In the late spring of April, everything is competing. Since the beginning of this year, AI technology has continued to make breakthroughs, and related applications have emerged one after another, and the capital market seems to have reached a crossroads where technology and dreams are intertwined. At the same time, against the backdrop of the U.S. economy and inflation exceeding expectations, the Fed's interest rate cut expectations continue to be postponed, which has had a certain impact on both the A-share and Hong Kong stock markets. In this context, what are the opportunities and challenges faced by quantitative investment? As one of the core sectors of the "new economy" of Hong Kong stocks, has the Internet sector of Hong Kong stocks ushered in the moment of "no pole Tailai"?
On April 17, the giants entered the game, and the new opportunities of the mobile Internet - Wells Fargo Fund Quantitative Investment Spring Strategy Conference and Wells Fargo Fund Investment April Special Session came to a successful conclusion. This special strategy meeting invited Kong Rong, co-president of Tianfeng Global Prospective Industry Research Institute and chief analyst of global technology, Wang Lele, ETF investment director of the quantitative investment department of Wells Fargo Fund, Cai Kar, fund manager of Big Data ETF, Tian Ximeng, fund manager of Hong Kong Stock Connect Internet ETF, Su Huaqing, fund manager of CSI A50 ETF, and the chief of the brokerage company and the manager of Wells Fargo Quantitative Fund to discuss the opportunities and challenges that quantitative investment focuses on when the decision is made in April. Nearly 30 platforms will broadcast live at the same time, which has attracted wide attention from the market.
Group photo of guests in the roundtable session
The first half of the special strategy meeting consisted of four keynote speeches, and the speakers Wang Lele, Cai Car, Tian Ximeng, and Kong Rong respectively brought their outlook for the market outlook from the four perspectives of ETF applets, market strategies, industry analysis, and industry trends. In the second half of the roundtable discussion, Yang Fan, senior strategic analyst of Wells Fargo Fund, served as the moderator, and discussed the investment opportunities worthy of attention in the current market with three guests.
Note: The views of external institutional guests only represent the views of themselves and their institutions on the date of release, and the market views and investment ideas of the fund managers of Wells Fargo Fund are not as commitments or predictions for the investment management of the fund products they manage, nor do they constitute investment advice. The above views are current and may be adjusted as market conditions change.
Wang Lele: Insight into the market, understand the investment weapon
Director of ETF Investment of Wells Fargo Fund Quantitative Investment Department
Wang Lele
The process of stock price formation: ETFs are not only tools, but also investment products
Taking the Value 100 Index as an example, its compilation scheme and index characteristics are essentially looking for companies with high earnings quality, and then looking for cheap companies among the best.
Change in perception: instrumentalization of products
Taking consumer 50 ETF and pharmaceutical leading ETF as examples, the core stock selection logic of consumption and medicine is not market capitalization, but the balance between sector leaders and profitability.
ETF innovation: Make a basket of stocks a little better in the hope of providing better returns
The first sampled copy ETF in the whole market
Shanghai Composite Index ETF
Keep improving the track and improve the long-term return of customers
Military leading ETF, consumer 50 ETF, technology 50 ETF, chip leading ETF, pharmaceutical leading ETF
Investability track, rational thinking and choice
Big Data ETF, Smart Car ETF, Agriculture ETF, Tourism ETF, Hong Kong Stock Connect Internet ETF
Understand the market and choose the right strategy
Bull Market: Hold on hold
Shock: Trading
Bear market: Short positions
Grid trading may be one of the rules to deal with market shocks
At present, A-shares are already in a state of overshooting
The year-on-year growth rate of profits of industrial enterprises has corrected
A-shares are still subject to disruptions from both internal and external factors (global trends), and it is recommended to keep an eye on them in the short term
Zeikar: The defensive road of the market in the second quarter
Big Data ETF Fund Manager
Zeikar
Value 100 ETFs: Rethinking Value Stocks
Investable value stocks are distributed in various industries, and there are also "value stocks" in growth industries.
The common defensive attributes of value and high dividends come from their lower valuations, and their different elasticity also determines their suitability to different market environments.
What are the other varieties with low valuation?
In the past two years, China Special Valuation has been one of the main lines of the secondary market, especially in the context of market value management.
On May 13, 2023, the SASAC meeting emphasized the promotion of central enterprises to increase their layout in strategic emerging industries.
The elasticity of the SOE Innovation ETF comes from two aspects: 1.) In terms of industry characteristics, the proportion of emerging growth industries in its constituent growth strategy is much higher than that of the central SOEs as a whole, and 2) the profitability of SOEs has steadily improved in recent years, and the performance growth rate is also higher than that of the CSI 300, and the relative advantages of the fundamentals are emerging (data source: Wind, as of April 2024).
There are two foundations of defense: valuation + performance
Controllable downside: Relatively low valuation, less room to kill valuation
Controllable downside: relatively stable earnings, less performance fluctuations, stronger certainty, and lower probability of stepping on thunder (cash flow, ROE)
Upside elasticity: Sustained earnings or room for valuation upside
Tian Ximeng: Changes and new opportunities in the valuation system of Hong Kong Stock Connect Internet
Fund manager of Hong Kong Stock Connect Internet ETF
Tian Ximeng
Southbound Internet ETF:
The concentration of individual stocks is high, and the stock price is highly elastic
In terms of industry distribution, the constituent stocks of the Hong Kong Stock Connect Internet Index are concentrated in communication services, information technology, non-daily consumer goods and other industries.
Not subject to QDII
It adopts the form of Hong Kong Stock Connect products, excluding Chinese concept stocks, is not subject to QDII quotas, T+0 trading, and the discount and premium are relatively stable.
New investment opportunities brought about by changes in business strategy
At the same time, the indicators of Earnings Yield and Free Cash Yield of some constituent stocks have turned from negative to positive, and the market is expected to rise significantly in the next few years (data source: Wind, Visible Alpha consensus expectation).
The main business finds the bottom, and AI provides upward options
The valuation of the sector is low, the leading performance is strong, and the elasticity of the Fed's interest rate cut in the future may be a better time for the layout.
Performance Determine: Wait for the elasticity of economic expectations to improve
The Hong Kong Stock Connect Internet is closely related to the macro economy, and the PMI and the growth rate of medium and long-term loans are the observation indicators.
Liquidity denominator: Hong Kong stocks are fully priced
In 2024, the interest rate cut cycle may begin, and the divergence lies in the number and timing.
Kong Rong: Giants enter the game, AI is forward-looking
Co-President of TF Global Prospective Industry Research Institute
Kong Rong
Energy & Power: Driven by data centers, power demand will continue to grow
Data centers are an important driver of growing demand for electricity in many regions. Rapid innovation in AI has driven the construction of massive computing infrastructures that require much more power than traditional data centers, and AI is part of a massive expansion of cloud computing.
Government labs and more than 30 companies are racing to use fusion to generate electricity, which one day will help the world reduce emissions related to climate change.
Robot: AI robot platform
Includes a full suite of GPU-accelerated innovations in AI perception, manipulation, simulation, and software. Users can now take performance to the next level by optimizing advances in artificial intelligence – including robot learning, large language models (LLMs), generative AI, and foundational models.
Intelligent driving: New models of well-known brands will use intelligent driving chips
Large model requirements
Sovereign wealth funds are entering the AI market one after another
OpenAI GPT 4 Turbo、Sora、Google Gemini、Anthropic Claude 3陆续推出
Applications: Focus on productivity tools, AGI, advertising, Capilot, AIPC, etc
AI+3D, AI+Search Engine, AI+Music, AI+Gaming, Database, AI Agent, End-to-end Autonomous Driving, etc
Roundtable Forum: What are the opportunities for mobile Internet when giants enter the game?
1. What is the impact of the postponement of the Fed's interest rate cut on A-shares and Hong Kong stocks?
Kong Rong: The market is usually very sensitive to the Fed's interest rate decision, and the postponement of interest rate cuts may lead to the impact of market sentiment in the short term, which may trigger a certain degree of adjustment; interest rate cuts are usually beneficial to the growth sector, because the low interest rate environment has low financing costs for growth enterprises, which is conducive to their development, and the postponement of interest rate cuts may bring some pressure to the growth sector, but whether it triggers a large "domino effect" also needs to consider the impact of other factors, such as corporate fundamentals, industry development, policy support, etc.
Tian Ximeng: From a statistical point of view, the Fed's interest rate hike or inflation rate exceeding expectations usually has a negative impact on the A-share and Hong Kong stock markets. Judging from the denominator end of the current market (i.e., the overall economic environment and policy side of the market), there is not much good news, but from a valuation point of view, the price has been relatively low. At the molecular end, even under macroeconomic pressures, innovation and operational efficiency improvements within enterprises can still bring about positive changes. These intrinsic positive dynamics, especially in revenue and profit growth, may be the main drivers driving stock prices higher. As a result, despite the challenging external environment, certain sectors of the stock market have been able to grow in value, demonstrating the complexity and volatility of the market.
Su Huaqing: The expectation that the US will cut interest rates this year should not be too high, and the main reasons behind it are as follows: First, the economic fundamentals are healthy, the economic cycle is smooth, and the household and business sectors with strong and healthy employment have started with the dual stimulus of fiscal and monetary policies; second, the road to deinflation has been twists and turns, and the logic of real interest rates has been challenged. The logic of real interest rates may be the main basis for the market to judge the Fed's precautionary rate cuts this year, and at the same time, the potential risks in the financial market are volatile. The pace of the Fed's interest rate cuts is no longer the core contradiction of A-share assets. The subsequent delay in the Fed's interest rate cut may weigh on growth assets, but the suppression effect is very limited.
2. Since the beginning of this year, there have been significant breakthroughs in AI applications, generating content from text to images to videos, and humanoid robots and smart cars are developing rapidly.
Kong Rong: I think the development direction of AI-generated content is very noteworthy, including the AI generation of multimedia content such as text, images, videos, etc., which can save manpower and time costs, improve efficiency and creativity by automatically generating high-quality content; humanoid robots combine robotics and artificial intelligence, which can play an important role in the fields of family, medical care, education, etc.; intelligent driving is also one of the more promising directions, which can release time and greatly improve the driving experience, efficiency and driving safety.
Simon Tian: Smart cars are becoming a revolution in the automotive industry, not only changing the powertrain, but also redefining the electrification architecture of vehicles. Compared with traditional combustion vehicles, the design concept of smart electric vehicles is more forward-looking, not only simply adding new functions to the old frame, but fundamentally reimagining the internal structure of the car. In addition, the electrification architecture of smart electric vehicles provides greater flexibility for iterative updates and function expansions of future vehicles. It not only improves the performance of the car, but also brings continuous innovation momentum to the entire industry.
2023 can be described as the first year of smart cars, and the future may be the replacement of traditional cars by intelligence, with great room for penetration.
3. From the perspective of the market in the second quarter of this year and the whole year, why should we pay attention to the investment value of large-cap assets at present?
Su Huaqing: There are several main reasons behind it: First, from the perspective of asset allocation, in terms of macro prosperity, after the Spring Festival holiday, PMI, consumption, exports and other data that can drive the upward movement of large-market assets have improved significantly. Second, the market returns to rationality and value returns. As funds continue to be cleared, the market will return to rationality, and it will tend to look for cost-effective sectors. Third, the industry rotation speed is relatively fast. In view of the fact that it is difficult to grasp the market of a single industry, the investment cost performance of the core asset broad-based index is highlighted.
In summary, before condensing the new main line of investment this year, we may focus on the logic of valuation reshaping, that is, core assets, and the value of dividend investment is also worth paying attention to.
Smart Car ETF, Big Data ETF, Hong Kong Stock Connect Internet ETF, Value 100 ETF, Central Enterprise Innovation ETF...... After reading the wonderful views of today's rich two quantitative investment spring strategy meeting, have you learned the offensive and defensive ways of investing in the second quarter?
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