Under the trend of "East rises, West falls", both Domestic and Overseas Institutions are showing new perspectives on the Chinese stock market.

First, the hundred billion private equity Jinglin Asset has recently stated that the era of undervaluation of Chinese assets, especially core assets, has ended, and a new development cycle may be unfolding; secondly, foreign institutions have successively become optimistic about the Chinese market, with Citigroup recently upgrading its rating on Chinese stocks to Shareholding while downgrading its rating on the US stock market from Shareholding to neutral.

While expressing optimism, the market is also welcoming inflows of capital from both domestic and overseas investors. Data from third-party platforms indicate that the stock private equity positions have reached a new high for the year. Meanwhile, Overseas funds such as Global Equity Funds and Emerging Markets Equity Funds have started to slightly increase their allocation to Chinese stocks since the second half of last year, showing signs of recovery.

All assets of Non-China companies have been entirely removed.

Recently, the well-known hundred billion private equity Jinglin Asset revealed their latest adjustment actions during an internal communication meeting: all assets of Non-China companies have been entirely removed.

Behind this action, Jinglin Asset Management Partner and Fund Manager Gao Yuncheng shared his views, stating that at this current time, there is a clear optimism about China's development prospects in the coming years.

In his view, accompanied by changes in global geopolitical and industrial patterns, the competitive strength of Chinese companies is undergoing a transformation from being significantly undervalued, to gradually being re-recognized, and now expected to attract global funds for reinvestment.

From a stock investment perspective, Chinese Assets have undergone a difficult period of continuous valuation suppression. During this period, enterprises faced enormous pressure in terms of operation and policy environment, leading to ongoing decreases in valuation, coupled with a lack of liquidity, and Hong Kong's international investors showed a trend of continuous outflow." Gao Yuncheng determines that the era of suppressed valuation for Chinese Assets, especially core assets, has ended, and a new development cycle may be starting.

In this context, he has formulated his recent investment insights as "Find and Hold China's 'MCGF 10'". The term "MCGF" is actually a word he created, which stands for "Make China Greater Future."

He further explains that these companies' valuations were compressed to very low levels in the past few years, but they have now successfully emerged from their operation cycle's low points, found new growth points, and are highly likely to become foundational companies in the next round of China's economic growth as well as in the global economic industrial development.

From the Global Sectors perspective, Gao Yuncheng mentioned that the main beneficiaries in this process may be two types of companies: one type is large foundational companies, while the other type consists of emerging entrepreneurial small companies like "DeepSeek" and "Yushu Robot."

The liquidity of leading stocks in the Hong Kong stock market is quite good.

Regarding specific markets, he is very optimistic about a series of companies in China related to Technology and new Consumer sectors, where the proportion of Technology companies may be relatively larger.

They have laid out investments in A-shares, Hong Kong stocks, and U.S.-listed Chinese shares, but the proportion of Hong Kong stocks may be relatively higher. The reason is that the number of companies aligning with their investment direction listed in Hong Kong is greater.

In addition, Gao Yuncheng recently observed the trading volumes of the top companies in A-shares and Hong Kong stocks and found that unlike the previous perception that A-share trading is more active and liquid, the trading volumes of the top three or top five companies in Hong Kong often far exceed those of the top three or top five companies in A-shares. "This indicates that the trading liquidity of leading companies in the Hong Kong stock market is quite good, with an efficient pricing mechanism."

What is the outlook on Consumer and Real Estate?

It is worth noting that as a previously core position for Jinglin Asset, the Consumer Sector has faced considerable difficulties in recent years.

However, Gao Yunchen noted that over the past few years, some phenomenal situations have emerged in the Consumer field. For instance, Blind Box, parts of the gold jewelry industry, and food and beverage companies often see long queues in front of their stores. Therefore, their current investments in the Consumer field will still focus on those phenomenal companies while also paying close attention to those favored by young people and with a high proportion of emotional consumption.

From a macro perspective, the latest round of economic cycles in China may closely relate to Technology, emotional consumption, and personalized consumption. Thus, we will conduct in-depth research and screening in areas of personalized consumption such as travel and self-indulgence, and our investment portfolio currently holds a number of related companies long-term.

Additionally, the latest government work report emphasizes stabilizing the real estate and stock markets. From micro-survey situations, Gao Yunchen observed that since September of last year, the volume in China's real estate market has stabilized and slightly rebounded, the downward trend in prices has slowed, and the price declines have basically ended in some cities, even experiencing a rebound, with the increase in volume significantly greater than the increase in price. "After experiencing price declines of 20% or even 30%, the real estate market may have found a stabilization point, which is of great significance for the stable development of China's economy."

Private equity stock positions reached a new high this year.

In fact, Jinglin Asset's optimistic statement is also a reflection of the current private equity industry.

According to data from Private Equity Ranking, on February 28, the stock private equity position reached a new high this year, with the stock private equity position index at 76.97%, an increase of 2.91% from the previous week. Since the beginning of this year, the stock private equity position index has shown a steady upward trend, currently up by 3.43% from a year-to-date low of 73.54%.

Among them, the asset allocation increase of the hundred billion private equity firm is particularly prominent this year. As of February 28, 2025, the current stock private equity position index for hundred billion firms stands at 78.69%, an increase of 3.29% compared to the previous week. Since the beginning of this year, the stock private equity position index has continued to set new highs, with the current position index showing a significant increase of 8.42% compared to the beginning of the year.

Overseas Institutions have raised their ratings and allocation ratios.

Recently, Overseas Institutions have frequently expressed their Bullish outlook on the Chinese stock market. Recently, Citigroup downgraded the rating of the USA stock market from Overweight to Neutral while upgrading the rating of Chinese stocks to Overweight, stating that the "exceptionalism of the USA" has at least paused.

The institution expects that the growth momentum in the USA will be lower than in other parts of the world, however, when the AI narrative once again takes center stage, the USA stock market may regain an edge over the Large Cap.

Considering the strength of China's Technology industry, government support, and relatively low valuations, the institution analyzes that even after a significant rally in the stock market, the Chinese stock market still appears quite attractive, with DeepSeek demonstrating that Chinese technology is at the forefront of Western technology.

Earlier, Goldman Sachs maintained an Overweight rating on the MSCI Chinese Index and predicted that this index would rise by 14% this year; Deutsche Bank expects that the valuation discount of Chinese stocks will gradually disappear, and there may be a valuation premium, as the current trading valuation of the MSCI Chinese Index is lower than that of the global index, and this valuation gap is expected to narrow as Chinese enterprises expand globally.

From the movement of overseas funds, the latest global public fund flow report released by Morningstar's China Products Department shows that since the second half of 2024, the allocation ratio of overseas funds to Chinese stocks has begun to increase slightly, showing signs of recovery.

From the segmented types, in the second half of 2024, the enthusiasm of global equity funds and emerging market equity funds for Chinese stocks has warmed up, with the allocation ratio gradually increasing.

Previously, from 2015 to 2020, the allocation ratios of Global Stocks Fund and Emerging Markets Stocks Fund to China Stocks showed an overall upward trend, reaching peak values of 5.2% and 37.1% respectively in September 2020. Subsequently, the allocation ratios to China Stocks began to decline, dropping to 1.8% and 21.7% respectively by March 2024.

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