests:

Wang Yu: Fund manager of the Science and Technology Innovation Board 100 ETF (588120).

Li Meicen: Chief Strategy Analyst of Caitong Securities

Live time: 15:30 on December 21, 2023

1. The market is expected to see positive changes in 2024

Wang Yu: Hello investors, today we have invited the chief strategy officer of Caitong Securities as our live broadcast guest, standing at the end of the year and the beginning of the year, to give you some summary and outlook for the market in the second half of the year.

Recently, the pressure on the market is relatively high, and there are certain adjustments every day. First of all, in view of the macro situation in the fourth quarter, please let Mr. Li introduce it to us.

Li Meicen: Recently, there have been a lot of changes in the market, I think the whole fourth quarter, especially the financial work conference and then the economic work conference, several major meetings that are very related to the market, to this point in time has come to an end, from the policy point of view, from the financial policy to the economic policy, it is still very much beyond expectations.

First, the most typical is that after the economic work meeting, the proportion of the first and second houses in Beijing and Shanghai has been lowered, which is what the whole market is looking forward to from July to December, and it has finally landed. Although there are some fluctuations in the short-term real estate data, in the medium term, such a policy strength is relatively large in history, and the real estate has been relaxed to only the last purchase restriction, which is particularly strong.

Second, let's look at recent liquidity. A few days ago, the central bank directly invested 800 billion yuan in the open market, and recently we can also see the possibility of deposit interest rate cuts, 800 billion yuan is equivalent to a RRR cut, and the intensity of the RRR and interest rate cuts is still worth looking forward to.

Third, the market has been in this position, has been around 3000 points around the shock grinding bottom, resulting in the entire market risk appetite is not too high, sentiment has not yet risen, and near the end of the year, everyone is more inclined to be conservative, wait until next year to take a look. During this period, the market volume has been significantly lowered compared with the previous period.

For next year's market, from the tone of the economic work conference, including the corporate earnings of listed companies, I think they are relatively confident. At this point in time, at the end of the year and the beginning of the year, looking at next year, the entire market will be more confident after the pressure of the past period, and more positive changes can be seen in terms of valuation and profitability. So, I'm looking forward to the market next year, and we've survived the tough days of the past quarter, and we'll be even better in the future.

Wang Yu: In the fourth quarter of this year, the market was a little incomprehensible, at the end of October, because the U.S. bond interest rate rose more, which affected the tightening of the entire liquidity, and the market showed a trend of correction in stocks and bonds. At present, the US Treasury interest rate in the overseas market has fallen by about 100 bps, and the market has gone down again after a brief rebound in November. We feel that the macro fundamentals, no matter which direction you look at, the second quarter may be a relative low. There may be some seasonal disturbances in the fourth quarter.

What I feel particularly deeply this year is that in many cases, people will short-term some long-term concerns, including real estate, aging, including our economy, and everyone is anxious in all aspects. But again, faith is more important than gold.

2. Why are you optimistic about the development of the Science and Technology Innovation Board?

Wang Yu: Next, let's talk about our views on the follow-up market and the current investment value of the STAR Market. After the meeting of the Political Bureau of the Central Committee at the end of July, we clearly put forward the policy of activating the capital market, and the Science and Technology Innovation Board 100 ETF has been listed for more than three months, and there have been many pullbacks this month, close to 10%. Next, we will analyze the characteristics and characteristics of the 100 products on the Science and Technology Innovation Board, and intersperse some views on the market outlook.

First of all, we ask Mr. Li to introduce the science and technology innovation board to you, because Mr. Li put forward in the market that we should be optimistic about the science and technology innovation cow.

Li Meicen: From various perspectives, I think the Science and Technology Innovation Board does play a very important role in activating the capital market in the new era, and there are several aspects:

First, in terms of macro policies, we have been emphasizing high-quality development, and the country is very concerned about technology-based industries, including electronics, semiconductors, medical care, biopharmaceuticals, high-end manufacturing, etc. In this regard, one of the most important carriers is the Science and Technology Innovation Board.

Second, from the perspective of performance, compared with the CSI 300, the Shanghai Stock Exchange, the Main Board, and the ChiNext Board, the performance of the Science and Technology Innovation Board has improved for two consecutive quarters, and the revenue and profit have changed relatively well, and the margins are going up, which is very important.

Third, the valuation of the Science and Technology Innovation Board is now about 30 times, which is at the low level of the past few years, at the level of 20 and 30 digits.

From the perspective of global experience, we are essentially in China's second transformation, the last transformation was from 2012 to 2016, when the largest carrier was the GEM, experienced two rounds of GEM bull market, 2013 to 2015, and 2019 to 2021, the first round is TMT, and the second round is represented by biomedicine + new energy.

This round is China's second transformation, to high-tech, to go in a new direction, I think the best carrier should be the science and technology innovation board.

Second, whether it was Japan's 90s or the United States' 70s, they saw a very core and prominent point in their scientific and technological transformation, and they were vigorously developing scientific and technological manufacturing. In the 70s, the United States focused on mobile highways, and in the 90s, 44 high-end technology manufacturing companies were the direction of Japan's transformation, and their own transformation brought a lot of structural opportunities to the entire market sector.

Third, the financial work conference emphasized that the most important thing in the next five years is science and technology finance, of course, there are others, but science and technology finance is in the first place. From a policy perspective, we can also see that the policy is very supportive of the technology industry.

From domestic, to global, and then to policy, we can see that the science and technology innovation board is the core logic of the future, and it is also the key source for us to be optimistic about science and technology innovation.

3. Characteristics of the STAR Market 100 Index

Wang Yu: Let me introduce our STAR Market 100. What is the difference between the STAR Market 100 Index and the more familiar STAR Market 50? Let's analyze this index for you. This index is relatively young, and now the entire scale of the existing science and technology 50 products in the market has reached the level of 100 billion, so its market capacity, we think it is close to the ceiling, because it may involve some technical barriers.

However, there are not many tools and grasps for investing in science and technology innovation in the market, including science and technology innovation information, science and technology innovation growth, and science and technology entrepreneurship, which are not particularly broad-based attribute characteristics. The STAR 50 can be said to be the big brother of the STAR Market, and it is a stock located in the 1st to 50th market capitalization of the STAR Market. The STAR Market 100 is located in the 51st to 150th stocks, which mainly characterizes the waist enterprises of the Science and Technology Innovation Board, with an obvious small and medium-cap growth style, and is also the representative of many high-end manufacturing and "specialized, special and new" enterprises.

From the perspective of market capitalization, the market value of the Science and Technology Innovation Board 100 ETF is about 15 billion yuan, and the Science and Technology Innovation 50 is about 50 billion yuan, so their volume is very different.

From the perspective of the distribution of the entire industry, the first weighted stock of the Science and Technology Innovation Board 100 is biomedicine, accounting for about 30%, and the new energy and chip industry is about 18%.

Judging from the performance of previous markets, the Science and Technology Innovation Board 100 is better than the Science and Technology Innovation 50. In 2020, 2021 and the first half of 2022, in each rebound, the average rise of the STAR Market 100 is 36%, while the STAR 50 is 20.8%. We have repeatedly reminded investors that its high elasticity will also bring high volatility, and from this point of view, if you want to fight for a high elasticity in the relatively low position of the market, you can also pay more attention to our Science and Technology Innovation Board 100 ETF (588120).

4. Why is the current performance of the Science and Technology Innovation Board 100 outstanding?

Wang Yu: There are two strategies that are more effective this year, one is the small and medium-sized market capitalization, and the other is the dividend strategy.

Li Meicen: I think the biggest difference between this year's market and the past few years (2019, 2020, 2021) is that the funds in previous years have always been incremental, and the issuance of public funds, over-the-counter funds, foreign capital, and quantitative funds are all incremental markets. This year, the biggest difference from previous years is the stock game. Why is this year a dumbbell-type configuration, one end is a bonus, and the other end is a small ticket.

First, for the allocation of such large funds, the rate of return is not so high, and it must tend to be more stable, so dividends are chosen. On the other hand, other investors in the market are looking for more Alpha, with limited funds, so they can only look in the direction of a smaller volume, and they will also see greater gains.

Second, why is the performance of the STAR Market 100 more prominent at this point in time? I have always had a point of view that the development of China's science and technology industry also has a sequence, from small to large, from large to strong. In the process of growing from small to large, doing one's own business in China is equivalent to replacing overseas in China, and in the process of changing from big to strong, it is equivalent to doing global business. 15 years ago or 20 years ago, the growth stocks of that year, similar to engineering equipment, also changed from small to large, when its market penetration rate in China has been very good, and the technology has reached the top level in the world, it will go to sea, from big to strong, all companies have such a path.

We see that American technology companies are doing global business and can pay dividends globally, and many companies are large companies, and the growth of large companies is not bad. In the past few years, our technology stocks have been emphasizing from small to large from national security and supply chain security, first replacing the domestic share, or realizing the autonomy of the supply chain. China's science and technology, unlike traditional stocks, such as machinery and chemicals, has grown from big to strong, and is doing global business, so the Science and Technology Innovation Board 100 may be more suitable for this stage.

At present, capital assets are in the stock game, and the stock game is more suitable for the style of small and medium-sized investors. We look at the history of growth stocks is the same, in 2007 ~ 2009, there was no science and technology innovation board and gem at that time, first invest in the CSI 1000, then invest in the CNI 2000, CSI 2000, similar to the first investment in the growth of the big ticket, and then invest in the growth of the small ticket, and then to 2013 ~ 2015, first invest in the GEM, the CNI 2000, the GEM at that time is similar to the CSI 1000, around 2020 to invest in the GEM, represented by medicine and new energy. At this point in time, slowly the GEM has become a big ticket, and it is no longer a traditional growth style, so the Science and Technology Innovation 50 and the Science and Technology Innovation Board 100 will gradually become the varieties that everyone pays the most attention to in the growth sector, which is a change in style.

From industry, capital to style, at least for now, it seems that the Science and Technology Innovation Board 100 may have such and such fluctuations in a single quarter, but in the long run, I believe that the performance of the Science and Technology Innovation Board 100 must be in the front, and I myself highly recommend and am optimistic about China's science and technology innovation enterprises represented by this.

Wang Yu: I just heard you talk about the Science and Technology Innovation Board 100, relatively speaking, the small market value of the Science and Technology Innovation Board 100, this year, will it have a certain advantage over the large market capitalization votes?

Li Meicen: Yes, in the second and third quarters of the entire science and technology innovation board, its profits may not be very good, because of the relatively large decline in semiconductor performance. Looking forward to next year, after more than two years of destocking cycle at the bottom of semiconductors, there is no need to discuss how much to recover up, and gradually going up at the bottom will also bring some relatively good changes, which is the core conclusion.

In the Science and Technology Innovation Board 100, because it is more widely distributed, just like the medicine, electronics, new energy, machinery, including computers, which Mr. Yu just said, the distribution is more balanced. We can see that the consumer electronics in the Science and Technology Innovation Board 100, the medical equipment in medicine, the cloud services in the computer, and the general equipment in the machinery have shown signs of marginal improvement in performance for two consecutive quarters.

Wang Yu: From the index level, the weight distribution of the Science and Technology Innovation 50, the semiconductor industry accounts for nearly 50%, and the semiconductors, medicine and machinery in the Science and Technology Innovation Board 100 add up to about 60%.

Although the performance of the Science and Technology Innovation Board 100 is not so satisfactory this year, we can still see some marginal improvement in the past two quarters. As one of the most weighted industries, medicine is also an industry damaged by the epidemic, and the purchase of many equipment, including surgery, has been delayed due to the impact of the epidemic. Judging from this year, the performance of the entire pharmaceutical industry is not bad.

From the short-term perspective of medicine, the anti-corruption that everyone is most concerned about this year is actually the impact of anti-corruption on the market of the entire pharmaceutical sector is just that day, because it may be a low-level negative. The pharmaceutical index of the whole market is basically corrected by more than 50% to 60%. In such a context, it is a deeply cleared industry. In addition, it has been two or three years since the top of the last cycle in the chip industry, and relatively speaking, the structure of institutional chips is also better.

In the medium and long term, medicine can benefit from consumption upgrades, and we now have the need for an aging population. Therefore, in the long run, referring to the experience of developed countries, whether it is Japan or the United States, pharmaceutical companies with innovative capabilities have a very bright performance in the capital market, so we are still optimistic about the long-term performance of the entire pharmaceutical industry.

Speaking of the impact of centralized procurement, the renewal of centralized procurement was released in July, and we observed the price of renewal, which is basically a parity renewal. Slowly the market has adapted to such an environment, can be divided into two, although there is a part of the blow to the industry, but in the medium and long term, if your sales and service expenses account for the proportion of the entire pharmaceutical enterprise expenditure is downward, we have invested more capital expenditure in research and development, which is worth tackling, we can actually get more benefits in the future. From the perspective of the pharmaceutical industry, we are more optimistic about the performance next year.

If you are particularly optimistic about the chip industry, you don't have to buy the science and technology 50, you can pay attention to our chip (512760), because the chip ETF covers the whole industry chain of chips, including equipment, materials, packaging, packaging and testing, etc.

So on the whole, we are also more optimistic about the performance of the Science and Technology Innovation Board 100.

5. How to lay out the 100 ETF on the Science and Technology Innovation Board?

Wang Yu: Now that the market is at a low level, investors are more concerned about when the market will stabilize and when should they intervene? I would like to ask Mr. Li to answer this question.

Li Meizen: When everyone wants to buy, they see it rise sharply the next day, which is what everyone expects and what everyone wants, which is normal and human. But you have also seen that a lot of articles, including reports and data, will write about the stage of the biggest investment harvest, which must be how much loneliness you can endure in the early stage and how much return you can get in the later stage. The one who can really buy the horse up is either in a big bull market or you are lucky.

For everyone, it is more important to consider the odds of buying it and what its winning rate is at this point in time. The money we invest in the securities market is only a part of everyone's personal wealth, and in the medium term, it is not so urgent.

At this point in time, we need to consider what the market as a whole cares about, such as valuation and value for money. Recently, the entire market has adjusted, including since July, there have been some adjustments in the middle, and the Science and Technology Innovation Board 100 Index has been around 1,000 points, and the bottom is particularly solid, which is a once-in-a-lifetime opportunity. From the perspective of the entire index and fundamentals, we just mentioned that the valuation of the STAR Market 100 is in the historical 20th to 30th percentile, and there is a marginal improvement in profitability, so the STAR Market 100 is very cost-effective.

Now the market has been at the bottom, along with next year's policy, fundamentals, and the possibility of interest rate cuts in the United States, which is marginally good for the market, and such a good will bring about a rebound in the entire market. Biased towards the direction of growth and the direction of greater imagination in the future, it is expected to become the leader of the rebound.

Wang Yu: I also feel that investors often say that I have lost money, whether I should cut my flesh or not. My question is, why do you want to cut the meat after you have just bought it for a few days? We still have to manage the duration of the funds in our hands, and some of the money is indeed only short-duration funds, which may be used every week or two, and we should buy low-volatility products such as money market funds. Or if you are a very sensitive investor to volatility, you should also consider some robust products.

Everyone buys funds to share the dividends of our country's development, not to be afraid every day, and the first thing is to ensure their physical and mental happiness.

At this position, I suggest that if you don't want to look at the market, you can make mechanical regular investment, such as investing money in the 100 ETF of the Science and Technology Innovation Board every month. If you are an investor who likes to participate in the market and has a certain amount of research on fund investment, it is recommended that you can take the way of buying big down and buying small down. As employees of fund companies, we also have the requirement to hold our own funds, and I myself have also bought the Science and Technology Innovation Board 100 ETF (588120), which can be regarded as a practice (the body and action are equally honest and honest).

The STAR Market 100 may be more resilient in the rebound. Each investor's investment preference is different, and I myself am in a low position in the market, and I think I still want to buy some more flexible varieties. After all, the 100 ETF is the growth of growth stocks, and every rebound may not disappoint everyone, and from this point of view, you can also pay attention to it.

Investors who have bought ETFs actually know that as an index investment tool, ETFs have a characteristic of close to full positions. Ordinary OTC funds may have restrictions on the percentage of cash, including positions. Because each fund manager's judgment on the current market is different, the judgment may be relatively poor now, and the position is relatively low. Once the market comes, it may not be able to keep up with the index. Moreover, there must be a 5% cash ratio for daily redemptions, which is equivalent to not a full position, and our indexed investment can make the investment target close to a full position investment, which is basically WYSIWYG.

Finally, let's introduce how to invest in the STAR Market 100 ETF. When we buy funds, one of the most common strategies is to buy low and sell high, carry out swing operations or grid trading, and set a take-profit point for ourselves, which is also relatively common.

The strategy of long-term holding is actually the most recommended for investors, because the index of the Science and Technology Innovation Board 100 is indeed very volatile, and the holding must adhere to a more long-term belief in order to fully enjoy its development dividends, otherwise it is very likely to earn a few points and run away, and then chase it back, and it falls again, so that the repeated investment experience will not be good.

Speaking of my own experience, I hope that everyone will strengthen a long-term concept and buy on dips. For example, buy big down, buy small down, according to the smile curve theory of regular investment, and finally when the market rises, the cheaper chips you accumulate will bring higher returns. That's why we recommend sticking to long-term investments.

There is also a strategy, investors can use broad-based ETFs as core assets to allocate, and wait until the main line of the market or the industry has a performance, and then buy industry ETFs for asset allocation, which is also more common for everyone.

Generally speaking, this is the investment strategy of our ETF, in fact, it is always the same. I mainly hope that you can pay more attention to our Science and Technology Innovation Board 100 ETF (588120) at a low point, so that the follow-up investment experience should be better.

Risk Warning:

Investors should fully understand the difference between regular and fixed investment of funds and savings methods such as small deposits and withdrawals. Regular investment is a simple and easy way to guide investors to make long-term investments and average investment costs. However, regular investment does not avoid the inherent risks of fund investment, does not guarantee investors to obtain returns, and is not an equivalent financial management method to replace savings.

Whether it is a stock ETF/LOF fund, it is a securities investment fund with higher expected risk and expected return, and its expected return and expected risk level are higher than that of hybrid funds, bond funds and money market funds.

Investors should pay attention to the fact that the fund's assets are invested in stocks on the STAR Market and ChiNext Board, which will face unique risks caused by differences in investment targets, market systems and trading rules.

The short-term rise and fall of the sector/fund is only used as an auxiliary material for the analysis of the views of the article, and is for reference only and does not constitute a guarantee of the performance of the fund.

The short-term performance of individual stocks mentioned in the article is for reference only and does not constitute a stock recommendation, nor does it constitute a prediction or guarantee of the performance of the fund.

The above views are for reference only and do not constitute investment advice or commitment. If you need to purchase relevant fund products, please pay attention to the relevant regulations on investor suitability management, do a good risk assessment in advance, and purchase fund products with the corresponding risk level according to your own risk tolerance. Funds are risky and should be invested with caution.

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