Weibin Lin

As the policies aiming at promoting macroeconomic recovery gradually manifest their effect, China's economy has continued the growth momentum. Industrial production is steadily picking up, with enterprises improving their revenue and profits, as well as marginal improvements in quantity, price, and profit margins. The overall performance of A-share companies has also stabilized and rebounded in the third quarter. Based on historical experience, during economic improvement, equity assets often demonstrate better performance. This can be attributed to both upward revisions in profitability and valuation recovery after an increase in investor risk appetite. Currently, the profitability and valuation of A-share core assets are at a bottom-up recovery stage, making them worthy of increased attention and investment. Additionally, the recent Central Economic Work Conference held in Beijing emphasized the need to strengthen financial support for new technologies, new sectors and new markets, as well as accelerate the cultivation of new growth drivers and advantages. Therefore, technology-driven assets with high growth potential are also worth considering.

The specific targets we can focus on are the representative indices of core assets and hard technology, such as the CSI 300 Index (000300) and the STAR 50 Index (000688). The CSI 300 Index consists of the most representative 300 securities with large scale and good liquidity in China’s A-share market, reflecting the overall performance of listed companies' securities in the Chinese A-share market. The STAR 50 Index is composed of the 50 securities with large market capitalization and good liquidity from the Shanghai Stock Exchange STAR Market, reflecting the overall performance of a group of market-leading tech-innovation companies.

Yaping Pang

Since early October, the yield spread between China and the United States has continued to narrow, and investors have been engaged in trading over available shares in the stock market, resulting in a new low for A-shares this year. By the end of the month, both macro and micro factors had shown marginal improvement, and A-shares experienced a "V"-shaped rebound. Looking at the overall situation, there will be three factors that will jointly affect the strength of the market rebound in the near future: domestic economic fundamentals, domestic policies and overseas liquidity. Firstly, on economic fundamentals, the GDP growth in Q3 exceeded expectations, and there have been turning points in production, consumption and credit. Apart from the weak real estate sector, other major sectors have shown positive signals. The subsequent economic recovery and pricing process are worth looking forward to. Secondly, on domestic policies, there are two aspects to consider. The first is the strength of policies to stabilize economic growth, and the second is the sustainability of capital support for A-shares. Currently, we can already observe that the continuous efforts of these two policy aspects have boosted investor sentiment in the overall market. Lastly, on overseas liquidity, the September decision by the US Federal Reserve to pause interest rate hikes for the rest of the year is the baseline scenario. At the same time, the trend of increased leverage in the US government is unlikely to continue, and the supply and demand for US bonds are expected to return to balance. There is a greater possibility of a fall in US bond yields after the peak of 5%, which could boost sentiment and valuation in the A-share market.

Previously, large outflows of foreign capital significantly restricted the A-share market. However, if overseas risks are alleviated and domestic policy expectations stabilize, there is a possibility of a significant inflow of foreign funds in the future, particularly into core assets.

In summary, in November, on the basis of investment value, we should be optimistic about the broad-based cyclical assets represented by the CSI 300 Index.

Haiyan Yu

Recently, the A-share market has shown positive changes and investor expectations have gradual improved. In the previous period, the market has been weak, with external factors such as monetary tightening in major countries and increasing geopolitical risks negatively impacting investor risk appetite. The domestic market has not reflected the marginal improvement in the economy since the third quarter. Recently, Central Huijin Investment’s purchase of ETFs and the issuance of special Treasury bonds beyond market expectations have helped to reverse investors’ expectations. Historically, Central Huijin Investment twice announced the purchase of ETFs, both when the A-share market faced certain liquidity risks and negative liquidity situation. In terms of effectiveness, after the two purchases, the index performed well in the following three months, effectively supporting market liquidity and stabilizing investor expectations. The valuation risk in the current A-share market has been released to a large extent, with overall valuation falling to historically low levels. For example, the P/E ratio of ChiNext Index has dropped to near its historical lowest level.

Overall, with the accumulation of positive factors at current stage, market expectations are expected to gradually improve. The periodical bottom has already appeared and the subsequent rebound will be driven by new policy prospects and a correction of previous pessimism. There is no need to be overly pessimistic about the future performance of A-shares, as the downside potential is limited. The market currently offers more opportunities than risks and we can focus on periodical and structural opportunities in Q4. High-beta sectors that have been oversold or sensitive to rebound, such as healthcare, internet and new energy, are expected to be the first to benefit.

Bing Fan

The performance of the stocks of China Internet companies listed overseas is mainly influenced by macroeconomy, corporate fundamentals, global financial conditions, industrial development at home and abroad, regulatory policies, etc. Firstly, the recent announcement of the issuance of one trillion special Treasury bonds and the budget adjustment plan of the Central government have sent positive signals, arousing expectations for fiscal expansion and macroeconomic recovery, thereby driving overall China asset valuation to recover marginally. Secondly, the total retail sales of social consumer goods in September and the user and order of major e-commerce platforms during the Double 11 shopping festival have shown significant year-on-year growth, indicating further recovery in domestic consumption demand. Thirdly, in late October, US Treasury yields reached new highs, with the 10-year rate surpassing 5% intraday for the first time since 2007, creating significant pressure on global capital markets. Lastly, the recent reduction of Hong Kong stock trading stamp duty to 0.1% has lowered market transaction costs, sent positive policy signals, boosted investor confidence, and also brought benefits to China internet companies listed in Hong Kong. Currently, the valuation of China Internet companies listed overseas is still low, offering allocation and trading value.

The constituents of the CSI Overseas China Internet 50 Index (H30533.CSI) are the top companies among overseas-listed Chinese internet companies in terms of total market value and liquidity, representing the leading enterprises in China's digital economy and platform economy. With the stabilization of China's economy and the recovery of consumption, China internet companies are expected to sustain healthy development. The CSI Overseas Chinese Internet 50 Index products are expected to become important tools for sharing investment opportunities in China's technology and internet industry.

Xi Cheng

At present, the fundamentals of semiconductor and artificial intelligence sectors, which are the main weight industries of the STAR 50 Index, are gradually improving. Firstly, global semiconductor inventory is at historically low levels, with significant room for restocking in the future. At the same time, global and Chinese semiconductor sales have started to rebound, and the development of artificial intelligence will continue to drive industry demand. Secondly, the commercialization of artificial intelligence overseas has accelerated, not only driving rapid development of related industry chain, but also boosting industry sentiment. Finally, the rapid increase in the localization rate has made the growth of related listed companies more certain and sustainable.

In October 2023, the STAR 50 Index continued to fluctuate at the bottom, reaching a historic low of 840 points. By the end of October 2023, the price-to-earnings ratio (TTM) of the index was only 41 times, at a historic low since the index was listed. The recent Central Financial Work Conference stated that it will "strengthen financial support for new technologies, new sectors, and new markets, and accelerate the cultivation of new driving forces and advantages", which is expected to boost market risk appetite for technology sector and growth sector.

In the long run, the STAR 50 Index (000688.SH), based on its positioning to focus on the hard technologies such as next-generation semiconductors, artificial intelligence and biotechnology, is expected to become an important tool for sharing China's technological industrial development.