The guest of this issue of "Dialogue - Foreseeing New Trends" is Yang Delong, Chief Economist of Qianhai Open Source Fund, who shared his views on the macroeconomic situation next year, the performance of the equity market, the biggest opportunity in 2024, and the biggest risk in 2024.
21st Century: How do you see the macroeconomic trend next year?
Now the policies to support economic recovery are gradually being implemented, especially the recent Politburo meeting once again emphasized that we must go all out to fight for the economy, in the policy to establish first and then break, to develop new economic enterprises first, and then reduce the production capacity of traditional industries, which means that for traditional industries, such as real estate, coal, Iron and steel and other traditional industries should also be given some support to prevent the rise in unemployment and the decline in economic growth, so there may be greater efforts in the policy to tilt, which is beneficial to promote the rebound of the capital market, and the Politburo meeting proposed to be more active in fiscal policy and monetary policy, fiscal policy should be able to boost actual demand, change the current situation of insufficient demand.
Therefore, in 2024, the troika of the mainland economy: investment, consumption and exports are expected to rebound significantly, thus bringing opportunities to the capital market.
There are some uncertainties in 2024 in terms of export trade, with both opportunities and challenges. First of all, the challenge is that the pressure of the global economic growth slowdown in 2024 is relatively large, especially the European and American economies may slow down to a certain extent, which will have a certain impact on the demand for mainland trade products. From the perspective of opportunities, the mainland's export trade is facing industrial upgrading, economic added value is constantly improving, such as automobile exports may surpass Japan, become the world's largest automobile exporter, especially the export of new energy vehicles is in full swing, enhance the added value of mainland export products, in addition to the export of electronic products such as mobile phones is also expected to become an important growth point. The export of some low-end products, especially OEM products, due to the negative growth of the population and the rise of labor costs, there may be some OEM products transferred to Southeast Asia and India, but the export structure is improving, so the mainland's export trade as a whole may remain stable in 2024, but the improvement of the export structure may bring certain opportunities.
21st Century: Do you think the stock market will be better next year?
Throughout 2023, A-shares and Hong Kong stocks have seen a relatively significant decline, and the money-making effect is relatively poor, and many investors feel that it will be difficult to do in 2023, and it will be a lost year in investment.
Looking forward to 2024, all factors are gradually improving, and we believe that we should be more optimistic about 2024, because in 2023, many high-quality stocks in A-shares and Hong Kong stocks have gradually fallen out of value, and many are only 3-4% off the price of the high. Therefore, at the moment, near the end of the year, investors do not need to be too pessimistic, they can firmly lay out some high-quality stocks or high-quality funds that have been mistakenly killed, and wait patiently for the arrival of the next round of market. In 2024, A-shares and Hong Kong stocks are expected to launch a bull market, which is my clear view.
From the point of view of the reasons, on the one hand, the policy will continue to increase, and it may continue to enlarge the moves. Expectations for economic recovery in 2024 have strengthened, and the troika of investment, consumption, and exports is expected to improve across the board. The property market may also be enlarged, including first-tier cities, administrative restrictions may be gradually lifted, so as to play a role in stabilizing the property market. The central government will introduce policies to resolve the three major risk areas of the property market, local bonds and small and medium-sized financial institutions, so as to alleviate investors' concerns and promote the recovery of the A-share market.
On the other hand, the renminbi is likely to see a strong rally as the Fed enters its rate-cutting cycle, and the market now expects the Fed to cut rates three times next year, which will push the renminbi higher. The period of RMB appreciation is often accompanied by the recovery of RMB assets. The A-share market is also expected to show an advantageous trend, the money-making effect is significantly improved, and investors are expected to win back. Now whether it is A shares and Hong Kong stocks, in fact, have a number of low characteristics, the market has been consolidating at a low level for a long time, from the point of view of the time of falling, many white horse stocks have fallen for nearly three years, and the space for decline is basically in place, many stocks have fallen by about 50% to 70%, it can be said that the time and space for adjustment have been relatively sufficient. The valuations of major stock indexes have fallen to historical lows, investor sentiment is more pessimistic, new fund issuances have failed frequently, and the trading volume of the two cities has also shrunk significantly, so there is not much disagreement at the current low level of the market, and the only difference is when it can be launched. The market start is often sudden, so it is not predictable in advance, we can do a dip layout at present, by absorbing some high-quality chips at a low level, and then patiently wait for the arrival of the next round of market.
The Fed's interest rate hike cycle has basically ended, and 2024 will enter a cycle of interest rate cuts, which is the current consensus expectation of the market. Goldman Sachs' expectations are more aggressive, he believes that the Fed may cut interest rates five times next year, and the market generally believes that the Fed may cut interest rates three times next year. But no matter how many times the rate is cut, the Fed's monetary policy pivot is an indisputable fact. The previous goal of the Fed's monetary policy was mainly to prevent inflation from becoming too high, but now that inflation has come down, it is likely to pay more attention to economic growth and the performance of U.S. stocks in the future under the condition of ensuring full employment.
In the statement of the Federal Reserve interest rate meeting that just ended in December, the Fed said that it would continue to pause interest rate hikes. This means that the current rate hike cycle is effectively over by the time of the July rate hike. This round of interest rate hike cycle is a rate hike cycle in which the Fed has raised interest rates the most times in history, and the slope of interest rate hikes is very steep, so it has caused a certain impact on the global economy and even the global capital market. It has led to the continuous rise of the dollar index, while the general depreciation of non-US currencies has been relatively large, and the US dollar yield has also moved to a relatively large increase.
In 2024, whether the Fed cuts interest rates three times or five times, it will play a role in promoting the rebound of the RMB exchange rate, and it is very likely that the RMB exchange rate will return to the "6 prefix". Generally speaking, with the recovery of the RMB exchange rate, there will be an increase in the valuation of RMB assets.
Mr. Wang Hongyuan, a strategic consultant of Qianhai Open Source, believes that these Chinese assets are seriously undervalued, once the Fed's monetary policy shifts, coupled with the gradual implementation of the policy of stabilizing economic growth, and the mainland economy rebounds, RMB assets will increase their attractiveness and attract more capital inflows, thus bringing opportunities for valuation improvement.
On the one hand, the U.S. election may have certain fluctuations in policy, and on the other hand, the Federal Reserve has raised interest rates violently 11 times in a row, raising the benchmark interest rate in the United States from 0 to a high of 5.25% to 5.5%, which has been maintained for a long time, which has increased the debt burden for American companies and individuals in the United States, and may also have a certain impact on U.S. economic growth. Fed Chairman Jerome Powell has repeatedly stressed that it is not yet time to discuss interest rate cuts, and that the higher benchmark interest rate may be maintained for a long time, which will also have a certain impact on the trend of US stocks. It is expected that the volatility of U.S. stocks in 2024 will be significantly greater than that in 2023, especially some technology stocks that have risen too much.
21st Century: Where do you think the biggest opportunity is next year?
When laying out the market in 2024, you can focus on finding high-quality companies from the following three areas to make a layout: first look at the direction of big consumption, which includes brand consumer goods such as liquor, traditional Chinese medicine, food and beverage, etc. The mainland has the world's largest population and the largest consumer market, and in the past three years, due to the influence of external factors, the growth rate of consumption has been low, and the valuation of consumer stocks has fallen sharply, and consumer stocks are expected to pass through the economic cycle and the bull and bear cycle. Warren Buffett has always loved consumer stocks, because consumer stocks have a strong ability to resist risks, branded consumer goods have a higher brand advantage, branded goods are often ten times more expensive than unbranded goods, and can even be a hundred times more expensive, so for branded consumer goods can be laid out on dips, and these consumer stocks may lead the rally in 2024.
Second, in terms of new energy, new energy will explode in the three years from 2019 to 2021, and I have repeatedly suggested in 2019 that we should lay out the direction of new energy, including new energy vehicles, lithium batteries, photovoltaics, etc., because it is the general trend for new energy to replace traditional energy, and it is also the only way to achieve the "double carbon" goal. In 2021, new energy rose sharply, and the two new energy funds of Qianhai Open Source won the double champion of equity funds and hybrid funds, and the rapid rise at that time also led to overdraft of future performance, so the new energy sector has fallen sharply in the past two years, and many stocks have fallen hugely. From the perspective of economic transformation, the performance growth of new energy is relatively certain, so when laying out the market in 2024, you can seize the opportunity of the new energy sector, or seize the opportunity of industry recovery through the layout of clean energy funds.
Third, in terms of technology, in 2023, represented by the sharp rise in the AI sector driven by ChatGPT, the technology sector has performed many times, including chips, semiconductors, artificial intelligence, etc. In 2024, the technology sector is expected to continue to show repeated performance, because technology is an industry that leads the direction of economic development, and it is also the direction that can be paid attention to in the future. It is possible to seize the opportunity in the long run by seizing the direction of economic transformation by laying out leading technology stocks, but considering the different characteristics of different industries, it can be roughly allocated to large consumption, new energy and technology in accordance with the ratio of 532, that is, consumer white horse stocks with stable performance, and about half of the positions should be allocated. Then the new energy has performance support, and the valuation is relatively low, it can be allocated 30%. In terms of technology, there is growth, but the performance fluctuates greatly, and the investment risk is also high, so it can be allocated about 20%. In this way, we can use the approximate proportion for your reference to grasp the direction of economic transformation.
21st Century: What risks are you most worried about next year?
At present, there are two major risk areas in the mainland, one is the property market and the other is local bonds. At present, in terms of mitigating these two risk areas, the central government has issued a lot of policies, including restrictions on the purchase of the property market, and now the measures are gradually being relaxed, and I think that in 2024, including first-tier cities, it is possible to completely cancel the purchase and loan restrictions to promote the stabilization of the property market. Financial support for the property market is also making big moves, increasing financial support for real estate, especially for important real estate enterprises to give financial support.
In terms of local bonds, it is also gradually resolving risks, and in 2024, there may be further big moves to reduce investors' worries in resolving local bond risks. Because of the large scale of local bonds, the debt ratio at the central level is actually lower than that of developed countries, and the central government can resolve local bonds through certain channels, which is conducive to reducing investors' worries and boosting the performance of China's stock market and Chinese bond market, these two major risk areas may be effectively resolved in 2024, and investors do not need to worry too much.
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