Key Findings
Core assets have long-term investment value
Judging from the cyclical positioning, the global economy is currently in a stage of transition from recession to depression. At this stage, capital costs are at the lowest level in a round cycle, financing for high-tech emerging industries is supported with certainty by policies, and long-term relative returns are clear. Looking from a comparative perspective between China and Japan, there are many similarities between China and Japan in the 90s in terms of development paths and problems faced, while Japan's consumer and pharmaceutical industry profits were stable during the same period. Judging from the concentration of the industry, the concentration of net profit or operating income in most industries has been rising in recent years, which has led to the formation of public funds to a certain extent. This phenomenon is likely to continue in the future, and the long-term investment value of core assets will not change.
Hong Kong stocks account for a high share of the new economy and complement the mainland. There is still room for fundamentals and relative valuations. After the Hong Kong Stock Exchange revised listing rules in 2018, the Hong Kong market attracted a large number of biomedical listings and the return of Chinese securities. The share of Hong Kong stocks in the new economy industry quickly rose to 61%, and the IT sector accounted for the highest share of the mainland consumer category, complementing the characteristics of the mainland's higher share of consumer classes. Furthermore, the Hang Seng Index EPS lags behind domestic PPI by one to two quarters. Domestic PPI is still on an upward trend, and index profits still have room to rise. The year-on-year difference between the Shanghai-Hong Kong AH Premium Index is related to the earnings spread of the Hang Seng Composite Index and the Shanghai-Shenzhen 300. There is still room for the premium rate and premium rate to decline year on year, and AH valuation is likely to continue to converge.
Funding side: Long-term capital will continue to flow in
The allocation ratio of non-financial assets of residents is negatively correlated with per capita GDP and is positively correlated with the proportion of the population aged 15-64. As China's per capita GDP increases and the working-age population declines, the proportion of residents allocated financial assets will continue to rise, directly or indirectly bringing incremental capital to the market. However, there is still room for improvement in the balance of insurance funds used and the share of stocks and funds in them. The internationalization process of A-shares is not over yet. It is expected that insurance capital and foreign capital will also maintain a long-term net inflow trend, favoring core assets.
China Securities Shanghai-Hong Kong-Shenzhen 500 Index: The constituent stocks of the China Securities Shanghai-Hong Kong-Shenzhen 500 Index, which is a one-stop arrangement of China's core assets, are mainly weighted stocks from Shanghai, Hong Kong, and Shenzhen. The total market value of more than 70% of the constituent stocks is above 50 billion yuan. The Shanghai stock market has the highest number of stocks, and Hong Kong stocks have the highest total weight, accounting for 43.54%. The top 5 industries were finance, information technology, optional consumption, daily consumption, and healthcare, in that order, with 27.18%, 21.15%, 12.31%, 9.56%, and 7.56%, respectively. The share of the Sino-Singapore economy sector that became inverse stocks accounted for 51.85%, and the weight of related industries has grown rapidly in recent years. Compared with major indices, the volatility of the Shanghai-Hong Kong-Shenzhen 500 is low, and Sharp's ratio is high; the relative valuation level is in the middle to low.
Huitianfu China Securities Shanghai-Hong Kong-Shenzhen ETF: The rate is the lowest in its class. The management and team are excellent. The Huitianfu China Securities Shanghai-Hong Kong-Shenzhen 500 ETF closely tracks the CSIC Shanghai-Hong Kong-Shenzhen 500 Index, pursues the goal of tracking deviation and minimization of tracking errors, and adopts a full replication strategy. The absolute value of the daily tracking deviation does not exceed 0.35%, and the annual tracking error does not exceed 4%. The product's management fee rate is 0.15% and the escrow rate is 0.05%, which is the lowest level among equity ETFs.
The product manager, Huitianfu Fund, is one of the leading comprehensive asset management companies in China. It has complete business, perfect product layout, leading asset management scale, and impressive long-term performance. Fund manager Ms. Dong Jin has 10 years of experience in the securities industry and has extensive experience in index product management.
Risk warning: The rules of historical statistics do not represent the future; historical performance does not represent the future; index fluctuations may cause phased losses; the analysis of specific fund products in this report does not constitute investment recommendations.