Jie Guo

The current market consensus is excessively pessimistic about the future economy. However, based on past experience, both the economy and the stock market tend to grow within cyclical fluctuations. In the real world, things usually oscillate between "quite good" and "not so good," but in investment sector, people's perceptions often swing between "perfectly flawless" and "despairing," leading to overreaction and then corrections.

Over the past two years, investors have been accustomed to viewing the economy from a negative perspective. From the market pricing of stocks, this pessimism seems to have become the consensus. However, past experience has told us that when market participants become excessively pessimistic, the pendulum is going to swinging back. Although we don't know exactly when the pendulum will swing back, what is certain is that the market's pendulum has already swung past the equilibrium point and is   approaching the extreme position. This judgment is crucial for our investment decisions. At present, the market has already priced in sufficient pessimistic expectations. At this point, the actual risks borne by investors may not be as significant as they appear, while the potential returns may be much more substantial. This is what we often refer to as an asymmetric opportunity of risk and reward.

The current price-to-earnings (PE) ratio of the representative CSI 300 index is only around 11 times, reaching the low percentile of historical valuation distribution at 14%. Compared to the current yield of around 2.7% for 10-year government bonds, the equity assets appear attractive. The risk lies in the occurrence of significant systematic risks leading to a sharp decline in corporate profits, but we assess the probability of such risks to be quite low.

As a notable investor once said, "Every great investment begins in discomfort." The current market sentiment may indeed provide such an opportunity.

Jiawen Yang

In the short term, the market still lacks confidence, while the dividend factors remain stable. Unless there is a significant downside risk in the market at such a low valuation, the allocation value of the dividend factor will decrease significantly.

In recent months, short-term market opportunities have been increasingly centered on zero-to-one themes and “chips gaming”. Simultaneously, the market has started to develop a consensus on factors such as economic growth, population aging and international expansion of corporations.

Recently, I have heard many voices suggesting a need for more balanced industry allocation and a bottom-up approach towards portfolio construction. This sentiment is in line with the current market valuation and the historically low stock-bond yield spread, indicating that the market is in a pessimistic position. However, we believe that "Bull markets are born on pessimism, grown on scepticism, mature on optimism, and die on euphoria".

Hai Lin

The market has once again approached a critical position where the prevailing view suggests that the market has reached its bottom. Fundamental investors believe that the economy will eventually rebound from the bottom under policy stimulation, while technical investors also see the market reaching an important support level for long-term upward trend. However, there is confusion and contradictory opinions regarding short-term predictions, and there is no consensus on the main direction of a rebound or upward movement. This actually reflects the early stages of bottom formation for both the economy and the market where momentum is gradually building up, and market participants' views have not yet converged. The main direction of the subsequent stage of economic and market development remains unclear.

I believe that the recovery of China's economic growth has reached a turning point towards the upside. In terms of industrial value-added data, it has deviated significantly from its long-term growth trend in a downward direction, and this deviation is quite substantial. Such a notable deviation has occurred only twice since 2000. If we believe that China's future is not in a downward trend, even if it is just a period of moderate to low-speed growth, the current deviation has significant room for correction. Every economy has intrinsic drivers to revert towards its long-term growth trend and possess strong recovery and self-correction capabilities. Moreover, I firmly believe that China's future is not limited to moderate to low-speed growth. In fact, the improvement in economic data over the past few months has already shown signals of a turning point. On the other hand, the growth trends of other major economies in the world may approach the peak of this current recovery cycle. Against this background, the global asset allocation landscape will adjust accordingly.

How to address the fall of growth rate? How to identify the next growth drivers? How to adapt to changes in demographic structures? And how to overcome the middle-income trap? These are all important questions that everyone must seriously consider. We need to think with long-term vision about the areas that can continue to enhance efficiency in manufacturing. Efficiency improvement and cost saving will enable us to enjoy income growth while maintaining China's global competitiveness in manufacturing. At the same time, we pay more attention to domestic demand growth and feel encouraged by the opportunities in the healthcare, elderly care, and affordable consumption sectors.

Jeff Li

One of the significant changes in the industrial sector in recent months is the thriving product cycles of domestically produced smartphones and automobile brands driven by innovation. In the smartphone sector, the Android industry chain, which had been in a downward trend for several years, has undergone a new round of upgrading due to the initiation of a new product innovation cycle. In the automobile sector, supported by the product cycles of state-owned automakers and favorable policies, the automotive industry has officially entered the era of intelligence centered around autonomous driving technology. While the economy is still in the process of recovery, these industries, characterized by large-scale and sustainable trends, are not commonly seen. We possess global competitiveness in both of these sectors. We believe that there are investment opportunities worth considering in A-shares, Hong Kong stocks, as well as Chinese concept stocks.

Zefan Guan

Based on the latest social financing data, the overall credit expansion has maintained a low growth rate. In October, the year-on-year growth of industrial value added increased by 0.1% to 4.6% compared to the previous month, while the year-on-year growth of social retail sales rose by 2.1% to 7.6% compared to the previous month. Internationally, following the release of higher-than-expected October CPI data in the United States, the market swiftly priced in the end of rate hikes and the start of rate cuts next year. As a result, the yield on 10-year US Treasury bonds significantly declined, leading to a recovery in overseas risk assets. Additionally, recent easing of tensions in US-China relations has slightly restored risk appetite among A-share investors, benefiting small-cap stocks noticeably. The CSI 1000 and CSI 2000 have outperformed the CSI 300, maintaining their strong performance throughout this year. From an industry perspective, the current market demonstrates distinct structural characteristics with frequent sector rotation. In terms of style factor performance, apart from the small-cap style, the volume-price, valuation, and low-volatility factors have displayed notable performance. The macroeconomic fundamentals are still in a phase of stabilizing, while the overall market volatility continues to decline. The market tends to maintain its current operating characteristics. Therefore, we remain optimistic about the short-term performance of previously strong styles. However, it is important to closely monitor the expected changes in the market's core contradictions and be prepared for potential seasonal style shifts towards the end of the year.

Zheng Xu

We are optimistic about the future of healthcare industry, and we expect the industry's fundamentals in 2024 to be significantly better than in 2023. The following are the main reasons for our positive outlook:

1. The aging population, particularly those born in the 1960s, is contributing to increased demand for healthcare services. The factors such as healthcare cost reduction have reached their limits, and there are clear policy incentives in innovative drugs, traditional Chinese medicine, and rehabilitation, etc.

2. There is a global wave of product innovation cycles, with advancements in areas such as ADC, weight-loss drugs and Alzheimer's disease drugs. Chinese companies have actively participated in this wave of innovation.

3. Following the success of CXOs, domestic medical equipment, high-value consumables, and in vitro diagnostics are embarking on the path of internationalization. Chinese companies currently have a low market share in the global market, but their products are already competitive.

4. Changes in the overseas macro environment may favor an increase in risk appetite and higher valuations for healthcare technology sectors.

In the long term, China’s healthcare industry is undergoing a transformation from domestic demand to globalization. Cost control measures and price reductions for mature products have spurred innovation and overseas expansion for companies. Excellent enterprises not only cater to the needs of Chinese consumers but also generate revenue in emerging markets and developed countries by offering cost-effective and differentiated products. We believe that vast opportunities in the global healthcare market lie ahead, and the prospects for a new round of investment opportunities in the industry are gradually becoming clear. Therefore, we maintain an optimistic outlook for the future.

Liangqi Ouyang

The technology industry has undergone significant transformations this year, and I maintain a positive outlook for technology-related assets in the medium to long term. Recent developments in both domestic and international companies indicate crucial turning points in artificial intelligence, autonomous driving, and emerging types of terminals. It is anticipated that investment opportunities in these areas will be relatively sustainable.

After a period of economic downturn, the domestic economy has stabilized and begun to rebound. Corporate profitability has exhibited signs of improvement. Combined with positive changes in the external environment, market sentiment is gradually warming up. Industries and companies that have experienced positive changes are demonstrating strong performance. The domestic technology industry has undergone remarkable shifts, and there will be numerous investment opportunities in leading companies that have achieved breakthroughs in key areas, as well as in companies with distinctive characteristics in niche sub-sectors.

Ke Peng

Recently, the market has witnessed significant divergence, with micro-cap stocks gaining momentum while larger-cap stocks, which represent the overall economy, have experienced a decline in stock prices. Given the current situation, we believe it is crucial to adopt a more proactive approach towards the market, with a particular focus on high-quality companies. On the one hand, the economic drag from the real estate sector has been largely reflected, and supportive policies have been consistently implemented. Macroeconomic data also confirms a gradual economic recovery. On the other hand, US bond yields have reached their peak, alleviating overall valuation pressures. Moreover, after three years of stock price adjustments, the valuations of the majority of high-quality companies have become relatively low. Additionally, many companies that have weathered the downturn have actually enhanced their competitiveness. Therefore, from a medium-term perspective, these companies now offer compelling cost-effectiveness.

Within the industries we focus on, according to the capital cycle investment framework, they can be classified into two categories:

1.High-quality companies that possess strong business models, competitive advantages, excellent corporate governance, and their valuations have been appropriately adjusted. For these companies, we need to employ more stringent criteria to select medium to long-term investment targets.

2.Industries with opportunities arising from supply-demand imbalances in the mid-cycle. These industries include those that have undergone significant industry cycles, with a substantial contraction in supply and approaching turning points in demand. It also includes industries where the supply may not be entirely clear yet, but there is strong potential for future demand growth, such as pharmaceuticals, electronics, and satellite communications.