**: China ** newspaper.
China** reporter Wu Jun.
Entering 2024, a number of foreign-funded institutions have expressed optimism about investment opportunities in the Chinese market and are actively deploying. Recently, Fidelity International, a public offering of Fidelity International, held a "2024 Investment Outlook" strategy meeting in Shanghai, where Zhou Wenqun, manager of Fidelity, and Cheng Hao, manager of Fidelity Fixed Income, expressed their views on the macro economy at home and abroad, the trend of the bond market, and the investment direction of concern.
Fidelity** believes that after three years of adjustment, the valuation of the A** market has fallen to a historical low, and the downside risk of the market is limited. As corporate earnings growth is expected to pick up, policies are active, and the overseas environment is loose, the market is expected to stabilize. Optimistic about high-dividend, globally competitive overseas companies, smart phones, semiconductors, automotive electronics and other growth sectors.
At the same time, in the Sino-US interest rate gap contraction, foreign capital allocation, real estate policy force, loose monetary environment, the bond bull market is expected to continue, strategically still look at the long term, but the short-term rhythm should be prudent timing, the strategy is more focused on credit qualifications and good liquidity varieties. In terms of investment direction, the valuation of short-term credit bonds of 1-2 years is attractive, and appropriate credit sinking can be done.
*Jun has carefully sorted out the content of the strategy meeting for your reference.
Zhou Wenqun: A-share earnings growth is expected to pick up.
Optimistic about high dividends, overseas companies, growth sectors, etc.
Looking forward to the macro environment in 2024, Zhou Wenqun, manager of Fidelity, said that more attention will be paid to policy force, and it is expected that monetary policy will remain relatively loose this year, and fiscal policy will be appropriately advanced. In the macro environment with a clear "policy bottom", the market will wait for more detailed rules to be implemented.
She further said that some of the major policy nodes last year, such as the ** Politburo meeting on July 24, the change in the real estate policy of "recognising housing but not loans" at the end of August, and the trillion national bonds at the end of October, had a great impact on real estate and economic growth. In addition, on the fiscal and monetary side, there are also certain interest rate cuts, as well as supportive policies for the capital market, such as stamp duty cuts. "There is a time lag between the resonance of policy and the market. Now that the policy direction is relatively clear, entering 2024, it is necessary to pay attention to the implementation of the policy and the specific implementation of the industry. ”
For the equity market, Zhou Wenqun believes that after three years of adjustment, the downside risk of the market as a whole is relatively limited. At the same time, the third quarter report of A-shares last year showed that the overall earnings growth rate bottomed out. If the follow-up stimulus policies are appropriate, it is expected that the growth rate of A-share earnings is expected to rebound to a high-single-digit level from a low base this year.
In addition, the situation overseas has changed greatly compared to 2023, and the overseas interest rate hike cycle is over, and it is expected that the first interest rate cut may occur in the second quarter of this year. Moreover, the overseas destocking is nearing the end and the transition to the replenishment stage is expected to promote the global recovery and benefit Chinese exporters.
From the perspective of foreign capital allocation, Zhou Wenqun said that at present, foreign capital is underallocated to the Chinese market, and the risk of continued outflow of foreign capital is relatively limited. Many overseas clients are interested in the Chinese market, as valuations in the Chinese market are at a nearly 10-year low, so the overall foreign capital outflow pressure has decreased this year.
These two points do not make us particularly worried about the overall valuation of the Chinese market. Peter Lynch said that it is important to maintain a certain exposure to the market because the risk is directly proportional to the return. We took the risk for three years, and what should have been a cycle of gains. Zhou Wenqun said.
In terms of investment strategy, Zhou Wenqun said that A-share investment will adopt a more balanced layout strategy and make dynamic adjustments in a timely manner. In terms of layout, there are several main optimistic ones: first, high-dividend varieties, which have very large opportunities when the economy is facing uncertainty; second, some enterprises with global competitiveness; the third is the growth sector supported by national policies and in line with economic transformation; Fourth, the pro-cyclical sector, there are also opportunities when the macro economy returns to normal growth.
Specifically, Zhou Wenqun believes that high-dividend varieties may not be a short-term defensive sector, but a class of assets that may be revalued in the long run. Because in the context of falling bond yields, high-dividend assets are scarce. Before the Fed raised interest rates, overseas experienced almost a decade of low interest rates, and high-dividend assets were the best performing assets.
At the same time, she also said that the opportunities for overseas enterprises are more certain this year, and they can dig out the best alpha. Because China's commodity exports account for about 15% of the world's first, exports include traditional consumer goods, machinery products, etc. With U.S. home sales bottoming out, residential investment has led to the growth of many manual and power tool sales; At the same time, the inventory of household appliances is close to the bottom, and with the recovery of demand in the future, there will be an incentive to replenish the warehouse; In addition, the fixed investment in the manufacturing industry in the United States is also an important direction to drive the export of China's machinery products. There is also strong demand from Southeast Asia, Europe and other countries. "After more than 30 years of development, China's construction machinery industry has become the first in many fields, with scale, cost advantages, and engineer dividends. ”
There are also growth sectors such as smart phones, semiconductors, and automotive electronics, Zhou Wenqun said that although there are cyclical factors, there is a lot of room for growth, and it is worth long-term layout. For example, after two years of decline in smartphones, theoretically the replacement cycle will have a significant rebound in 2024, and Huawei mobile phones will return strongly in the second half of last year, bringing many new features, which is expected to drive the wave of consumer replacement; The localization rate of semiconductor equipment is a very important investment direction; In addition, when the penetration rate of new energy vehicles in China is close to 35%, new functions such as automotive electronics, including intelligent cockpit, automatic driving, and human-vehicle interaction, will be greatly displayed, which will have a good impact on some parts and software companies.
Cheng Hao: The constraints of the external environment on the bond market have eased.
Bonds will remain in a bull market in 2024.
Talking about the bond market, Cheng Hao, manager of Fidelity Fixed Income, said that the external market environment in the second half of 2023 will be a constraint on the domestic RMB bond market, but this factor will be greatly alleviated by 2024. He said that the U.S. inflation rate may show a downward trend in 2024, the Fed will enter a cycle of interest rate cuts, and as the U.S. Treasury interest rate is lowered, the spread between Chinese and U.S. Treasuries will shrink.
At the same time, he believes that the depreciation pressure on the RMB exchange rate will ease in 2024, which is conducive to a certain downside of the domestic monetary policy.
In addition, the situation of foreign holdings in the Chinese bond market has also changed, Cheng Hao said, before the US Treasury bond yields became higher than the RMB bond yield, foreign bond holdings were downward, reversing the long-term upward trend from 2014 to 2021, but with the increase in the expectation of US interest rate cuts, the interest rate differential between China and the United States has narrowed rapidly, and foreign investors can see a continuous increase in Chinese bonds in the past four months.
At the same time, real estate trends have a great impact on the bond market. Fidelity believes that the demand for real estate will decline significantly after peaking in 2021, and the actual annual sales volume will return to the range of 1.1 billion to 1.2 billion square meters, Cheng Hao said. "Looking ahead, we believe that after a sharp downturn in real estate over the past two years, sales are expected to return to a more neutral position in terms of actual demand. However, in the medium to long term, as the population growth trend slows, its demand will remain relatively weak and slowly declining. ”
From a medium and long-term perspective, there will be a certain adjustment of the economic structure, Cheng Hao said that in the future, the negative drag effect of real estate on the economy will be reduced, the proportion of real estate investment in the entire fixed asset investment will decline, and the year-on-year growth rate of fixed asset investment in high-tech industries will be maintained at a high position. "We believe that in the short term, the amount of credit pulled by the high-tech industry will not be able to fully compensate for the decline in real estate. In the process of this switch, the growth of social credit may remain in a relatively weak position. ”
Cheng Hao bluntly said that the interest rate curve of bonds is very flat now, and the long-end interest rate is close to the short-end monetary policy interest rate. "We believe that the short-term monetary policy should first open up a certain downside, which is conducive to the downward trend of long-term interest rates, so that the financial industry can better support the real economy. After multiple rounds of interest rate cuts in 2022 and 2023, we believe that further interest rate cuts in 2024 are also very necessary. ”
At this year's two sessions, we pay attention to some major policy statements, such as expectations for short-term growth and real estate easing, which will affect bond yields in the short term. Cheng Hao said.
In general, Cheng Hao also said that it is important to adjust the economic structure in the process of maintaining a stable economy. Monetary easing must take precedence over the growth of credit. Therefore, the accommodative monetary environment in the future is conducive to maintaining a relatively strong bond market. "We think the bond market will still be in a relatively good bull market in 2024. ”
In terms of the credit bond market, Cheng Hao said that Fidelity does not believe that there will be a particularly large public bond default event in the urban investment market in 2024. With the implementation of the package of debt policies, it has played a good role in mitigating the risks of urban investment bonds, and it is expected that the overall risk of the industry is still controllable.
In 2024, we do not expect to have a particularly large number of defaults, but the liquidity of urban investment is tight, and the possibility of some public opinion on interest or non-public bonds is still relatively high. We will pay more attention to such risks, and if there is a certain fluctuation in the ** of urban investment, it may be a better time to enter the market. In terms of investment, it is still necessary to choose some varieties with better qualifications. Cheng Hao said.
Editor: Xiao Mo.
Review: Muyu.