Source: Broker China Author: Yu Shipeng
Original title: Big changes in “top” positions in the 40 billion public offering! Reduced TMT positions and binge bought 3 stocks

Li Xiaoxing bluntly stated that the Internet platform is the direction he is most optimistic about in terms of Hong Kong stock technology, but the development of the AI industry will not happen overnight; there will inevitably be twists and turns in the middle, including potential risks such as data privacy and ethics, which may cause subsequent sector fluctuations. “Currently, the TMT sector accounts for more than 40% of transactions. There are quite a few voices in the market saying that this time is different. The record share of transactions represents the establishment of the main market, but there is nothing new under the sun, and excessive enthusiasm will always subside at some stage.” Li Xiaoxing admits that he reduced his position in the TMT sector in the first quarter, and the current allocation is likely below the market average.

Stock positions maintained at more than 90%

Li Xiaoxing is currently the Deputy General Manager of Yinhua Fund's business, the investment director of the Investment Management Department, the fund manager, the investment manager (social security basic pension), and the co-chairman of the Active Stock Investment Decision Committee. Currently, he manages about 10 public funds, with a management scale close to 40 billion yuan. Among them, Yinhuaxinjia is one of the few funds managed separately by Li Xiaoxing for two years. As of the first quarter, the size was 9.591 billion yuan, making it the largest fund managed.

According to Yinhua Xinjia's two-year quarterly report, the fund's stock position as of the first quarter was 92.15%, a further increase from 90.69% at the end of 2022. At the end of the first quarter, the fund's top ten heavy-duty stocks were BYD, Kuaishou-W, Meituan-W, Tencent Holdings, Jingao Technology, Deye, Jinlang Technology, Jingke Energy, Dongfang Cable, and Aerospace Electric. Compared with the fourth quarter of 2022, 7 of the ten heavy-duty stocks were adjusted in the first quarter.

Specifically, Li Xiaoxing bought Kuaishou-W, Meituan-W, and Tencent Holdings in the first quarter, which ranked second to fourth as of the first quarter respectively; in addition, the heavy-duty stocks added in the first quarter include Jingao Technology, Deye, Jinlang Technology, Jingke Energy, Dongfang Cable, and Aerospace Electric. Compared with the end of the fourth quarter of 2022, Ziguang Guowei, Zhifei Biotech, Yao Ming Biology, Tianqi Lithium, Ningde Times, Haida Group, and Bethenny withdrew from the top ten positions at the end of the first quarter.

Furthermore, as of the first quarter, the size of the Yinhuaxinyi Hybrid Fund managed by Li Xiaoxing was close to 8.7 billion yuan, and the stock position was also as high as 92.25%. The fund's top ten heavy-duty stocks in the first quarter were the same as those held by Yinhuaxinjia in two years. BYD shares ranked first. The new heavy-duty stocks Kuaishou-W, Meituan-W, and Tencent Holdings also ranked second to fourth largest heavy-duty stocks. Judging from the overall holdings, the distribution of the industry involves various tracks such as new energy, Hong Kong stock internet, electronics, national defense and military industries, food and beverages, and pharmaceuticals.

The economy continues to recover, and the configuration is dominated by technology

Li Xiaoxing gave a detailed explanation of the above position adjustments and track layout in the quarterly report.

“In the first quarter, the overall economic recovery direction continued to improve, but the slope was not high. Overall, it showed a steady recovery trend.” Li Xiaoxing said that during the economic recovery process, there is a high degree of certainty that the travel chain, infrastructure chain, and high-end manufacturing industry will recover, and the degree of recovery in real estate consumption, automobile consumption, etc. is weaker than the market's optimistic expectations. Since March, as government personnel changes and adjustments have come to an end, a new round of steady growth and confidence has continued to be implemented. In particular, he mentioned that senior officials have continued to insist on two unwavering commitment to stabilizing the private economy and stabilizing confidence in foreign investment; the Ministry of Commerce has designated 2023 as a year to boost consumption, and the government will revitalize the market and promote the release of consumer demand through various means; industrial policies continue to be implemented, the Ministry of Finance further supports enterprise science and technology research and development, and increases the deduction ratio for enterprise R&D expenses to 100% to promote industrial upgrading.

“Our macro-judgment on this year's domestic market is still that the economy as a whole is recovering steadily, industrial restructuring continues to be upgraded, and consumer confidence is gradually recovering. Judging that due to the continuous strengthening of the country's own strength, international partners have more common interests with us, the international situation will warm up compared to before, and international trade will gradually bottom out.” Li Xiaoxing said.

Under this general environment, Li Xiaoxing comprehensively considered industry trends, industry sentiment, and stock price positions in the first quarter. The first quarter focused on electric vehicles, midstream, photovoltaics, energy storage, sea wind, semiconductor equipment and design, internet platforms, military industry, consumer medicine, beauty care, food and beverages, etc. “The overall market fluctuated upward during the reporting period, but there was great differentiation. The AI theme led to a sharp rise in the TMT sector; consumption performance was mediocre; and real estate and banks lagged behind. We maintain high positions, focus on technology, balance consumption, and focus on new energy, Hong Kong stocks, the Internet, electronics, defense and military industries, food and beverage, medicine, etc., and select high-growth individual stocks from booming industries.”

Semiconductors are expected to restart the upward cycle in the second half of the year

In terms of market conditions in the sector, Li Xiaoxing bluntly stated in the quarterly report that the new energy sector was abandoned by the market a lot in the first quarter. The share of transactions and valuations in this sector are already historically low. It's just that the market is paying more attention to the benefits of rising targets and the downside of falling sectors. “We generally think that the current market's concerns and discussions about the new energy sector are more of a stressful response to a declining sector.” Li Xiaoxing said that in the 2022 interim report, he mentioned some risk points in the new energy sector. After these risk points were digested for more than half a year, judging from the current valuation position and stock price position, the risk factors in the new energy sector have been fully released. The current time period is very attractive. As a result, he increased his positions on electric vehicles, photovoltaics, energy storage, sea breezes, etc. in the first quarter.

Furthermore, Li Xiaoxing also admits that “Internet platforms are the most promising direction for Hong Kong stocks in terms of technology.” He analyzed that from a performance perspective, Internet companies continued to exceed expectations starting in the second quarter of 2022. In the context of user dividends being superimposed on anti-monopoly at the end of the year, cost reduction and efficiency increase is the main theme driving performance growth in the next stage. At the valuation level, after two years of decline in the Internet stock price of the Hong Kong stock market, the valuation is at the bottom of history. The accelerated upward trend in performance is superimposed on the emergence of new technologies such as AI, which is expected to open up room for upward valuation.

In terms of semiconductors, Li Xiaoxing said that he is optimistic about domestic alternatives, focusing on semiconductor equipment, materials, and components.Looking at the medium to long term, domestic wafer production line construction will accelerate again with the active verification and introduction of domestic suppliers. In the direction of economic recovery, his opinion will be marginally positive. “The global semiconductor downturn cycle is nearing its end. After the past few quarters of inventory removal, it is expected that the upward cycle will restart in the second half of this year. Upward elasticity depends on the strength of the recovery in downstream demand. Focus on relevant left-hand layout opportunities.”

However, with regard to the artificial intelligence sector, which was most popular in the first quarter, Li Xiaoxing believes that the development of the AI industry will not happen overnight; there will inevitably be twists and turns in the middle, including potential risks such as data privacy and ethics, which may cause subsequent fluctuations in the sector. In terms of investment opportunities, he said that the “water seller” hardware-first computing power industry chain and the vertical application scenarios where AI empowers users are worth paying attention to. “Currently, the TMT sector accounts for more than 40% of transactions. Of course, there are quite a few voices in the market saying that this time is different. The record share of transactions represents the establishment of the main market, but there is nothing new under the sun, and excessive enthusiasm will always subside at some stage. We are good at investing in growth stocks with valuation-bound performance growth stocks. It's not something we are good at during the market dream rate investment period, so we reduced our positions in the TMT sector in the first quarter, and the current allocation is likely less than the market average.”

edit/lambor