Outlook
Domestic: Epidemic prevention enters the normalization stage, the focus of the government is expected to tilt from "zero COIVD" epidemic prevention to "stabilizing the economy", and the economy is expected to bottom out and rebound.
In May, the epidemic in Shanghai and other places was gradually brought under control, and the resumption of work and production has begun in early June. With the epidemic prevention entering the normalization stage, the government's focus is expected to return to the "stable economy", which is verified by the recent speech of the Prime Minister at the national teleconference on stabilizing the economy. The Prime Minister pointed out that the current economy has been severely impacted, and development is the foundation and key to solving all problems in our country. We must seize the time window, strive to bring the economy back to the normal track, and put stable growth in a more prominent position. Subsequently, local governments indeed actively introduced policies to stabilize investment and promote consumption, which is a further verification. Therefore, with the resumption of work and production superimposing the government to underpin the economic market, we have reason to believe that the domestic economy should bottom out and will enter a recovery stage.
Overseas:
Fighting inflation remains the most important objective of the Fed, but the moment when tightening has the largest marginal impact on liquidity and valuations has likely passed.
Fighting inflation remains the primary goal of the Fed and the government, so monetary tightening is far from over, and the Fed will begin to tape in June in addition to continuing to raise rates. However, considering that 1) The market is already ahead of the Fed, reflecting expectations of a rate hike, with the 10-year Treasury bond yield exceeding 3% at one point; 2) Although the tapering has started in June, the supply and demand situation of US bonds is expected to be better than that in the first half of the year, since the demand for bonds issued in the second half of the year fell sharply due to the decline in the fiscal deficit, which offsets the increase in supply caused by tapering. In addition, a slowdown in the U.S. economy will also restrain interest rates from rising further; (3) At current, the average valuation of the S&P 500 is lower than that of the past five years, only slightly higher than the value after 2000. Therefore, the greatest impact on the valuation of the interest rate rise may have passed, and the fundamental factors will have a larger impact in the future.
Investment Ideas & Market Outlook
Hong Kong stocks: still too undervalued, maintain a bullish view
The view on Hong Kong stocks is unchanged. As an offshore market, Hong Kong is susceptible to greater volatility due to various factors. But the companies we invested in are all Chinese companies with valuations below historical averages and are significantly undervalued even in a global view, making them the most attractive investments at present.
US stocks:
Despite the recently increasing macro disturbances, U.S. stocks have better corporate governance, and we can find many opportunities with strong competitive advantages and the ability to expand globally. There are a few companies with strong fundamental resilience and reasonable valuations after taking macro disturbances into account.
Several main directions we are currently focusing on:
Investment opportunities in overseas cloud computing, bullish on the segments serving medium and large enterprise customers and with a good competitive landscape.
Structural growth opportunities in semiconductors, primarily bullish on advanced semiconductors.
Investment opportunities in travel service platforms under overseas Reopen.
Domestic service industries, investment opportunities that have long-term growth but are seriously undervalued such as property management.
Other directions are still being explored and we will be happy to include those that meet our criteria.
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