**: The Paper.
In 2023, the A** field will be significantly adjusted due to many factors. Entering 2024, under the release of intensive policies, the A-share market will continue to be **, when will the bottom come? What incremental funding is expected to come to the rescue? What is the attitude of international investors towards Chinese assets? What are the factors that are more important for Chinese assets?
Recently, Meng Qiao, Director of Investment Strategy of Fidelity**, was a guest on the 2024 New Year's Eve market outlook program of The Paper's "Spring Breeze Blows Again" - Chief Connection, bringing analysis and outlook on the above related issues.
When it comes to the considerations that international investors pay the most attention to in the A** market, Meng Qiao believes that the first is the policy, the second is the recovery of fundamentals, and the third is the comparison between the domestic economic situation and the overseas economic situation.
Talking about the specific layout, Meng Qiao said that on the whole, A-share investment will adopt a more balanced layout strategy and make dynamic adjustments in a timely manner.
In terms of layout, first of all, we are bullish on high-dividend varieties with greater certainty, including energy, utilities, transportation, banking and telecommunications. Meng Qiao said that he is also optimistic about Chinese overseas enterprises with obvious global competitive advantages, such as home appliances, tools and construction machinery industry leaders, who are gradually developing from local enterprises to global enterprises. At the same time, considering the new cycle demand brought by emerging technology products such as mixed reality (MR), the replacement cycle brought about by Chinese smartphone brands to regain market share, and the first stage of development of automotive intelligence, growth sectors in line with the direction of economic transformation such as consumer electronics, semiconductors, and automotive electronics are also worth paying attention to.
In addition, as the economy and earnings bottom out, Meng said that according to the pace of recovery, he will also choose opportunities to allocate pro-cyclical sectors with low valuations, including consumption, materials and industrial sectors.
Expect incremental funding.
Looking back on the capital side in 2023, Meng Qiao said that in 2023, in a relatively tortuous market trend, we can see a lot of incremental funds entering ETF trading, which is a positive information, proving that in addition to the volatility brought by the ETF itself, investors are really paying attention to this aspect of trading, whether it is the broad base of A-shares or the industry. In Meng Qiao's view, this shows that institutions and individuals are actually considering **, believing that the current valuation is getting cheaper and cheaper. At the same time, the flow of new hair** and foreign capital will indeed be under pressure in 2023.
Entering 2024, we believe that foreign investors have already underweighted A-shares, so we are expected to get more attention from foreign funds in the process of different cycles of the economic environment. At the domestic capital level, if this year's economy finds its own power point, and the follow-up policies continue to land, it is actually expected to see the end of the economic bottoming out and the process of rebounding, then the public offering of new ** may usher in a small spring. At the same time, the current overall ** of the institutional side is still low, and there is a relatively large space to increase allocation, so the institutional side may also become an important ** for incremental funds entering the market. Meng Qiao said.
Foreign investment is expected to return gradually.
So, what is the attitude of international investors towards Chinese assets? What do they value more about Chinese assets?
Meng Qiao believes that China's fundamentals are actually a situation that everyone is more concerned about, and this is a process of changing expectations. China's economy is undergoing a process of adjustment, emphasizing high-quality development, and it is inevitable that some painful periods may be experienced in some policies or industries in the process of shifting gears. For international investors, they also need to use a new perspective to understand and recognize China and the direction of China's future industry changes and development.
For example, Meng Qiao said that in the past 10 or 15 years, investors have seen the rapid development of China's real estate industry and the entire industrial chain brought about by its development. However, when the dependence on the traditional economy such as real estate is decreasing, and high-tech industries such as advanced manufacturing are taken as the future development direction, it may not be comparable with real estate in these industries at present.
However, there are many forward-looking policies on the domestic policy side that can help these industries, and we hope to help overseas investors, so that they can more truly understand the reasons behind the changes in the entire market, as well as some industries and tracks with strong endogenous growth momentum in the future, and find investment opportunities from them. Meng Qiao said.
Meng Qiao further said that cheap should not be the reason why overseas investors are optimistic about China, cheap may be the reason why everyone will look at it, but it should not be the reason why everyone will invest, and it is still necessary to look for some sustainable industries and opportunities in the future in the change of momentum.
Meng Qiao pointed out that policy drive is quite crucial, especially how to exert force in the economy, which can really help the recovery of investment, consumption and confidence. At the same time, we can also see that some positive factors are accumulating, from the perspective of the New Year's GDP target finalized by each province, the vast majority of provinces are not less than 5%, if it can reach such a level, A-shares are expected to achieve a high single-digit profit level growth under the state of low base, which will be a fundamental boost. In addition, the end of the Fed's interest rate hike cycle and the expected start of the degradation cycle, the liquidity of the overseas environment has improved significantly, which is also a positive asset class for emerging market countries, including China.
Policy governance, earnings growth is expected to increase, and valuations are at historically low levels, which are actually the main considerations for foreign investment to return to China, or to value China and invest in China. Meng Qiao concluded that many of Fidelity's overseas ** managers came to China in January to participate in the survey of listed companies, which not only showed their interest in Chinese assets from the investment side, but also represented that the customers behind them may be paying attention to Chinese assets.
Bullish on high-dividend varieties.
In terms of layout, first of all, we are bullish on high-dividend varieties with greater certainty, including energy, utilities, transportation, banking and telecommunications. In December last year, the China Securities Regulatory Commission (CSRC) introduced a series of new rules to encourage listed companies to pay dividends, buy backs, and enhance shareholder returns, laying a good foundation for enhancing the long-term attractiveness of A-shares. Meng Qiao said.
For the high-dividend sector, Meng Qiao pointed out that these listed companies have a stable balance sheet and are willing to give back to its shareholders, and their own quality is very superior, and the future is also relatively stable, so that the two parts bring income to investors, and will bring better returns to investors in the current stage of low interest rates or falling interest rates for a long time.
Secondly, Meng Qiao is also optimistic about Chinese overseas enterprises with obvious global competitive advantages, such as home appliances, tools and construction machinery industry leaders, who are gradually developing from local enterprises to global enterprises. At the same time, considering the new cycle demand brought by emerging technology products such as mixed reality (MR), the replacement cycle brought about by Chinese smartphone brands to regain market share, and the first stage of development of automotive intelligence, growth sectors in line with the direction of economic transformation such as consumer electronics, semiconductors, and automotive electronics are also worth paying attention to.