After more than three years of correction, the CSI 300 index has recently fallen to the historical bottom area.
The ups and downs of the index are indeed a test of investors' mentality, and the contrarian layout is always a challenge to human nature.
However, it is advisable to take a long-term view.
When we look at this index, which represents the core assets of A-shares, from a more macro and long-term perspective, we will find that the current potential of the CSI 300 Index to repair its valuation may mean picking up chips at the bottom and waiting for the wind to reap the fruits.
As an index system solution provider, Penghua Ashares, a subsidiary of Penghua Fund, is deeply engaged in the index business, especially in the broad-based index layout, which is very comprehensive and hierarchical, covering mainstream broad-based indices from CSI 300 to CSI 500, CSI 800, CSI 1000, CNI 2000, ChiNext 50, and Kechuang 100.
Taking CSI 300 as an example, Penghua Ashares has successively deployed CSI 300 ETF Penghua (159673), Penghua CSI 300 ETF Connection (Class A 160615/Class C 006939) and Penghua CSI 300 Index Enhanced (Class A 005870/Class C 006939) and other products.
This means that in response to the differentiated needs of different investors on and off the market, Penghua has provided refined index investment tools.
When investing in the CSI 300 index, you will always find a favorite tool in Penghua Ashares.
Buying "national fortune", fundamentals may support long-term returns
In general, stock prices can be broken down into two key factors: fundamentals and valuation. Fundamentals reflect the intrinsic value of a company, while valuations reflect the market's expectations for the company's future growth.
For an index that covers a basket of stocks, it is also applicable to understand the source of income of the index in terms of the factors that affect the stock price.
In the long run, the income of the CSI 300 Index mainly comes from the operating income of the constituent companies, which is reflected in the steady growth of net assets. According to Wind statistics, since December 31, 2004, the average return on equity (ROE) of the CSI 300 Index has been 13.41%, significantly higher than the level of 11.54% in the A-share market during the same period.
It can be said that as a representative of 300 high-quality listed companies in China, the constituent stocks of the CSI 300 Index as a whole have strong profitability and capital return capabilities.
Charlie · Munger, a famous investment guru, once said: "In the long run, the return on a stock is hardly much higher than the average annual profit of the company that issued the stock." "To a certain extent, the ROE of the CSI 300 Index can be used as an anchor for investors' expected returns, and its long-term excellent performance is also an important basis for investors in index selection.
By holding the CSI 300 Index for a long time, investors are actually sharing in the operating results of China's high-quality enterprises, and its rate of return will be close to the intrinsic rate of return of China's capital factors.
From this point of view, investing in the CSI 300 Index can be understood as "buying national fortunes" to some extent.
Cheaper chips, higher safety cushions
Of course, investing in indices isn't just about ROE. In fact, the annualized return of the CSI 300 Index since the base date is lower than its average return on equity. One important factor is that index performance tends to be significantly affected by valuation volatility in the short term, which explains why the CSI 300 index has underperformed in recent years.
Although the net assets of the CSI 300 constituents are still growing steadily, the decline in valuations has offset the increase in the intrinsic value of companies, resulting in a relatively large correction in the index in the short term.
But falling valuations aren't always a bad thing. As the saying goes, "opportunities fall out", low valuations often mean that investors can "pick up chips" at lower prices.
Whether the valuation is judged by the price-earnings ratio or the price-to-book ratio, the current layout of the CSI 300 has a strong safety cushion. Wind data shows that as of September 2, 2024, the price-to-earnings (PE) ratio of the CSI 300 is 11.26, which is at the 13.45% percentile in the past decade. The price-to-book (PB) data is even more striking, currently at 1.21, at the last decade percentile of 2.22%.
Source: Wind, as of 2024/9/2
Penghua Ashares has diversified options for CSI 300
At present, the valuation of the CSI 300 has fallen, providing investors with a "good price" for the layout at a low level. Of course, the "good price" is not a specific point, but a range.
In the face of the current uncertain market environment, it may be a wiser choice to adopt a regular investment strategy.
Regular investment can help investors smooth the risk of market fluctuations and avoid making irrational decisions due to short-term market fluctuations. Especially in the current situation of low valuation, the regular investment strategy is more likely to help investors continue to deploy the CSI 300 Index at a relatively low average cost.
As an index system solution provider, Penghua Ashares, a subsidiary of Penghua Fund, is deeply engaged in the index business, especially in the broad-based index layout, which is very comprehensive and hierarchical, covering mainstream broad-based indices from CSI 300 to CSI 500, CSI 800, CSI 1000, CNI 2000, ChiNext 50, and Kechuang 100.
Behind this is an industry-leading quantitative investment research team, with a total of 21 members, all of whom have compound educational backgrounds and rich experience. The team not only closely tracks the benchmark index in passive investment, but also continuously explores the direction of product revenue growth, captures excess returns through various means such as "AI+" and "α+β", and uses the effective tool of fundamental multi-factor quantitative strategy to increase returns.
Taking CSI 300 as an example, Penghua Ashares has successively deployed CSI 300 ETF Penghua (159673), Penghua CSI 300 ETF Connection (Class A 160615/Class C 006939) and Penghua CSI 300 Index Enhanced (Class A 005870/Class C 006939) and other products.
This means that in response to the differentiated needs of different investors on and off the market, Penghua has provided refined index investment tools.
When investing in the CSI 300 index, you will always find a favorite tool in Penghua Ashares.
Investment guru Benjamin · Graham once said, "In the short term, the stock market is a voting machine, but in the long term, it is a weigher." "Despite the underperformance of the CSI 300 Index in the short term, valuations are already at historically low levels, and the downside is relatively limited. On the contrary, it sets the stage for a possible valuation repair in the future.
The current low valuations create potential buying opportunities for long-term investors. Once market confidence is restored and investors' risk appetite increases, the CSI 300 index is likely to usher in a valuation recovery market. In this case, investors may not only enjoy the benefits of corporate earnings growth, but also receive additional valuation enhancement benefits, achieving double benefits.
The risk disclosure of promotional materials is as follows
Dear Investors,
Investment is risky and should be cautious. A publicly offered securities investment fund (hereinafter referred to as a "fund") is a long-term investment tool, and its main function is to diversify investments and reduce the individual risks brought about by investing in a single security. Unlike financial instruments such as bank savings that can provide fixed income expectations, when you buy fund products, you may not only share the income generated by the fund's investment according to your holdings, but also bear the losses caused by the fund's investment.
Before you make an investment decision, please carefully read the fund contract, fund prospectus and fund product key facts statement and other product legal documents and this risk disclosure, fully understand the risk-return characteristics and product characteristics of the fund, carefully consider the various risk factors existing in the fund, and fully consider your own risk tolerance according to your own investment objectives, investment period, investment experience, asset status and other factors, and make rational judgment and prudent investment decisions on the basis of understanding the product situation and sales suitability opinions. In accordance with relevant laws and regulations, the fund manager Penghua Fund Management Co., Ltd. and the relevant sales agencies of the fund make the following risk disclosures: 1. 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