The macroeconomic recovery is less than expected, and the current economic fundamentals are still relatively low. What is the historical stage of Hong Kong stocks? How do you view the investment opportunities where Hong Kong stocks may have an inflection point in economic recovery?
Article picture 1
Luo Jiaming, Dialogue Fund Manager
Q 1, the performance of Hong Kong stocks in the first half of 2022 is still not optimistic. What challenges are Hong Kong's stock market experiencing?
Luo Jiaming: In the first half of 2022, after a deep adjustment of 202 1 year, the Hong Kong stock market fell again due to the downward pressure of global macro-economy. Specifically, it is mainly reflected in two challenges. On the one hand, affected by the domestic epidemic and economic restructuring, the profits of listed companies continue to face greater downward pressure. On the other hand, liquidity is affected by the Federal Reserve's interest rate hike and the "Russia-Ukraine conflict", which leads to a downward trend in equity risk appetite, thus affecting the company's valuation.
Q2。 As a fund manager deeply involved in investing in Hong Kong stocks, what do you think of "Southbound Fund"?
Luo Jiaming: As we all know, most of the funds going south are mainly institutional investors. On the whole, the capital from the south or the original foreign capital and some local capital are mainly institutions, so this market is essentially a market where institutions learn from each other.
Insurance and Public Offering of Fund southbound capital account for the highest proportion, as can be seen from the spot market transaction research report released by the Hong Kong Stock Exchange. In the past few years, the proportion of institutions in southbound capital has increased from 23% to more than 50% now, and the proportion of individual investors has dropped from 60% to 30%. By the end of 20021,Public Offering of Fund's market value in Xia Nan funds accounted for 33.2%, and this ratio is expected to continue to increase. To sum up, Xia Nan Fund is actually a very professional institutional investor, and their professionalism is constantly improving.
Q3。 There are more than 4000 A-share companies. Why do institutions leave the local A-share market and invest in the Hong Kong stock market?
Luo Jiaming: In fact, we found that some industries of Hong Kong stocks and some industries of A-shares * * * together constitute all walks of life in China's economy. In other words, some outstanding companies in Hong Kong stocks and A-share companies are all outstanding companies in China economy.
Therefore, we think that among Hong Kong stocks, we should pay more attention to outstanding companies in industries that we can't find in the A-share market. For example, some emerging consumption in the new economy, including some internet companies, some enterprises with new energy vehicles and some high-end property companies. HKEx is also a diligent institution. In the past, many changes have been made, such as the second listing, the policy of sharing the same shares with different rights, including some biomedical enterprises, and even excellent pharmaceutical companies that are still in the research and development stage and have not yet made a profit, they can also be listed in Hong Kong.
At present, the Hong Kong stock market has gradually precipitated some biopharmaceutical companies that we think may have great prospects for China to go abroad in the future. For American investors, the configuration of these companies needs attention.
Q4。 Do you have any experience or lessons to share about investing in Hong Kong stocks?
Luo Jiaming: We have actually stepped on many pits in Hong Kong stocks, especially in Hong Kong stocks. Every time we step on it, it is bottomless. So I summed up a lot of experiences and lessons.
First of all, we may be special. We will first look for the strongest people in all industries, that is, the "wise men" in all industries. There is a saying that walking with the wise. I think this method is very effective in Hong Kong stocks, that is, we may go to the industry and ask companies in various industries. Which companies in this industry do you think have the strongest entrepreneurs, the strongest team and the best corporate culture? After we start to contact them, we will track their reactions in different environments. This year, for example, this economy is under great pressure. How do they adjust? Whether it is to save costs or expand costs, we must understand the reasons behind their choices and the results they bring. So this is a consideration for people.
On the other hand, Hong Kong stocks are actually a relatively difficult market to invest in. We have very strict requirements for the sustainability and growth of the business model of the enterprise. This judgment of business model is based on the accumulation of years of research. The business model of each business is different, but in general, we emphasize free cash flow, which means that it can continuously have cash flow and flow to this company, and try not to ask for too much capital from our own investors and shareholders.
Generally speaking, we just look at people and things. Good people do good deeds, and there are spaces and barriers, which are probably the four points. At these points, we choose good companies at all levels. If we say portfolio, we are relatively scattered in various industries. There are some industries that only we can buy, which may be different from the mainstream public offering in which funds choose to invest in Hong Kong stocks. They all appear in our portfolio. In fact, they can also make some contributions to our portfolio in history.
But overall, this year's macro pressure may be relatively large. In the Hong Kong stock market, the profits of these companies follow the China economy, but their valuations sometimes follow the policies of the Federal Reserve or follow the global currency liquidity. The pressure on both sides is relatively high this year, but this time may also be a good time for layout.
Q5。 What risks may Hong Kong stock investment encounter in the future and how to avoid them?
Luo Jiaming: For our professional investors, first of all, we can't choose the wrong company. If a company is not good or good enough, we should not buy or buy many positions. On the other hand, the economy has not yet reached a very large upward stage, and it is not clear when the Fed's policies will end. When this round of austerity comes, we should be relatively cautious. Our choice of assets is more from the perspective of cash or higher certainty.
Secondly, we need to observe whether there are any new changes in China's economy, such as whether the real estate industry can be eased, or whether there will be more time-limited adjustments to the structure of some industries. Once we find a clear context, we are likely to make some adjustments in shareholding and industry allocation.
In addition, if the Fed stops raising interest rates, we may shift this position from defensive position, dividend position and a certain position, and may shift to the direction of growth and then future cash flow. In this process, in addition to observing these changes, we will cherish this opportunity, and we will look for companies that can do better in this adversity. These are some assets that we should firmly grasp in good times.
Q6。 What kind of mentality should a market like this year make a good investment?
Luo Jiaming: First of all, this year may be the most difficult stage of the Hong Kong stock market in the past decade. From February 20021year to now, this round of decline is actually the deepest round and the longest round of decline since 2008, so it is normal for everyone to feel unconfident and uncomfortable at this stage. Because it has been 14 years since we were so miserable last time.
Secondly, we should have some long-term confidence in the best entrepreneurs in China economy and the best business model in China economy. As long as China's new economy, high-quality enterprises and these outstanding entrepreneurs and hard-working people can continue to create value, then no matter whether the company is listed in Hong Kong stocks or A shares, it can still bring value to shareholders. We still have to invest on the basis of value and have this belief.
Looking ahead, we expect that China's economy will bottom out in the second half of the year, and the profits of our quality companies may also improve month-on-month. At the same time, we believe that the second half of the year will gradually see the end of this round of monetary tightening by the Federal Reserve, and the biggest factor suppressing the valuation of the Hong Kong stock market will also be weakened.