Investment highlights:
The domestic economy is gradually stabilizing, and the price-performance ratio of Chinese assets has improved. Compared to the third and fourth quarters of 2023, economic activity gradually stabilized and began to pick up in the first quarter of 2024. Profits of industrial enterprises have improved markedly, real estate policies have continued to be optimized, and higher exports have led to a further recovery of the domestic economy.
Overall, China's economic fundamentals are relatively stable, and market transparency and standardization have greatly improved.
From the perspective of margin of safety, Chinese assets have significant advantages in the global market.
The new “National Nine Rules” were introduced, and it is currently more cost-effective to invest in the entire market. On April 12, 2024, the State Council issued “Certain Opinions on Strengthening Supervision and Risk Prevention and Promoting High-Quality Development of the Capital Market”. After a lapse of 10 years, it once again issued guidance documents on the capital market, enhancing the long-term investment value of the capital market. Currently, the overall market layout reflects balanced allocation of value, risk-return performance is more stable, and investment in the entire market is more cost-effective. Compared with the Shanghai and Shenzhen 300 central state-owned enterprises, the Shanghai Stock Exchange Composite Index has a higher weight and is more advantageous in the context of the new “Nine Rules of the State.”
The constituent stock industry of the Shanghai Composite Index has clear attributes and long-term allocation value. As of May 29, 2024, among the constituent stocks of the Shanghai Composite Index, the top ten industries with market capitalization distribution made up 67.29% of the Shanghai Composite Index's weight. From December 31, 2019 to May 29, 2024, the cumulative earnings of the Shanghai Composite Index significantly outperformed mainstream broad-based indices such as the Shanghai and Shenzhen 300 and China Securities 1000. Currently, the price-earnings ratio, market-sales ratio, and net price-to-market ratio of the Shanghai Composite Index are all low since December 31, 2009, and the investment cost ratio is outstanding.
The Shanghai Composite Index ETF (510760) was established by Cathay Pacific Fund Management Co., Ltd. on August 21, 2020. The tracking target is the Shanghai Composite Index. The fund will be listed and issued on September 9, 2020. As of May 28, 2024, the fund size was 1,794 billion yuan, product management rate 0.15%, and escrow rate 0.05%. The rate of this product is significantly lower than that of similar products. At the same time, the share of “Chinese characters” stocks is high. Using a sampling and replication method, it has a clear advantage over the excess earnings of the Shanghai Composite Index and the Shanghai and Shenzhen 300.
Risk Reminder All analyses in this report are based on public information and do not constitute any investment advice; if there are adverse changes in the market environment or policy factors, the development performance of the industry may fall short of expectations; the sample data used in the report is limited, there are risks that the sample is insufficient to represent the overall market, and there may be errors in data processing statistics; past performance does not represent future performance; historical summaries are for reference only, or will not be completely repeated.