First, global investment can better spread risks.
China's capital market is still a new market with the characteristics of high returns and high risks. Starting from the asset allocation of investors' families, global investment is a good way to reduce systemic risks in investment. The data shows that if the Shanghai Composite Index is used to represent the systemic risk of China's capital market, the average annualized return of the Shanghai Composite Index is 17.6% from 1997 to 2006, while the volatility (risk degree) of the annualized return is 46%. If the Standard & Poor's 500 Index represents the systemic risk of the US capital market, the average annualized rate of return of the Standard & Poor's 500 Index is 8.3% from 1997 to 2006, while the annualized rate of return fluctuates by 18.7%. Comparing the above data of China market and global market, we can see that our China market is indeed a high-risk emerging market.
The emerging market characteristics of China's economy determine that we are in different stages of economic development and have different economic cycles and industrial cycles from developed countries. Moreover, due to the relative closure of China's capital market, on the one hand, it avoids the influence of global market events, on the other hand, it constitutes a benign complementarity with the global market. These factors lead to the low correlation between overseas investment and domestic investment, and global investment further reduces the risk of the whole portfolio due to the correlation. For example, China only started this bull market in 2006, while the United States began to enter the bull market as early as 2003. At this time, some assets are invested in the US stock market, which reduces the risk of the entire global portfolio. The data shows that from 1997 to 2006, the correlation between the Shanghai Composite Index and the S&P 500 Index was only 0.23. If 1/3' s assets are invested in the S&P 500 index and 2/3' s assets are invested in the China market, the average annualized rate of return of the whole portfolio is 14.5%, and the fluctuation of annualized rate of return is 32.8%. Although the yield is reduced by 3%, the risk is reduced by 13%.
Since the beginning of this year, with the rise of the Shanghai Stock Exchange Index, the risks contained in China's capital market have become more and more serious, and the long-term sharp fluctuation of the stock index has almost become the norm. During the ten years from 1997 to 2006, the average daily volatility of the Shanghai Composite Index was only 1.5%, but it has increased to 2.3% this year. Therefore, with the continuous improvement of China market valuation, global investment and risk diversification have become a top priority.
Second, share the global economic growth.
Tang, a senior analyst at Tianxiang Investment, believes that the current global economy is the best period since World War II, and global GDP is expected to maintain rapid growth. First, global inflation will be controlled for some time. For some time, global inflation has remained at a relatively low level, which is rare in history. Of course, there are many reasons for this, including China and Indian countries, which have experienced rapid economic growth and provided the world with a very low-cost manufacturing base. Secondly, the global employment situation is very good. The labor tension in the United States has intensified and the unemployment rate has been decreasing. It has recently dropped to 4.5%, which should be very low. The labor tension in the euro zone is increasing rapidly, its employment rate is rising, and the unemployment rate is falling rapidly. The natural unemployment rate in the history of the euro zone is relatively high, because it is a region with high welfare. The unemployment rate of 7% in the euro zone is the lowest in the past 10 years. The current unemployment rate of 4.5% in the United States is close to the lowest value in 10 years; Japan's unemployment rate is close to the lowest level. Third, the global capacity utilization rate remains high. Capacity utilization ratio is the ratio of total industrial output to production equipment. A simple understanding is how much actual production capacity plays a productive role in the operation. When the capacity utilization rate is too high, the pressure of inflation will rise rapidly because the capacity cannot cope. On the other hand, if the capacity utilization rate is too low and continues to decline, it means that the equipment is idle and the economy is declining. The United States is around 83% to 85%, the euro zone is around 85%, and Japan is higher. Capacity utilization rate of 80% is more appropriate.
Therefore, under the background of global economic growth, although the domestic stock market has indeed performed well in the past two years, it is not the best in the world, and the investment income of many countries is higher than that of China. According to Morgan Stanley's index statistics, China's annualized rate of return in the past three years is 45%, while overseas countries, including Egypt, Argentina and Indonesia, have annualized rates of return in the past three years of 47%-77%. Extending the time period to the past decade, countries such as Colombia also have very high return on investment. Therefore, adding foreign capital markets to the portfolio can not only reduce the risk of the portfolio, but also improve the overall income level of the portfolio.
Under the background of global asset allocation, with the comparative advantages of regional economic development and market valuation, global funds have accelerated to flow, and global hot spots have emerged one after another: in fact, in addition to the fiery performance of the A-share market that domestic investors are familiar with in the past two years, the performance of emerging markets such as South Korea and Brazil has also attracted attention, whether in the last two years or in the last five years; However, mature markets such as the United States and Europe show stable return characteristics different from emerging markets. Global investors can fully share the growth of the global economy and stock market, and share the endless investment feast, which is an opportunity that investors who only invest in a single market cannot get.
Table 1 Global investment opportunities come one after another (annual return rate of national indexes), data source: Bloomberg system.
Third, look for global valuation depressions.
The core of stock investment is value investment. At present, globally, the valuation of many markets is lower than that of domestic A-shares. The average PE of American stocks is only 15 times, that of Italy is only 13 times and that of Brazil is only 10 times. From the perspective of long-term investment, these valuation depressions are quite attractive to us.
Table 2 Finding the Margin of Safety-Comparison of P/E Ratio among Countries
Judging from the valuation, especially after the recent month's decline, the global stock market PE is generally at a low level, with an average of less than 20 times, especially in Europe and America, which is even lower than that in 2005. In the Hong Kong stock market, the discount rate of H shares to A shares has approached 90%, reaching an unprecedented low. For example, the share price of Datang Power Generation in H shares is around 8 yuan, while the share price of A shares is as high as 24 yuan, a difference of three times.
All these provide rare investment opportunities for QDII funds. In the past, we only looked for cheap stocks in the domestic stock market. Now, we are looking for "gold" on a global scale. You can open positions in index funds in mature markets and emerging markets, look for oversold high-quality stock funds in emerging markets, and look for oversold high-quality stocks in Hong Kong market. Through the optimal allocation of fund assets in the global market, we can provide investors with the best return while diversifying risks.
Therefore, the recent adjustment of the international capital market provides a good opportunity for our domestic investors to set foot in the international market, and the timely launch of QDII funds provides a convenient channel for everyone to invest in the global market. Buffett began to plan to buy the company at a low price when the American market fluctuated. Our domestic investors should also board the QDII fund that is about to go to sea for treasure hunting, ride the wind and waves, sail and sail, and successfully allocate personal assets to the world.