In the first half of 2024, A-shares have experienced a complex and volatile market, from a rapid bottom to a "Jedi counterattack", and then to a volatile return. During this period, the market rotation accelerated, the plates were alternately switched, and the dividend blue chips rose.
As the second half of the year begins, how do fund managers view the investment opportunities in the future? What warehouse did they transfer? … Let's take a look at the latest views↓↓↓
The digital economy industry chain with artificial intelligence as the core is expected to become the main line of the next cycle
China's industry boom / China's vision growth
Fund manager Zhong Shuai
The A-share market has partially cleared up after experiencing a rapid decline in small- and mid-cap stocks at the beginning of the year. It is expected that the market will show a volatile trend throughout the year, and there are structural investment opportunities. We believe that the current valuation level already reflects the market's pessimistic expectations for the economy. What is exciting is that artificial intelligence technology represented by generative large language models is making exciting progress, and artificial intelligence technology is bound to have a broad and far-reaching impact on the global economy and human society, and we should pay more attention to artificial intelligence technology than the economic cycle itself. During the Reporting Period, the Fund continued to increase its investment in the TMT sector. At the same time, the introduction of a series of institutional policies in the capital market represented by the "National Nine Articles" has caused a phased valuation suppression for small and medium-sized market capitalization stocks, but we believe that it is the enterprise value that really determines the stock price in the long run, and we are still full of confidence in the small and medium-capitalization stocks with long-term investment value in the portfolio.
We believe that China's economy still has strong endogenous growth potential, and if the policy can respect the market rules and further unleash market vitality, the economic fundamentals are expected to improve. We should have confidence in China and believe in the power of technological progress. The great progress of artificial intelligence technology will completely change the face of human society in the near future, and the digital economy industry chain with artificial intelligence as the core will become the main line of the next cycle of the market. The portfolio will continue to explore potential beneficiary investment targets around artificial intelligence technology and its related industrial chains, and further increase the allocation ratio of the TMT sector while maintaining a relatively balanced allocation of the portfolio as a whole. (The content comes from the second quarter report of 2024 of China's industry boom)
Focus on exogenous variables such as real estate policy and fiscal policy, and actively look for companies that are seriously undervalued in a pessimistic market atmosphere
Huaxia Value Selection, etc
Fund manager Zhu Yi
In the second quarter of 2024, there was a relatively clear structural differentiation in the market. Concerns about long-term growth have intensified as the economic recovery continues to fall short of expectations and no new growth direction is in sight. From the perspective of financial markets, long-term concerns are reflected in the continuous decline in long-term Treasury bond interest rates, the pursuit of high-dividend assets in the stock market, and the continuous decline in valuations of growth sectors. In the second quarter, the Shanghai Composite Index fell 2.41%, the CSI 300 fell 2.14, and the CSI 1000, which represents small and medium-sized enterprises, fell 10.02%.
In the short term, the weakness of the economy continues, and breaking the pessimistic cycle of reality and expectations requires external intervention. Next, we need to focus on exogenous variables such as real estate policy and fiscal policy, and if there are positive changes, we can break the current cycle. At a portfolio level, Q2 also did not perform as well as we expected. The main reason is that at the end of last year, we increased the allocation of small and medium-sized growth companies in the direction of digital economy and smart grid. In the pessimistic mood of the market, the stock prices of small and medium-capitalization companies are more affected by the sentiment, in this case, we cannot follow the market to "chase the rise and kill the fall", but should actively look for companies that are seriously undervalued in the pessimistic atmosphere of the market. We believe that this approach will pay off in the coming period.
Although the portfolio's recent performance has not been satisfactory, we still tend to think about investment issues with a long-term mindset, and if we use a combination of certainty, expected return space and margin of safety, we still believe that there is enough potential return space in the current direction of the portfolio. Looking ahead, we believe that we will continue to deliver predictable returns in the future as our holdings demonstrate continued value creation. We will continue to adhere to the long-term concept of "long-term value investment", and will not chase hot spots and amplify portfolio risks because of poor short-term portfolio performance, but will continue to practice long-termism and continue to look for investment targets in accordance with the original framework. At the same time, we will continue to optimize the structure of the portfolio and positions according to the market price. (The content is excerpted from the second quarter report of China Value Selection in 2024)
Focus on investing in high-quality companies in consumption, real estate finance, technology, high-end manufacturing and other sectors
Huaxia Return / Huaxia Return No. 2, etc
Fund manager Wang Junzheng
In the second quarter of 2024, the A-share market as a whole was mainly adjusted, and the economic data improved in April, and the market rose significantly. Entering May and June, the market entered a stage of adjustment due to the weakening of some economic indicators.
From the perspective of industry sectors, the new quality productivity and high growth space sectors represented by AI, and the low-valuation and high-dividend sectors represented by coal, banks, home appliances, petroleum and petrochemicals, etc., performed better; Sectors such as computers, services, real estate, and pharmaceuticals performed poorly.
During the reporting period, the Fund adhered to a bottom-up stock selection approach, mainly investing in high-quality companies with good competition patterns, high barriers and long-term growth certainty in various sub-sectors of consumption, real estate finance, medicine, technology and high-end manufacturing. Based on our confidence in China's long-term solid economic growth, as well as confidence in the medium- to long-term fundamentals of the companies we have chosen, we still have good expectations for the medium- to long-term investment returns of the equity market. (The content is excerpted from the second quarter report of China Return in 2024)
Preferred stocks have run out of alpha relative to the industry, and they are full of expectations for the resonance of supply and demand in the third quarter
Huaxia Xinghe/Huaxia Blue Chip, etc
Fund manager Li Yan
In the second quarter, the economy performed steadily, consolidating in the current range. In terms of consumption, the low-end consumption in the society is stable and the basic market is stable, while the high-end consumption is downgraded and business consumption is at a low level. In terms of investment, real estate investment fell sharply, but the drag on the overall economy is getting smaller and smaller, and industrial investment is stable. In terms of exports, the export performance in the second quarter was strong, Europe and the United States replenished the inventory from the end of last year, and the recent sharp rise in sea freight rates showed a relatively obvious export rush in May and June, and the current orders are positive. In February-March, we found more meso-micro evidence that the economy is expected to recover, and now it seems that this judgment is a little more optimistic, the overall economy is stable, and the export performance is a clear bright spot.
In the second quarter, we continued to focus on lithium batteries, large-scale energy storage, wind power and other sub-industries. These sectors have undergone certain adjustments in the second quarter, because the supply side needs time to consolidate, and the production capacity released by the past frenzied investment wave has basically reached the end of this cycle, and the leaders in the subdivision have shown their advantages over their competitors. The government has constrained the industry through financing means, but at present, it seems that the strength is weak, if more binding capacity expansion restrictions can be introduced in the future, then the industry will gradually get on the right track, into a new round of obvious upward cycle.
On the demand side, China's new energy vehicles are unstoppable, with super product strength and cost performance have won consumer recognition, domestic demand and export performance have bright spots, and the industry is changing from quantitative to qualitative, and strive to obtain better added value. On the other hand, in Europe and the United States, the demand for power batteries for new energy vehicles has slowed down significantly, the supply chain is being reconstructed, and it will take half a year to a year to launch cost-effective new energy vehicles.
The demand for large-scale energy storage has maintained a high growth rate of more than 30% at home and overseas, and the world is accelerating the transformation of the power grid, and large-scale energy storage is a good cure for the power grid.
On the whole, the supply is still consolidating in the second quarter, and the demand remains stable. Our preferred stocks have outperformed a certain amount of alpha relative to these sectors. Starting from the third quarter, the industry will gradually enter the peak season, and there is no interference from industrial destocking this year, we are full of expectations for the resonance of supply and demand in the third quarter. (The content is excerpted from Huaxia Xinghe's 2024 second quarter report)
Focus on the allocation of end-side AI-related assets and industry sectors that are expected to reverse in the second half of the year
Huaxia Renaissance/Huaxia Science and Technology Innovation, etc
Fund manager Zhou Keping
In the second quarter, the market fluctuated and fell, dividend-related assets strengthened, while growth assets continued to be under pressure after an over-falling rebound in the first quarter, and companies related to the Growth Enterprise Market and the Science and Technology Innovation Board weakened significantly. A large number of industries have returned to the lowest valuation quantile in history, such as pharmaceuticals, some electronics, new energy, and military-related assets, which have reflected rather pessimistic expectations.
Operationally, we have optimized the portfolio to a certain extent, increasing our holdings of end-side AI-related consumer electronics-related assets, reducing some illiquid new energy assets, increasing our holdings of terminal companies, and increasing our holdings in the pharmaceutical and military industries, which are expected to reverse in the second half of the year. (The content is excerpted from the second quarter report of China Revival in 2024)
In the second quarter, the economy is still looking for the bottom, and the supply clearance and the industry going overseas are the two main clues of the layout
Huaxia energy conservation and environmental protection/Huaxia core growth, etc
Fund manager Lu Jiawei
In the second quarter of 2024, the domestic economy is still in the bottoming stage, and domestic supply clearance and overseas expansion are the two main trends of industrial development. A-shares corrected in the second quarter. The CSI 300 index fell 2.14% and the ChiNext index fell 7.41%. The market style is still biased towards the market with low valuation dividends, and the growth style continues to be under pressure.
Focusing on the two clues of supply clearing and going overseas, the fund has laid out high-quality growth stocks in the direction of semiconductors, new energy, high-end manufacturing, building materials, robots and so on. (The content is excerpted from the second quarter report of Huaxia Energy Conservation and Environmental Protection in 2024)
Focus on semiconductors, artificial intelligence and other digital economy directions, and increase positions in AI computing power and consumer electronics stocks
The frontier of Chinese innovation/the frontier of the Chinese era, etc
Fund manager Tu Huanyu
In the second quarter of 2024, the macro environment at home and abroad basically continued the previous situation. Among them, the economic growth momentum of United States has slowed down but remains resilient, and the Fed still lacks confidence in the certainty of the timing of interest rate cuts; The domestic economy basically remained stable, structurally speaking, external demand and exports were relatively prosperous, domestic demand and consumption were not strong, and financial data were still weak. After the capital market experienced large fluctuations in the first quarter, the second quarter was generally relatively flat, and there are certain structural investment opportunities. Among them, dividends and resources as a configuration in line with the current market environment show obvious excess returns, artificial intelligence, semiconductors, power equipment, home appliances and other sectors also have phased performance.
Looking back on the second quarter, the fund focused on the digital economy represented by semiconductors, consumer electronics, artificial intelligence, information and innovation localization, and satellite Internet, and increased its position in some AI computing power and consumer electronics stocks that benefited from large models. Secondly, to a certain extent, the carbon neutrality direction represented by photovoltaic wind power energy storage, power battery leaders, and auto parts is configured, and the sea breeze and submarine cable targets with relatively guaranteed prosperity and the power equipment targets going to sea are overallocated. In addition, it is also equipped with strategic emerging directions such as innovative drugs, military industry, high-end manufacturing, and new materials. (The content is from the second quarter report of China Innovation Frontier in 2024)
The combination of Chinese medicine industry has been optimized, and the growth direction of the emerging consumer industry has been found
Huaxia emerging consumption/Huaxia Youjia life, etc
Fund manager Sun Yijia
In the second quarter of 2024, there will be a certain correction in the market. In terms of market style, the performance of value stocks is still relatively dominant, while small-cap stocks as a whole are still in the process of adjustment. However, some growth stocks have begun to rebound to a certain extent, and the performance of overseas related stocks is still relatively bright. For the consumer sector, due to concerns about demand in the market as a whole in the second quarter, consumption as a whole showed a certain degree of adjustment, and mainland consumption fell by 6.94% in the second quarter.
The Fund is allocated according to a long-term growth consumer goods investment framework, and in the second quarter of 2024, we focus on the following opportunities: (1) home appliances, property services and home furnishing industries around the real estate chain; (2) service-oriented consumer sectors benefiting from economic recovery; (3) Consumer goods companies that benefit from the export of consumer goods. At the same time, the portfolio has made some optimization adjustments to the pharmaceutical industry that benefited from the aging in the early stage. In the future, our portfolio will continue to look for the growth direction of emerging consumption and explore investment opportunities in the industry. (The content is excerpted from the second quarter report of China Emerging Consumption in 2024)
The fluctuation of demand in the new energy vehicle industry and the price reduction of the industrial chain are nearing the end, and the medium-term positive factors are accumulating
Huaxia new energy vehicle leader, etc
Fund manager Yang Yu
In the second quarter of 2024, the overall macro economy will continue to run on the track of weak recovery, and the development momentum of high-end manufacturing industries such as new energy, semiconductors, and automobiles will be good. The A-share market fell slightly in the second quarter, with small and mid-cap stocks performing relatively poorly. At the same time, investors have shown a certain degree of concern about the sustainability of new energy vehicle sales growth, and the overall stock price of the new energy vehicle sector has performed poorly, coupled with the acceleration of industry capacity launch. We strive to select superior companies that are significantly ahead of competitors in terms of products, technology, and cost from the bottom up in the sector, and strive to obtain excess returns.
As the most important subdivision of new energy vehicles, the lithium battery sector has a positive performance in April, but since May, the plate has returned to a volatile trend, only the leading companies in some links such as batteries, structural parts, iron and lithium, and anode have walked out of excess returns, the reason is that the industry has begun to flatten in May-July production scheduling, which is related to the domestic vehicle entering the off-season, and the phased demand for domestic energy storage has fallen. Second, the market believes that the profitability of the industrial chain is only bottoming out, and the upward elasticity is insufficient, although the negative electrode, copper foil, household storage cells, etc. have risen in price, but there are also links such as iron and lithium, electrolyte, and separator that still have price reductions, so the plate lacks beta.
Looking ahead, on the demand side, the domestic auto market will enter the peak season after September, the penetration rate of new energy vehicles will continue to increase, overseas emerging markets and large reserves in the United States are expected to contribute to the increase, and the industry production schedule is expected to return to the upward channel; In terms of profitability, there is still product differentiation in the lithium battery industry chain, and the structural shortage always exists, and the profitability of the industrial chain will be differentiated; At the same time, the debt financing pressure of the tail companies of the industry has increased, which has significantly reduced the expansion capacity of the supply side of the industrial chain, and the price and profitability of the industrial chain have been repaired late. Finally, from the perspective of globalization, the overseas construction of domestic materials is accelerating, and batteries are also achieving breakthroughs through innovative business models such as technology licensing.
From the perspective of the overall automotive industry, the performance of new energy + exports is outstanding, with low-end and high-end volumes, and it is expected to grow steadily throughout the year. With the acceleration of the number of applications for car trade-in subsidies, it is expected to boost the demand for passenger car replacement by 50-1 million. It is estimated that passenger car sales are expected to reach 27.3 million units in 2024, a year-on-year increase of +4.9%, of which new energy passenger vehicle sales are expected to reach 12 million units, with a penetration rate of 44%. In terms of pattern, the share of independent brands continued to increase, with an independent share of 59.9% from January to February 2024, an increase of 7.6pct year-on-year, with a strong performance.
At this point in time, we continue to be optimistic about the investment opportunities in the new energy sector. The fluctuation of industry demand and the price reduction of the industrial chain are nearing the end, and the positive factors in the medium term are accumulating. Looking back on 2023 and the first half of 2024, under the expectation of falling lithium carbonate prices, the industrial chain will continue to destock, suppressing the short-term prosperity; The European and American markets are exposed to risks, including the reduction of subsidies for Germany and France, as well as the United States of vehicle inventories and the FEOC policy of the IRA Act. However, the follow-up industry is expected to usher in positive changes, first, the decline in profitability and the significant slowdown in supply expansion after the tightening of financing, 2024H2 earnings are expected to stabilize, and there is room for repair in 2025. Second, after the cost of lithium batteries has dropped significantly, domestic 5-150,000 economic models are expected to increase, and the penetration rate of single vehicles with electricity and EVs is expected to increase. Third, Europe and the United States are expected to return to medium-high growth, including European carbon emission assessment constraints, the release of supply-side models, and the easing of bottlenecks in the battery supply chain in United States.
In the second quarter, we added some leading companies in high-quality lithium battery materials. These companies have good fundamentals, low share prices, and relatively low valuations. We are bullish on the performance of these companies in the coming quarters. At the same time, we have adjusted the position structure of auto parts companies and increased the position of more relevant targets of automotive intelligence. (The content is excerpted from the second quarter report of 2024 of Huaxia new energy vehicle leader)
Layout in the direction of innovative drugs, innovative medical devices, and in-hospital just-needed diagnosis and treatment
Huaxia innovative pharmaceutical leader, etc
Fund manager Wang Zeshi
In the second quarter, the main indices of the domestic equity market fluctuated downward. The pharmaceutical sector also experienced a long period of adjustment in the second quarter. The anti-corruption in the medical industry has been going on for nearly a year, and it will enter the stage of normalization in the future. Affected by this, the revenue growth rate of the medical industry in the first half of the year remained low. From a long-term perspective, we still believe that anti-corruption in healthcare is conducive to the clean-up of the pharmaceutical industry and the realization of high-quality development. In terms of policy, the executive meeting of the State Council deliberated and approved the "Implementation Plan for Supporting the Development of Innovative Drugs in the Whole Chain", showing the support for innovative drugs in the design of the system.
In the second quarter, our portfolio was deployed in the direction of innovative drugs, innovative medical devices, and in-hospital treatment products, and actively sought investment opportunities in a number of innovative R&D directions, such as ADCs, weight loss drugs, antibody drugs and other fields. We have increased the proportion of Hong Kong stocks, and some innovative drug companies in the Hong Kong pharmaceutical sector have already had a good investment price-performance ratio. After several years of development and policy support, the pattern of the domestic innovative drug industry has gradually become clear. Some innovative products are close to the market or have entered the commercialization stage. Globally, the emergence of new products in recent years, such as ADC drugs, weight loss drugs, Alzheimer's, and small nucleic acid drugs, has also brought new vitality to the innovative drug market. Domestic high-end medical equipment and consumables have gradually entered high-level hospitals, and some medical devices have become quite competitive in the international market, which is still the direction we are optimistic about. (The content is excerpted from the second quarter report of 2024 of ChinaAMC Innovative Pharmaceutical Leader)
Focusing on the three clues of cycle recovery, technological progress, and artificial intelligence computing power, the allocation of some semiconductor design companies with a gradual recovery trend is added
Huaxia semiconductor leader/Huaxia advanced manufacturing leader
Fund manager Gao Xiang
From April to early May, the broader market index as a whole continued its upward trend since February, but there was a certain retracement at the end of May and June. From a market-wide perspective, the better performers are still the defensive sectors. The representative index of the domestic semiconductor industry rose slightly in the second quarter, but the magnitude was not large, showing a narrow range of fluctuations. In the second quarter, from the perspective of the global semiconductor industry, the performance of the artificial intelligence computing power-related chain is still relatively good. Global tech giants are still investing heavily in cloud data centers, with the goal of further capturing the capabilities of AI models. At the same time, we also see that the global end-side hardware field has also become more lively, and technology giants have initially demonstrated how to integrate the capabilities of existing large models into the end-side hardware system in the second quarter, so that a wider consumer group can experience the convenience brought by artificial intelligence. The global end-side hardware-related IP, core processor chips, memory chips and other related sectors performed well. In addition, the field of analog chips, which has been poor in terms of prospects, and the downstream chips that are mainly in the fields of industry and automobiles, show a certain marginal improvement signal.
The fund still focuses on the three clues of cycle recovery, technological progress and artificial intelligence computing power, and further concentrates on the top stocks in the second quarter, and adds some semiconductor design companies with a gradual recovery trend. (The content is excerpted from the second quarter report of Huaxia Semiconductor Leading in 2024)
We will continue to focus on the two core main lines of localization and global competitiveness
China's digital economy leader, etc
Fund manager Zhang Jingsong
The Fund focuses on the thematic investment of the digital economy, strives to grasp the development opportunities of new quality productivity, and adheres to the simultaneous development of digital industrialization and industrial digitalization. (1) In the direction of digital industrialization, focus on the underlying infrastructure of semiconductors, software and hardware, Internet, new materials and other sectors; (2) In the direction of industrial digitalization, we focus on the empowerment of digitalization in the pan-manufacturing industry, covering not only the digital products in the pan-manufacturing industry, but also the digital governance within the enterprise, and the core scenarios include high-end manufacturing, smart vehicles, smart energy, etc.
In the second quarter of 2024, under the established macro expectations, the overall performance of the market is flat, the growth rebound is limited, and investors still prefer to chase dividends, resources, overseas and other certain directions, but the investment opportunities of emerging growth domestic demand have become more and more diversified. If the follow-up demand-side policies continue to be implemented, the emerging growth direction is expected to follow the market's risk appetite recovery in the second half of the year. The Fund continued to focus on the two core themes of "localization and global competitiveness cultivation", and increased its allocation to core industries such as semiconductors, AI, and large-scale equipment renewal in the second quarter. The Fund believes in innovation-driven value, adheres to the core of in-depth industry research, and strives to become a continuously sharp spear in the positive growth style through meso-comparison and individual stock mining. (The content is excerpted from the second quarter report of 2024 of China's digital economy leader)
Keep the dividend strategy and the cyclical strategy relatively balanced
Huaxia Xinjinshun and so on
Fund manager Zhai Yuhang
In the second quarter, the market generally rose first and then declined, and the main broad-based indices fluctuated and weakened. In terms of rhythm, the market in the first half of this year showed an N-shaped trend. The decline at the beginning of the year was caused by multiple factors, including the pressure of economic data at the macro level, as well as the pressure of liquidation and redemption of snowballs, equity pledges, leveraged funds, and asset management products at the short-term capital level, resulting in the continuous fermentation of negative liquidity feedback. Subsequently, against the backdrop of the accumulation of bullish factors and the marginal improvement of economic expectations, the market started a round of rebound since February. This round of rebound is not only due to the recovery of the market in the context of quarterly pessimism, but also from a series of marginal positive factors such as the easing of real estate policies, the improvement of economic data and the improvement of market liquidity. However, since the end of May, with the weakening of the overall economic data, the market's expectations for real estate repair and sustained economic recovery have been disappointed, and the market has re-entered the weakness.
The Fund's strategy is a dividend low volatility cycle enhancement strategy. In our view, against the backdrop of weak end-user demand but resilient industrial production, the upstream cyclical sector still has a good price-performance ratio. In the first half of the year, the portfolio maintained a relatively balanced dividend strategy with a cyclical strategy, and in the second quarter, we significantly increased our exposure to non-ferrous metals and reduced our allocation to pro-cyclical airlines. (The content is excerpted from the second quarter report of Huaxia New Jinshun in 2024)
The AI era ushered in a singularity, and increased allocation to AI beneficiary companies
Huaxia Global Science and Technology Pioneer, etc
Fund manager Li Xiangjie
The global artificial intelligence (AI) industry is in the ascendant, driving global technology stocks to continue to perform strongly in the second quarter of 2024.
The AI industry has become a huge global industrial wave. Global Internet companies, companies in various industries, and countries continue to develop new large models and vertical applications, and the demand for AI computing power continues to increase. The global AI semiconductor supply chain is full of orders, and has entered a positive cycle of increased sales, continuous expansion, and technological progress.
In the second quarter, the Fund increased its allocation to leading companies in the semiconductor industry chain that lead the development of the AI industry, including AI computing chip design, advanced communication chip design, AI wafer foundry, advanced semiconductor equipment and other subdivisions. AI industry stocks rose well in the first half of the year, contributing to the outstanding performance of the Fund's net value.
The quarterly performance of the leading AI chip companies in United States, which is heavily positioned, exceeded market expectations, accelerated the iteration of GPU products, and transformed from single chip sales to rack system sales, continuing to lead the technological progress of global AI computing power and network communications.
There are many people who question the lack of popularity of AI applications, but we are satisfied with the achievements of AI applications and are full of confidence in the future of AI applications. We believe that the AI era has only reached a singularity, and the future of AI applications and AI hardware will bring about changes in the business models of various industries.
For now, United States technology stock fundamentals remain strong and valuations remain reasonable. Inflation in the United States eased further in Q2, while Canada and Europe cut rates in June. The market expects the Fed to cut interest rates in the second half of the year, and monetary easing will increase to boost the economy, which also helps the stock market. The Fund is confident in the future performance of global technology stocks. (The content is excerpted from the second quarter report of ChinaAMC Global Technology Pioneer in 2024)
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