"In 2021, first of all, there is enough money, and it is unprecedented, especially foreign money."
"Globally, as the only major economy with positive growth in 2020, China still has enough momentum and possibility to maintain a good level of growth in 2021." So China still has a relatively long-term attractiveness, and money will still come to China. ”
"The capital market in 2020 has developed relatively well, and the global market value has increased by nearly 40 trillion yuan, and there is a wealth effect: the targets and enterprises invested by equity investment institutions will be fully developed in the stock market in 2020 or listed before 2020, or the market value will increase, so the enthusiasm of investors will also be there."
"When 2021 may be more and more external factors begin to tend to be determined. Consumption decisions about residents will also resume, including short-term, medium-term and long-term. ”
"In 2020, the expenditure on education, culture and entertainment projects that should have increased fell by nearly 20% year-on-year, which is obviously an abnormal phenomenon. In 2021, such projects will grow at a high rate. This is our most basic judgment of consumption. ”
"If there are changes in the capital market, including the model represented by the perfect diary, if there is a change in judgment, maybe the bubble will burst a little, or everyone's valuation will be affected."
"Maybe this year China's foreign trade e-commerce competition will become much more intense than last year." "Maybe the survival of the fittest will start to develop." We wait and see, I hope that there are a lot of China's excellent foreign trade e-commerce, including brand foreign trade e-commerce in this cycle, can grow into a new representative of China's foreign trade or Chinese brands of listed companies or big Macs. ”
"Historical experience proves that when some new Internet platforms are most sought after and recognized in the capital market, the next generation of new Internet application platforms is usually born silently."
On March 28, Li Feng, founding partner of Fengrui Capital, analyzed the new consumption trends in China this year at the Wall Street Alpha Spring Summit, as well as his insights on consumer investment and Internet consumer investment, and made the above judgments.
The following is the essence of Wall Street news collation, to share with you:
<h2>There is more money than ever before, especially foreign capital</h2>
In the year 2020, globally, mainly referring to the cumulative increase in liquidity in developed countries, the money that ordinary people often call "printing" is about 20 trillion US dollars. This resulted in an increase in global debt of about $30 trillion and an increase in the market value of global equities of roughly $40 trillion.
The world has almost never printed so much money in a year, but in this liquidity, China is relatively restrained and conservative. Although our total social financing last year also reached a new high of more than 30 trillion yuan, it includes some special government bonds generated by the fight against the epidemic, and if this part is removed, it will not increase much in terms of total amount compared to 2019.
In such a situation, what will 2021 look like?
First of all, there is enough money, and it is more than ever, especially foreign capital. If there is no major policy shift in the policies of the developed countries of the world's central banks in 2021, China, as the only major economy with positive growth in 2020, and still has enough momentum and the possibility to maintain a good growth level in 2021, then the Chinese market is attractive enough that they will come.
Therefore, in 2021, for the investment market, the Chinese market will at least have enough money, and both foreign capital and RMB may be able to meet everyone's expectations. Although venture capital and equity investment are essentially a relatively small part of the financial industry, we are still affected by the whole. Since the overall money is enough, the industry will receive enough development and enough investment.
Let's look at the other side of the coin. That is, for the global capital market, everyone is doing well in 2020, especially in developed countries and including China. The above mentioned increase in global stock market value of nearly 40 trillion yuan, in fact, has exceeded 100% of global GDP, or even close to 120%.
In this case, a wealth effect appears - in the past, many of the targets and enterprises invested by equity investment institutions like us, listed in 2020 or listed before 2020, have been fully developed in the stock market in 2020, or the market value has increased, thus bringing about a wealth effect, so the enthusiasm of investors will also be there.
These two parts solve the problem that both may continue to have money, and everyone has enough enthusiasm to make money. Combined, the entire investment market in 2021 will still maintain a certain degree of heat.
<h2>
Consumption that has been suppressed since the second half of 2020 has been released
</h2>
After looking at the overall investment market and then looking at the consumption problem, 2020 shows some special situations in this regard.
In the last two quarters of 2020 – probably starting in August last year , equity investment became the first hot spot in consumer goods venture capital, which has to do with a lot of things that have happened in the past year, including "more money" and good capital market performance.
A set of data is the 2020 statistical report on residents' income and consumption expenditure released by the National Bureau of Statistics, showing that after removing inflation, the average income of residents rose by 2.1%; and the average consumption of residents, also known as the total retail sales market, fell by 3.9%. In other words, last year, everyone's average income has risen, but the average consumption has decreased, which is obviously not a reasonable phenomenon. There is no doubt that this is due to the epidemic.
So what impact did the epidemic have on consumer investment last year? During the epidemic, each individual has roughly experienced such a psychological change: in the three months of 2020, three, three, and four, we don't know how long the epidemic will last, we don't know how much it will affect, and we don't know how many industries it will affect, and we may even not know whether our company, our own business, and our income will be sustainable, which is called the huge uncertainty brought about by the system. Because uncertainty has an impact on everyone's consumer psychology, called avoiding long-term decisions.
The so-called long-term decision is a consequence that involves not the present, but the years to come. For example, during the epidemic, we probably won't buy a car, we may not buy a house, and we may even include not having children, and childbearing and raising are also a long-term decision. These are long-term decisions, and the more uncertain they are psychologically, the more they are inhibited.
So we saw a decline in overall consumption last year, the first reason being to avoid making long-term decisions, and the second being due to the limitations of some activities, such as outdoor activities, gatherings, tourism, and some culture and entertainment.
After a huge amount of uncertainty, what will change in 2021? All the uncertainties just mentioned, whether related to the domestic and international situation or related to the control of the epidemic, these uncertainties are stabilizing, or they are expected to be more controllable.
That is, we probably know what the epidemic will become, whether it will affect a year and a half, or whether it will have a smaller and smaller impact in the future; we also know that Sino-US relations will become relatively more certain after two years of ups and downs; of course, including our country's economic growth compared with the past three years, everyone has had a variety of confusion about China's economic restructuring, but during the epidemic period, it has been verified and confirmed.
When certainty is enhanced, it leads to a recovery in medium- and long-term consumption decisions. For example, we have seen the auto consumer market, which has been declining since 2018, return to high-year growth in September-December last year; just-in-demand real estate has recovered. These suppressed consumption began to be released in the second half of 2020.
When 2021 may be more and more external factors began to tend to determine. Then consumption decisions about residents will also be restored, including short-term, medium-term and long-term.
<h2>The epidemic has brought about new consumption phenomena</h2>
In the A-share market, we have found that among the white horse stocks or group stocks that perform very well in 2020, there are a lot of consumer necessities, whether it is liquor or condiment soy sauce. These stocks that perform well in the capital market will drive the psychology of investors, who believe that these directions are worth investing in for a long time.
In February 2021, the consumption report released by the National Bureau of Statistics can see a special situation, that is, the tobacco, alcohol and food industry categories increased by 5.1% year-on-year in 2019 and 2020. It is worth noting that this is the growth achieved in the case of a 4% reduction in the total amount of social zero. Apparently this is partly due to reduced dining out and increased growth in home spending from cooking at home.
Because the epidemic can not go out, time at home increases, Internet time increases, Internet penetration increases, and some new Internet time has been generated. For example, new traffic such as e-commerce live broadcasting and short videos has brought about an increase in e-commerce. The combination of these two things has made us see a lot of new brands developing relatively quickly in 2020.
In 2021, service, education, culture and entertainment projects may have high growth
So will this type of growth continue in 2021?
China's economic development stage will experience a gradual decline in the proportion of consumption of necessities, and the consumption of non-essential goods and services industries will gradually increase.
Then the proportion of consumption expenditure on necessities such as food, tobacco and alcohol reflected under the epidemic will be adjusted when the epidemic is controlled and we return to a normal state of life, which should be more in line with the consumption stage under the current economic structure of our country. That is, consumer spending on necessities will theoretically not grow at a high level, they may grow at a low rate or even flat, and then their share of consumption should decline relatively.
After experiencing negative growth in 2020, as the epidemic is controlled, as everyone returns to their own behavior patterns, it is likely to return to positive growth in 2021. As for the amount of positive growth, it is difficult to predict.
If we take GDP as an analogy, if GDP is 6% or 7% or even 8% this year, we predict that if we assume that after the recovery of the epidemic, people's normal consumption behavior will begin to recover, it should maintain similar growth to GDP. Because in the years leading up to 2020, our consumption grew more than GDP, so we assumed to be flat this year. If our consumption is the same as GDP this year, it will grow by about 7%, because last year's base was -4%, so the year-on-year growth in consumption can not rule out reaching double digits.
So what will get better in the process of high consumption growth? We know that consumption of necessities will not grow as high as it did last year. But overall, in 2020, the least optimistic and most affected service industry may start new opportunities and show new high-speed growth in 2021, because everyone's consumption logic has all recovered, which is a part of consumption, related to our physical service industry or with our physical goods.
In 2020, the expenditure on education, culture and entertainment projects that should have increased fell by nearly 20% year-on-year, which is obviously an abnormal phenomenon. But in 2021, this project will grow high. This is our most basic judgment of consumption.
On this basis, how many of these consumer brands that invested in the past year can maintain high growth in 2021? I think some of these two things, with the increase in Internet penetration and the emergence of new traffic, can still be sustained.
The entertainment industry, which has not been very optimistic in the past few years, includes virtual entertainment, games, music, videos, movies, variety shows, etc., as well as content creation such as book writing. In fact, in 2020, the entertainment industry or content creation industry has been relatively well developed. Whether it is because of the performance of Station B in the capital market, or because of the performance of these digital music platforms that have just released their financial reports, as well as the vibrato and Kuaishou we use, the performance of these platforms has been very good in the past year.
But in fact, this industry has not received much attention in the past few years, because everyone has invested in the funds of these industries, and they feel that the opportunities in these industries are not large, or these industries have been affected and restricted more, so everyone has turned to consumer goods. When any country at a stage of development similar to China goes through a cycle, the products or services of this experience service and spiritual consumption will become better and better.
So we can draw another conclusion: these content creations, including entertainment, which have been snubbed for several years, should be back on their growth track in 2021, just because they are doing well on the Internet in 2020, and maybe they will start to grow in every aspect of 2021.
During this year's Spring Festival, we saw a miracle in China, with movies and movie box offices exploding in 2021 after a whole year of impact. We see that once this so-called spiritual experience or spiritual demand or entertainment demand breaks out, it will not only affect the online, but also recover more online and offline in 2021, which is also an inevitable phenomenon in the consumption composition and changes of any country like China. Therefore, We Fengrui will be optimistic about these industries that have been snubbed for several years.
During 2020, the new generation of cosmetics representative Perfect Diary was listed in the United States with a market capitalization of $10 billion. The performance of Perfect Diary in the entire capital market in 2021, that is, the capital market finally accepts perfect diary as a reflection of how much market capitalization it is, may also determine whether these consumer brand startups that have received investment will continue to be hot in 2021, or will correct some bubbles.
If the capital market has changed, including the model represented by the perfect diary, if there is a change in judgment, maybe the bubble will burst a little, or everyone's valuation will be affected.
<h2>China's foreign trade e-commerce competition, intensified differentiation, or the emergence of giant companies</h2>
In the last 4 months of 2020, there is also a very big hot spot in investment, that is, the foreign trade e-commerce we are talking about.
Foreign trade e-commerce in China has also experienced several generations of development, simply put, in the past year, because the global supply chain China recovered the best, China is large, so China has become the main body of the supply chain that supports global demand. On this basis, and because international travel is limited, everyone has to solve the problem by not meeting or the form of foreign trade e-commerce. Therefore, in the second half of last year, especially since August, China's foreign trade has grown rapidly, and e-commerce in foreign trade has grown at a higher speed, which has caused foreign trade e-commerce to become the hottest investment area in the past few months.
But maybe this industry will change a little bit this year.
The first reason is that with the intervention of vaccines or other control methods, including most of the world's moderately developed countries are mainly in the northern hemisphere, so we think that perhaps from May and June 2021, the global supply chain will begin to recover. In the second half of last year, China's supply chain, as the only large-scale supply chain that is almost stable, may be dispersed to support global demand, and perhaps everyone will start to distribute global procurement again.
Therefore, foreign trade may not necessarily be like everyone speculates that "this year will still maintain ultra-high-speed growth", of course, there is growth, I believe it is certain.
The second reason, last year's foreign trade e-commerce was produced because people can not meet and communicate, can not travel internationally, on this basis, it has produced another effect is that many of the original offline international trade traders have begun to do e-commerce on the Internet, because the number of people doing e-commerce on the Internet is very much more in China than before. They are either forced to go online, or actively seek development on the Internet, of course, including many practitioners of the Internet who have entered the industry. So the result is that the total supply of foreign trade e-commerce at this end of China has increased a lot in the past year.
After the global supply chain is restored, the demand will be redistributed globally, although China will still grow, but because the supply has increased a lot online, so it may be that this year China's foreign trade e-commerce competition will become much more intense than last year. Even if there is overall growth, it may not be easy for each individual startup, and it may begin to differentiate and develop. We wait and see, I hope that there are a lot of China's excellent foreign trade e-commerce, including brand foreign trade e-commerce in this cycle, can grow into a new representative of China's foreign trade or Chinese brands of listed companies or big Macs.
However, the foreign trade e-commerce industry as a whole should continue to be good. Because since last year, foreign trade e-commerce has begun a high-growth trend, and buyers and sellers are accustomed to going online, and the penetration rate of e-commerce in developed countries has increased greatly in the past year's epidemic. Taking the United States as an example, the e-commerce penetration rate reached 21.3% in 2020, an increase of more than 5% year-on-year, which is unprecedented.
<h2>The next generation of super unicorns is being nurtured in current startups</h2>
There is also the last consumption phenomenon related to Internet traffic. Kuaishou and Douyin, two huge companies that represent new traffic and new Internet media, have been listed or heard that they are ready to go public, and include the excellent stock performance of B Station in 2020, as well as the return to Hong Kong listing is hotly subscribed. We boiled these phenomena down to a conclusion: whether they were created 10 years ago, 7 years ago, or 8 years ago, this wave of new video and Internet startups has grown into super unicorns, because they are mostly tens of billions of dollars or nearly hundreds of billions of dollars of listed companies, which means that this era has reached a high point in the first stage.
Historically, every time this new giant platform goes public, it usually means that the next generation of platforms is being nurtured among startups.
Taking the United States as an example, when Google is in the capital market, Facebook may have begun to be born and initially developed. At the time of WeChat's peak, perhaps the Kuaishou and Douyin we just talked about have entered their early stage of development. In that sense, when Douyin, Kuaishou, and B stand in the capital market emerge, a similar situation may occur in the new traffic platform and new Internet application platform that are the most concerned in consumer Internet investment.
Of course, in the past year or so, the new Internet consumption platform that has landed on the capital market has obviously not only been Kuaishou, nor has it been the former B station, but also includes the US group and so on.
These from the last cycle of mobile Internet development, the first cycle of the new Internet platforms, since they have landed in the capital market, and are more than 100 billion or tens of billions of dollars in market value, it is likely that the next generation of Internet platforms will begin to brew, whether it is related to social, media-related, or related to other services or transactions we need, we guess that in 2021 they should begin to emerge.
So, from our point of view, when everyone thinks that the Internet has no platform opportunities, because these already very huge platforms have landed on the capital market one after another, occupying enough time among users, they are like day in the day, but instead or in the past 20 years of Internet development, it has proved that each round of platforms has begun to go public, and is more hotly sought after and recognized by everyone, usually when the next cycle of platforms begins to be born and develop silently.
Now that we have this understanding, Feng Rui hopes to have such an opportunity to find a new platform for the next Internet or the next generation of the Internet. Where they are, what they look like, what problems they solve, of course, this is also something we can wait and see about consumer investment.
The above is Li Feng's wonderful views, replay please log on to the Wall Street Insider APP to watch, and there are more summit guests to explain how to find investment opportunities in the current global market of the earthquake.
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