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Monthly Report-202309

Updated: May 23


Market Review

The domestic economy in China faced various challenges this year, including the drag from the real estate sector, exposure of local government debt risks, and a lack of consumer confidence. Since October, the government has adopted several supportive measures, such as optimizing real estate policies and promoting the transformation of urban villages, to alleviate these issues. These measures began to show some marginal effects in September.

In the United States, the Treasury rates rose beyond expectations in Q3 amidst declining inflation, especially the 10-year Treasury rates, which increased by about 100 basis points. This reflects a stronger economic resilience than expected, with driving factors such as consumption and inventory replenishment. More profound driving forces include global industrial rebalancing, AI innovations, and robotics, which are expected to continuously benefit domestic investments and consumption in the U.S. The market has also repriced due to uncertainties regarding the delayed path of interest rate cuts and increased marginal supply due to fiscal bond issuance.


Market Outlook & Investment Strategy

Based on current policies and expectations, the chances of the economy decelerating too quickly or risks spiraling out of control have significantly decreased. However, challenges such as economic slowdown and asset-liability contraction persist in the medium to long term. Due to these, there’s a cautious approach towards domestic investment opportunities, demanding a higher risk premium in valuations and considering factors like economic growth slowdown, intensified industry competition, real estate, and local debt risks.

There's optimism towards some well-performing companies that maintain differentiation and explore new growth points, such as leading cost-effective e-commerce and coffee chain enterprises. There’s a relative optimism towards select outstanding companies due to supportive policies and reduced market expectations.

For overseas investment opportunities, there’s more optimism, expecting a situation of relatively high interest rates and a soft economic landing, making the valuation system more stable and beneficial for stock selection. From a structural perspective, opportunities are seen in technology and consumption sectors, with technology sectors like AI and cloud security having more substantial opportunities due to their innovation and growing market demands. In the consumption sector, opportunities lie in new-style chain restaurants, beverages, and niche sports brands.


Current Focus Areas:

  • AI: Viewed as the most crucial growth opportunity in the future, focusing mainly on semiconductors and software, while also paying attention to the development of other applications.

  • Semiconductors: Seeing structural growth opportunities, mainly optimistic about advanced processes and opportunities related to high-performance computing semiconductors. AI is expected to accelerate industry growth.

  • Overseas Cloud Computing: Positive outlook on investment opportunities serving large enterprise customers and in competitive niches. Combining with AI is expected to improve efficiency and user value.

  • Overseas Travel and Tourism Platforms: Investment opportunities benefiting from increased personalized demands in travel and tourism shares.

  • Consumption & Internet: Investment opportunities in sectors aligning with consumer trends, solving fundamental consumer needs, and having potential for faster growth and increased market shares.

  • Domestic Services: Services represented by professional education are still seen as having steady growth, value reassessment, and continuous dividend-gaining investment opportunities.

Other directions, including new energy, global supply chain restructuring, robots, Apple XR, and the global expansion of Chinese companies, will also be actively researched.

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