Chen Jinquan interviewed the viewpoint 00: 0022: 15
Chen Jinquan
Deputy General Manager of Industrial Securities Global Fund
Director of Investment Department and Fixed Income Department
Investment Manager of The Special Account Investment Department
Mr. Chen Jinquan, Deputy General Manager, Director of Special Account Investment Department and Fixed Income Department of Industrial Securities Global Fund, is a veteran with 21 years of investment and research experience in all product lines. He was previously the fund manager of Xingquan Green Fund, with a product return of 94.2% and an annualized 19.36% during the management period, ranking 6/229* in the same category. (*The management range is from May 6, 2011 to February 3, 2015, and the same type is haitong securities strong stock hybrid fund classification)
Since 2015, he has been engaged in the special account investment business, and the current special account management scale is nearly 20 billion, covering absolute return and relative income products in the stock category. Mr. Chen Jinquan also serves as the Director of the Fixed Income Department of INDUSTRIAL Securities Global Fund and has a deep understanding of the fixed income asset and bond markets.
On June 9, we invited Mr. Chen Jinquan to share a detailed discussion on the future outlook of the stock and bond markets. The following are excerpts of important points, followed by a transcript of the full version.
"From the perspective of large-scale asset allocation, stocks are more attractive than bonds at present. The current risk premium for stocks relative to bonds is one standard deviation above average and is in the second-highest range in history. ”
"You can think of the CSI 300 as a company and calculate the company's revenue growth, profit growth, ROE and other indicators. The minimum criterion for stock selection is that the company's ROE should exceed the CSI 300, that is, the level of 11-13%. ”
"Comparing the differences in the industry and weight of the Capital Markets between China and the United States, it can be seen that the proportion of China's A-share market in the two fields of science and technology, medicine and the United States is relatively large. Drawing on the experience and history of the United States, many large companies will grow in these areas. ”
"The power of the decline in bond prices has been basically unleashed, and the 10-year Treasury yield is around 2.8%, or 3%, or becomes the neutral level in the future."
"Special account products can be relatively concentrated in the industry or individual stocks, and the core behind it is of course based on our relatively deep research and understanding of enterprises."
The following is the transcript of the full version.
The current level of equity risk premium is at an all-time high,
More attractive
Q: Standing at this point in time, how do you see short- and long-term equity market opportunities?
Chen Jinquan: In the long run, stocks are more attractive than bonds. Stretched to 10 years or even longer, the risk premium of stocks to bonds at the current point is one standard deviation above the average, and is in the second high range in history, second only to the level of 13 and 14 years.
In the short term, with the weakening of marginal improvement power, asset prices may show a volatile trend in the future. We can see that the biggest point of the impact of the epidemic on the global market is basically in the third week of March. In the past three months, the market has been repaired, the NASDAQ index has hit a new high, and some technology and pharmaceutical companies have hardly been affected by the epidemic or a possible economic recession, and the stock price has gone all the way.
Fundamentally, China's worst economic data probably came in March, after which the marginal rate of change is relatively positive, but in the future, the marginal improvement may weaken after June. The situation in Europe and the United States is similar, relative to China's delay of 1-2 months, it is expected that the economic data will enter a repair in the third quarter, and the power of marginal improvement after the third quarter may weaken. Economic fundamentals and asset prices are expected to enter a period of volatility.
Question: How do you control your position in the future?
Chen Jinquan: This year is my 10th year of joining the Industrial Securities Global Fund, and my personal investment philosophy is highly consistent with the company, that is, weakening timing, obtaining benefits by choosing excellent companies, and only in extreme cases there will be clear timing behavior. At present, the Shanghai Composite Index is below 3,000 points, and we believe that the valuation level of this market is relatively low, and the relative bonds are very attractive, so we do not do more operations on the timing, and the core is to choose excellent companies that are competitive for a long time.
There is congestion in the pharmaceutical, technology, and consumer circuits.
However, it does not affect the focus of stock selection
Question: In terms of individual stock selection, what qualities do you have to select as a good company in the stock pool?
Chen Jinquan: Our most basic investment framework is to treat the CSI 300 as a company and calculate the company's revenue growth, profit growth, ROE and other indicators. The minimum stock selection criterion is that the company's ROE should exceed the CSI 300, that is, the level of 11-13%.
Second, good companies generally have good business models, profitability and growth. These companies are priced high or low in the capital markets, so the core of the choice is to look at a longer cycle of 3-5 years, and once we find these excellent companies, we hope to be able to accompany them to grow.
From the perspective of the industry, comparing the differences in the industry and weight of the Capital Markets in China and the United States, it can be seen that the proportion of China's A-share market in the two industries of science and technology, medicine and the United States is quite different. Drawing on the experience and history of the United States, many large companies will grow in these areas. Consumer goods, pharmaceuticals, and technology are just three of the key areas we continue to focus on.
Question: Now in the structural market, funds are concentrated in some industries, how to seize the opportunity to find good in this situation?
Chen Jinquan: The phenomenon of crowding and hugging has also appeared several times in the history of A-shares, from the beautiful 50s in 16 years, to the core assets in 17 years, and then to the growth stocks in 19 years. At present, there are indeed some crowded phenomena in the market, but our judgment is acceptable, and if some of the prices are higher in the future, it may prompt us to control this investment.
We look at the so-called crowded and grouped problem from the following two aspects -
First, there are not many excellent companies, and dozens of the more than 3,000 companies in A-share companies we really invest in, and we must have confidence in the best of the best companies. Short-term is a little more expensive, but with good growth and the power of long-term growth, we have a greater tolerance for it. Unless there is a big problem with the fundamentals or management, we will veto it, and expensive is not the most important reason for us to sell stocks.
Second, many people are optimistic about medicine, technology, and consumption, which does not affect the focus of our choice of company. In fact, good companies always buy too little rather than too much, and hold for not too long but too short.
The power of the decline in bonds has been basically released,
Attractive relative to global markets
Question: Recently, there has been a lot of discussion about the bond market in the market, and many people are discussing whether bonds have fallen to the bottom, and the opportunity has come. How do you see the value of bonds allocated today?
Chen Jinquan: In the short term, there has indeed been some adjustment in the current bond price, and the yield of the 10-year Treasury bond has been adjusted from about 2.46% to 2.8%, that is, a change of thirty or forty bps, which is already a relatively large adjustment at the monthly level.
In fact, the level of bond yields is a key benchmark for pricing the entire capital market, often affected by macroeconomic and monetary policies, and I mainly understand the adjustment of the current bond market from three aspects.
First, investors have seen a decline in their level of economic concern. After the epidemic hit the economy this year, global governments and central banks have done a lot of hedging in monetary and fiscal policy. At present, crude oil prices and stock prices are gradually recovering, and the relevant economic data have gradually improved, as the economy has improved and investors have declined in worry, bond prices naturally have downward pressure. However, compared with the global bond market, the current yield level of China's bond market is still relatively attractive.
Second, the pullback after the last bond bull market. Bond yields have fallen by about 140 bp since the end of 2017, and over the course of more than two years, the bond market has accumulated a lot of leverage and profitability, which has also led to the current volatility.
Third, the 10-year Treasury yield is around 2.8%, or 3%, or it will become the future neutral level. Although the average yield of China's 10-year Treasury bonds in the past 20 years has been about 3.6%, while 3% has historically been a relatively low level; but from the international experience of Japan, Europe, the United States and other countries, as the future growth of China's economy slows down, interest rate levels will also correspond to the decline. Therefore, the current point in time does not have to worry too much about the further adjustment of the bond market due to the short-term economic recovery.
On the whole, the current power of the decline in bond prices has been basically released and returned to a more balanced level.
The concentration of special account products in individual stocks,
Based on deep research and cognition
Question: You used to be a public fund manager, and now you are responsible for the special account business in the Industrial Securities Global Fund, we know that the special account products are more based on absolute returns, how different will this be from the management of public offering products?
Chen Jinquan: According to my summary of the experience of special account management in the past 5 years, the first point of difference between special accounts and general public offering products is reflected in the absolute return, and the special account will control the volatility. In the absolute return framework, if the stock market is too expensive or volatile, we will make certain actions to reduce the volatility of the product, such as controlling the proportion of investment in the equity of the product.
Second, special account products can be relatively concentrated in the industry or individual stocks. Generally, the public offering accounts for 5% to 10% of the position is likely to be a heavy stock, but we can buy 10% to 15% in the special account. We believe that once we find a good company and the price is reasonable, we should buy more, so the concentration can be at a relatively high level, and the core behind this is of course based on our deep research and understanding of the enterprise.
Third, there are many auxiliary tools for special account products, such as bond transfer strategies, block trades, fixed increase strategies, stock index futures hedging strategies, etc. In the past years, we have the corresponding tools or operations to hedge our risks and fluctuations, so that our customers have a better investment experience.
Good investment, time visible
Text: Wen Qianyu, Chen Hantao (Intern)
Risk Warning: Xingquan Green Fund Chen Jinquan tenure (May 6, 2011 - February 3, 2015) Full results: May 6, 2011 to December 31, 2011 (-9.90%/-19.55%), 2012 (1.44%/6.90%), 2013 (43.87%/-6.35%), 2014 (44.03%/42.92%), January 1 to February 3, 2015 (2.53%/-1.84%), Data source: Haitong Securities, Wind, Industrial Securities Global Fund promises to manage and use the fund property in good faith, diligence and responsibility, but does not guarantee that the fund will be profitable, nor does it guarantee the minimum return, investors should carefully read the relevant fund contracts, prospectuses and other documents when investing in the company's funds and select investment varieties suitable for their own risk tolerance. The short operating time of China's funds cannot reflect all stages of the development of the stock market. The past performance of the fund does not indicate its future performance, and the performance of other funds managed by the fund manager does not constitute a guarantee of the performance of the fund. The views expressed in this article are solely those of individuals and do not represent the positions of the Company and are for reference only.