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: Yu Shipeng

The market gradually reaches a consensus on the "year-end market trend."

The so-called year-end rally refers to the phased upward market trend that occurs in the stock market from December to January or February of the following year. Since this period coincides with spring, the market is also referred to as the "spring active" market or "calendar effect". Regardless of the terminology used, this market trend reflects good expectations in the market for the next year's economic fundamentals, policy environment, corporate profits, and market liquidity.

According to statistical analysis by Huaxia Fund, in the ten years from 2014 to the present, A-shares have experienced 6 year-end rallies. Seller data cited by Huaxia Fund shows that from 2010 to 2023, A-share spring active market rallies have had a high realization rate (missing only in 2022), with rallies mostly starting in January but showing better average returns in February, with an average duration of about 65 days. The index upward elasticity varied significantly in past rallies, with the Shanghai Stock Exchange Index increasing between 5% and 33% (with an average increase of 12.4%). Taking the rolling 3-month market trend in the stock market as an example, Shangyin Fund statistical data shows that from 2005 to 2024, the period from December to February of the following year had the highest average return rate, with a relatively high probability of upward movement, demonstrating a significant relative win rate.

Shangyin Fund attributes the reasons to the triple impact of economic fundamentals, liquidity, and policy at this time of the year in the Chinese financial market: Firstly, the Central Political Bureau meeting in December and the Central Economic Work conference and subsequent "Two Sessions" in March are often interconnected, improving the market's assessment of policy stimulus intensity; Secondly, the end of the year is a period of performance vacuum, with A-share annual reports released by the end of January, potentially containing substantial fundamental long/short news, leading to repeated speculation on profit reversal or targets exceeding expectations; In addition, approaching the end of the year and the Chinese New Year, commercial banks face core capital sufficiency assessments, corporations have liquidity needs, and residents have seasonal consumption habits, while interest-bearing bond issuance has peaked (concentrated before November), providing relatively good liquidity in the financial market during this period.

In light of the current situation, Ping An Fund stated in a recent forecast that with the dual drive of liquidity and policy expectations, institutional funds, active funds, and retail funds are expected to work together to drive A-share market into a year-end rally, with the Hong Kong stock market also expected to benefit, indicating a possibility of an early start to the spring active market.

In addition, market analysts believe that, with the surge on November 27 as a symbol, A-shares are gradually shaking off the impact of Trump's tariffs and returning to the logic of domestic policy stimulation. Entering December, the market gradually reached a consensus on the 'year-end market', and policy drive began to outweigh Trump's trade, becoming the main logic of A-share market.

Corporate profits are expected to further recover.

Although institutions have high expectations for the year-end market, this round of market activity is not a simple repetition, but has a different background and investment logic from the past.

"This round of year-end market activity differs from last year in terms of macro environment, policy background, and industry trends." According to Fuguo Fund's analysis, in the first three quarters of this year, the actual GDP grew by 4.80% year-on-year, and the nominal GDP grew by 4.02% year-on-year, with domestic effective demand still insufficient. At this current point in time, the market has relatively positive policy expectations for the Central Political Bureau meeting and the Central Economic Work Conference to be held in December, around which policy expectation dynamics may become the main direction of market trading.

"The heavyweight meetings in December this year will set the tone for next year's fiscal policy, including the deficit ratio, special government bonds, and special bonds; while the heavyweight meetings in March next year will also determine the official deficit ratio target and total budget for 2025. Therefore, from now until February next year, we are in a stage where the policy effects have yet to be verified, and expectations may continue to heat up." Fuguo Fund stated.

Zhongou Fund believes that, amid continuous overseas uncertainties, market expectations for the Central Political Bureau meeting and the Central Economic Work Conference in December are gradually brewing. Considering the increasing policy expectations, market trading activity remains high, and the previously accumulated downside risks have been released well, with a more positive outlook for the market in the future. Before the 'two sessions' in 2025, the market's expectations for economic stimulus policies are unlikely to cool down, but geopolitical risks may continue to disrupt the market's upward trend due to the emotional political needs in the United States before the new president takes office.

Ping An Fund believes that, from a global macro perspective, the Federal Reserve is currently in the process of normalizing monetary policy, providing greater room for domestic policy objectively. Recently, a series of incremental policies combined with 'twin' and 'new' policies taking effect have injected positive expectations into the economic situation of December, with corporate profits expected to further recover, providing a solid foundation for the market. However, under the dual challenges of weak domestic demand and rising external pressure, the upcoming Central Economic Work Conference and Central Political Bureau meeting at the end of this month will clearly deploy the policy directions for the next stage, the incremental policy space is expected to open up, further boosting market sentiment, and the large cap is expected to continue to rise in the turbulence.

Adopting a dumbbell-shaped allocation strategy.

In terms of sector layout strategies, Huaxia Fund believes that most markets will show a significant 'value sets the stage, growth sings' characteristic at the end of the year and the beginning of the year. In the fourth quarter, driven by the expectation of stable growth policies, financial, consumer, and stable styles perform well; entering the first quarter of the following year, with the increase in risk appetite, growth styles stand out. From the perspective of economic prosperity, the market usually 'takes the lead' at the end of the year and the beginning of the year, anticipating the direction with strong performance in the following year, mainly focusing on two directions: continued prosperity and turning adversity into opportunities.

Specifically, Ping An Fund suggests that investors can adopt a 'dividend high dividend + technology growth' dumbbell-type allocation strategy. Dividend assets, favored by the year-end insurance funds' favorable fund allocations, are expected to attract more incremental funds, further consolidating their stable trend; at the same time, under the impact of potential trade conflicts causing export pressure and adjustments in export tax policies, end-of-line companies in advanced manufacturing may face elimination, sectors such as electronics, new energy, autos, and machinery are worth investors' special attention in order to capture more investment opportunities in the upcoming year-end market.

Fuguo Fund stated that in terms of industry trends, since 2024, AI applications abroad have been emerging endlessly, significantly empowering advertising, games, and other sectors. Domestic AI applications are also progressing rapidly, with many listed companies repeatedly updating and iterating large models. Constantly catalyzed by AI applications, the industry trend might become a hot spot of market focus in this year's year-end market.

Senior Director of Huaxia Fund's Absolute Return Investment Division, Zou Weina, believes that in 2025, the market is expected to continue maintaining a loose stimulus environment, providing a benign and healthy 'soil' for economic recovery, focusing on sectors with cyclical recovery. Strategically, adopting a balanced allocation, seeking opportunities in low-cycle, sensitivity assets and pro-cyclical assets. Focus on three main directions: growth sectors, with a focus on AI software and hardware terminal innovation, weak semiconductor cycle recovery, and the resonance of domestic substitution acceleration opportunities; emphasis on the defense industry under a secure background can maintain medium-term allocation; new energy sector dampened, potential for structural opportunities. Second is the value of cyclicals and finance, focusing on opportunities in non-banking and cyclical goods. Third is the innovative drugs and medical devices in the pharmaceutical sector and the opportunities in segmented industries under the backdrop of consumer recovery worth paying attention to.

Editor/Jeffy