1. Investment Review​

The total position decreased slightly in March, but the overall position is still high. Focus on investing in the Internet, semiconductors, cloud computing, consumption and financial technology. In March, technology-related investments were reduced, especially humanoid robots and semiconductors.
Due to the slower-than-expected progress of AI applications and the impact of tariffs and geopolitics on upstream chip manufacturing, the investment ratio has further declined. Currently, the proportion of AI investment is around 20%, and the main directions are still AI applications, chip manufacturing leaders, end-side AI and robots. The proportion of overseas investment is 70-80%.

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2. Market Review and Outlook

The United States has reignited a “tariff war” in its second round, aiming to rebalance production, trade, and debt. This move has ended the decades-long trend of global trade liberalization. Going forward, global trade may shift from a paradigm prioritizing efficiency to one balancing security and efficiency. The impact of this “tariff war” on markets is difficult to predict. However, through rational analysis, after the significant adjustments seen so far, it’s more likely that the U.S. stock market is not far from its bottom. In a less probable scenario, if the “tariff war” spirals out of control, it could trigger a more substantial market correction.

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Looking back at recent history, instances of major market declines—such as the Nasdaq dropping over 50%—occurred during the 2000 dot-com bubble and the 2008 financial crisis. Both were cases of uncontrolled situations (the 2000 bubble burst due to the destruction of tech companies’ fundamentals combined with excessive speculation, while 2008 was a liquidity crisis triggering the collapse of rigid balance sheets). In other cases, market declines have been more manageable, with corrections typically ranging between 25-40%, driven by revisions to earnings forecasts and valuations. These declines were relatively contained due to negative feedback mechanisms: when interest rate hikes went too far, rate cuts followed once inflation subsided; during the pandemic, when economic activity stalled, fiscal stimulus to citizens actually boosted purchasing power.

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Currently, the Nasdaq has fallen nearly 25% from its peak. Unless the situation spirals into an uncontrolled state, the market may not be far from its bottom.

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​The “tariff war” is more likely to move toward negotiations rather than escalate into a full-blown conflict. 

The U.S. is determined to rebalance production, trade, and debt, but the overall result may be a greater emphasis on security at the expense of efficiency. This could hurt investment returns (turnover efficiency, utilization rates, and profit margins). If consumer wallets remain unchanged, declining global trade efficiency could lead to higher product/service prices, ultimately damaging demand. Alternatively, if prices remain stable, companies and supply chains might absorb the costs internally, reducing ROI.

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Structurally, surplus countries will suffer, as will those that previously benefited from globalization’s expansion (choosing the lowest-cost, most efficient regions for production). Low-income groups will also be hit. The U.S., relatively speaking, is in a better position: apart from high federal government leverage, household and corporate leverage are very healthy, providing resilience to withstand shocks. Moreover, while economic efficiency declines, there’s hope that tax cuts, deregulation, and manufacturing reshoring could offset some losses.

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Surplus countries, however, face much greater risks: either high household/macro leverage (e.g., South Korea, Japan, China), where falling asset prices could trigger debt risks, or high dependence on exports and foreign capital with significant external debt (e.g., Southeast Asia), where coping mechanisms against tariffs are limited. Whether through currency depreciation or domestic deflation, these could spark capital outflows or sustained asset price declines, potentially leading to default risks.

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In summary, surplus countries face deflationary pressure and greater debt risks, making them less able to weather turmoil. The U.S. will also take a hit but has relatively better resilience. From this perspective, the likelihood of countries uniting to confront the U.S. head-on, escalating the tariff war, seems low. Additionally, the U.S. has internal constraints: if tangible results aren’t achieved quickly and citizens’ lives are significantly harmed, the Trump administration’s consensus could weaken, reducing its resolve to push forward aggressively.

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If the “tariff war” avoids escalating out of control, its market impact might resemble the initial shock of the 2020 pandemic: a sharp demand hit followed by a rapid recovery driven by loose liquidity, fiscal handouts to citizens, and the gradual resumption of economic activity. However, unlike the pandemic—when governments globally distributed cash, boosting purchasing power—this time, purchasing power is likely to remain impaired overall.

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Risks Appear Manageable Based on Current Pricing

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The market is currently priced at 20x PE, corresponding to a risk-free rate of 4% and a risk premium of 4.4%. This risk premium is at the lower end of the 2000-2024 range but is notably higher than the previous 3.7% (a historically low level) and still below the 2000-2024 average of 5%. On one hand, the rising risk premium reflects downgraded growth expectations and declining ROIC. Even if the risk premium rises further to 5%, a simultaneous drop in the risk-free rate could limit downward pressure on valuations. A further 10% drop might be the extent of it.

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Based on this analysis, we will closely monitor developments, actively assess impacts on industries and companies, and seek opportunities. AI remains a key structural opportunity we aim to seize. Currently, AI applications are primarily focused on simple tasks like Q&A, but if more complex applications—such as Agents—begin to scale, the economics will fully support it, unlocking opportunities several times larger. Compared to this potential, short-term market beta may pale in significance.

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Investing always involves looking forward from the current position. The long-term trajectory of global economic growth and technological progress remains intact. The current conflicts, through trade pattern restructuring, will eventually form a new paradigm. Within the next six months to a year, we may gain clarity on the situation. Companies that avoid damage or benefit structurally in the long term will still present strong opportunities post-rebalancing, while those structurally impaired should be decisively abandoned. If you’re confident certain companies will thrive long-term, now could be a good buying opportunity.

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Even in a crisis as severe as 2008, after a 30% market drop, opportunities far outweighed risks. As Churchill said, “Never let a good crisis go to waste.”

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Where Are the Opportunities?

This year, we will more actively seek opportunities from different alpha sources, focusing on new areas: AI, robotics, new consumer trends, fintech, and emerging markets:

• AI is a significant source of long-term alpha. As human value increases, AI, by enhancing human efficiency or even replacing humans, will also see its value rise. This is just the beginning, with a very high ceiling.

• The pursuit of health and self-focused lifestyle changes will continuously present consumer opportunities.

• Emerging investment opportunities in fintech.

• Opportunities in emerging markets (Latin America, Asia-Pacific, etc.).