Source: Brokerage China Author: Qu Hongyan Recently, China Yangtze Power hit a historical high and once again showed the slow bull stock trend of "tripling in ten years". The slow bull market has left behind many passers-by and brought good returns to the steadfast investors. It is "rare for those who triple in one year to be like carp jumping over the dragon gate, while those who double in three years are few and far between." On the other end of the investment world, however, violent collapses are also deafening, with many financial products suspected of "Ponzi schemes" ceasing payments, leaving investors with no hope of recovering their investments. Both positive and negative cases illustrate the importance of forming a suitable mentality towards money in one's lifetime; otherwise, sooner or later, you will divorce yourself from your money. "I call this the money mind, a person's IQ can reach 120, 140, or even higher levels, and perhaps some people's minds are good at doing one thing, while others are good at doing another. They can do things that most ordinary people can't do. But I know some very smart people who make very foolish decisions because they lack the money mind." Buffett once said so. The so-called money mind refers to believing in common sense, believing in compound interest, being cautious and rational, thinking independently, prioritizing security over return, not dealing with people with questionable character, not easily guaranteeing for others, not believing in windfall profits, and not trying to cross legal norms for extra benefits. In today's world of ubiquitous information, everyone's wealth may become the "prey" of those with ulterior motives. Only with the money mind, can one form good behavior habits and shield oneself from separating from one's wealth. Do not entrust your wealth easily. Wealth is easy to lose but hard to accumulate, and trust is a vital reason leading to the rapid loss of wealth. "Do not allow anyone else to manage your business unless you can watch their every move closely and understand their behavior; or you have strong reasons to believe in their character and ability. For investors, this criterion determines when you can let someone else make investment decisions for you." Graham's criterion written eighty years ago is so clear. Almost all the investors who lost their wealth in the financial products have violated the above two criteria. They did not have the ability to closely supervise the whereabouts of their funds, nor did they have sufficient reasons to believe in the character of the product issuers. They easily invested their own wealth solely based on others' glib tongue and a piece of commitment paper. They did not act as gatekeepers of their own wealth and ended up with nothing left even if the government punished the wrongdoers. "An ounce of prevention is worth a pound of cure." This is a phrase Munger often says. Destiny must be in one's own hands, and investors with a suitable money mind will try their best to find suspicious points in their investments to protect the safety of their principal. For example, whether the manager is trustworthy, whether the underlying assets are profitable, whether oneself can timely monitor the risks in the investment process, and whether the sales staff is obtaining large commissions. As long as any unreliable signs are found, these investors firmly will not invest their money. Do not desire to get rich quick. As in the capital market and anywhere else, making money is not easy, and desiring to get rich quick will lead to quick loss of wealth. In the capital market, the desire to get rich quickly often leads to investors over-allocating specific stocks, industries, or assets at the worst time. For example, buying high-risk stocks that can gain huge returns once an adventure succeeds, but the chance of success is very small, also known as "whispering stocks" by legendary fund manager Peter Lynch. "They often tell investors a story with explosive effects. These 'whispering stocks' have a hypnotic effect on people, and it is easy for you to believe that the story the company tells has an emotional appeal that can easily confuse you." This is like hearing a very tempting "sizzling" sound, making you salivate, but you did not notice that there is no steak on the grill. In the eyes of investors who lack the money mind, stable yield provided by blue chips such as China Yangtze Power cannot meet their demands. However, historical experience clearly shows that buying stocks lacking in safety solely based on imagined high yields is unwise. The long-term average investment return of general stocks is 9%-10%, which is also the average investment return of stock indexes in history, a benchmark to measure one's investment performance and the benchmark to measure fund investment performance.
Author: Xu Nuo

In the violent surge of the general rise in the market, there are still subtle differences in the stock selection strategy of funds that quickly repair their net asset value.

It is obvious that time is particularly important for fund net asset value and ranking. Although the current market is in a general rise, the strategy of repairing the net asset value of funds based on the fastest time and strongest stock price has led to the phenomenon of 'weak first, strong later' and 'strong first, weak later' being revealed between oversold and strong stocks. Many heavily weighted stocks in funds that have already started rebounding earlier in the year and achieved a doubling of the annual K-line have significantly underperformed the index since September, while a batch of oversold stocks have experienced a violent surge in the market.

Institutions quickly 'eliminate' small-cap stocks

On October 7, the last trading day of the National Day holiday in the Hong Kong stock market, $Hang Seng TECH Index (800700.HK)$rose again by more than 3%, leading to a full-scale rise of technology and consumer sector stocks, with many small-cap stocks 'disappearing' in the violent surge in stock prices.

Journalists from Securities China noticed that the AI artificial intelligence company heavily weighted by E Fund. $SENSETIME-W (00020.HK)$ Closing up 9.9%, robotics company.$UBTECH ROBOTICS (09880.HK)$up 9.72%, $MEDBOT-B (02252.HK)$ up 11.57%, $WB-SW (09898.HK)$ rose 9.66% in the Hong Kong stock market that day, $ZA ONLINE (06060.HK)$Rose by 12.9%, $YEAHKA (09923.HK)$The company rose by 9.42%, $KINGSOFT (03888.HK)$Rose by 11.86%, $HUA HONG SEMI (01347.HK)$Rose by 16.25%. Despite the violent spike in the market, Chinese stocks in the Hong Kong market are showing an overall rise, with every single stock participating, but the spike still has its subtleties.

These subtle differences in the overall rise are reflected in the market's fastest and fiercest price elasticity, 'eliminating' small-cap stocks in the rising trend, making small-cap stocks the most beneficial sector in this round of uptrend. On October 7th, soared by 67.16% in a single day.$EASOU TECH (02550.HK)$For example, during the four Hong Kong stock trading days of the National Day holiday, the cumulative increase of this stock has reached 192%, making the mobile advertising algorithm company, which had only about 3 billion Hong Kong dollars in June this year, completely out of the micro-cap stock category. After another surge of 67.16% on the last trading day of the National Day, the market cap of Yisou Technology has rapidly approached 20 billion Hong Kong dollars from less than 3 billion Hong Kong dollars three months ago.

The phenomenon of micro-cap stocks entering the mid-cap stock category during the violent rally has frequently occurred in the Hong Kong stock market, further indicating the importance that institutional investors attach to the resilience of micro-cap stocks. It also implies the likelihood of public funds and other institutional funds going long in this round of the market.

Stocks that are held by funds start strong and then weaken.

It is worth noting that the 'elimination' of micro-cap stocks, which triggered a frenzy of fund raising stock prices, also put some pressure on fund heavyweight stocks that have been rebounding since the beginning of this year, as evidenced by the pressure on the stock prices of fund heavyweight stocks on the last trading day of the National Day.

The fund heavyweight stocks, which soared from 45 billion Hong Kong dollars to a high of 98 billion Hong Kong dollars this year, ended down 1.63% on October 7 when the Hang Seng Tech Index rose sharply by 3%. Unlike many Hong Kong stocks that do not face institutional selling pressure in the frenzy, Bilibili had been included in the top ten holdings of more than 30 funds by the end of June this year. $BILIBILI-W (09626.HK)$ In the crazy surge, many Hong Kong stocks faced no institutional selling pressure, but Bilibili had been included in the top ten holdings of more than 30 funds by the end of June this year, a list of heavyweight holdings.

In addition, unlike many oversold stocks that may double in price during a rebound, the stock price has not yet achieved positive returns within the year, while bilibili has already achieved a positive return of 131.6% in the year, doubling in the year's candlestick.

"Although we have observed many stocks double in price during a rebound, the annual candlestick remains negative. However, many large-cap stocks held by funds have already achieved positive returns or even doubled in the year's candlestick. This may become the trigger logic for the market to quickly eliminate small-cap stocks, but for funds holding large-cap stocks, there may be some short-term pressures from switching positions." A fund manager in Shenzhen believes that despite the current market's mixed signals, the subtle differences in the market are still apparent, which may become more evident in the subsequent market trends.

Closing with a 0.36% increase on October 7th.$POP MART (09992.HK)$also reflects the pressure on funds holding large-cap stocks. Similarly, pop mart has a market cap exceeding 70 billion Hong Kong dollars, with a year-to-date stock price increase of up to 1.79 times. It is also because the annual candlestick has already doubled, causing public funds to significantly underperform the Hang Seng Index in the violent market from September 26th to October 7th, with a rebound of approximately 18% in stock price.

It is obvious that the phenomenon of heavyweight fund stocks that have already doubled in annual candlestick lagging behind during the rebound highlights that although this round of market is driven by institutional funds, it still shows the phenomenon of "weak before strong" and "strong before weak" in terms of individual stock position management and exploration of stock elasticity in the capital game.

Technology innovation is the first choice.

Regarding the current market performance, fund managers determine that the positive policy shift may lead to continuous long positions in the all market funds, including public funds, foreign funds, private funds, and retail investors.

Morgan Stanley fund personnel emphasized that Chinese assets lead the global stock market, with both the Hong Kong stock and A-share markets almost unanimously bullish. The trading volume has significantly increased, expecting a substantial net inflow state, with private equity funds and individual investors as potential incremental fund drivers. Currently, the strong buying momentum in Chinese assets is expected to continue.

The aforementioned fund personnel determine that after a short-term rapid rise, the A-share and Hong Kong stock markets have received a certain degree of valuation repair. However, from an absolute level,$CSI 300 Index (800122.HK)$the static PE ratio still remains very attractive, at only 12.3 times,$S&P 500 Index (.SPX.US)$at 28 times,$Nikkei 225 (.N225.JP)$at 20.9 times, therefore, the A-share market still has significant room for repair. Subsequently, it is necessary to pay attention to the progress of policy implementation and the strength of fiscal measures. The future policy proposals are to intensify countercyclical adjustments in fiscal and monetary policies, ensure necessary fiscal expenditures, and there is a high possibility of increased fiscal stimulus in the fourth quarter. If implemented, this will provide strong support to the market.

Regarding investment opportunities in Hong Kong-listed internet companies, professionals from Huaan Fund believe that since 2021, the policy orientation has shifted from "anti-monopoly and strict regulation" to "promoting the sustainable and healthy development of the platform economy." This change emphasizes the important role of the platform economy in stabilizing employment and promoting economic growth. This policy adjustment is a significant bullish signal for private internet enterprises. As the government begins to focus on and support the development of the platform economy, these enterprises are expected to usher in new development opportunities. By providing more support measures, the government hopes to encourage innovation, enhance efficiency, and ensure fair market competition, thereby promoting the prosperity of the entire digital economy sector. In addition, the government also aims to boost market confidence and attract more investment into the internet and related fields through these initiatives, thus driving overall economic growth. In short, this positive policy shift helps to rejuvenate the internet industry.

Li Yue, Fund Manager of the International Business Department of Penghua Fund, pointed out that as assets greatly impacted by overseas liquidity, the valuation restoration resilience of Hong Kong stocks is considerable. Zhang Yuxiang, the manager of Penghua Hong Kong Science and Technology ETF Fund, also believes that Hong Kong's technology sector is supported by industrial capital, with increasing buybacks and dividends; innovative drugs, consumption, and other areas benefit from relevant policy support, which will help in the valuation restoration of the pharmaceutical and consumption sectors.

Editor / jayden