Multiple Fund Firms at Autumn Strategy Meetings: Optimistic on Q4 Equity Market, Eyeing AI and Dividends

Source: China Fund News Reporter: Cao Wenjing

Recently, several fund management companies—including China Universal, Fullgoal, Hwabao, CCB Principal, and HSBC Jintrust—have held autumn strategy meetings or mid-term client exchanges. Fund managers discussed a range of hot topics, including equity trends, technology, and fixed income.

Overall, public funds maintain an optimistic outlook on equity assets for the fourth quarter, with a focus on investment opportunities in the AI supply chain, overseas expansion, and dividend-yielding assets. On the fixed-income front, bond yields are expected to remain range-bound at low levels, described as having a "ceiling above and a floor below."

Optimism on Q4 Equity Assets

Looking ahead, Yuan Jianjun, Deputy General Manager of China Universal Fund, suggested that market opportunities can be observed from four perspectives:

• Artificial intelligence has far-reaching implications. China can provide a complete AI supply chain, with accelerated progress in self-reliance and control, revealing related investment opportunities.
• Amid dramatic shifts in the global geopolitical landscape, China's stability premium is expected to emerge gradually. For example, since 2021, China's export growth has reached a new level, with significant growth not only in manufacturing sectors such as automobiles, electromechanicals, and chemicals, but also in service trade like innovative drug CDMOs.
• Resources and energy may enter a long-term boom cycle due to supply-demand imbalances. Chinese mining companies, leveraging their manufacturing advantages, have become major contributors to global production growth.
• High-dividend assets are becoming scarce resources in an era of low interest rates.

Jiang Yanze, Fund Manager and Deputy Head of Research at CCB Principal Fund’s Equity Investment Department, noted that a "barbell strategy" may return to favor. On one hand, the AI theme should be maintained, while sectors such as chemicals, new and traditional energy, and power equipment are also worth watching. On the other hand, dividend assets should be allocated to hedge against short-term market liquidity fluctuations.

"In the medium to long term, dividend-paying assets continue to expand, reflecting a decline in the central tendency of long-term capital gains returns, while the central tendency of dividend returns rises. The elasticity of investment returns is weakening, but stability is expected to improve. With the central tendency of government bond yields at relatively low levels, high-dividend stocks are also attractive in cross-asset allocation. The Hong Kong market is also fertile ground for high dividends," said Sun Bin, Fund Manager at Fullgoal Fund.

Xu Tingquan, Deputy Director and Fund Manager of the Overseas Equity Investment Department at HSBC Jintrust, pointed out several directions worth noting in the Hong Kong market:

• Industries with strong growth and high visibility, such as overseas AI components and supply chains, domestic computing power alternatives, AI applications, and innovative drugs.
• Sectors where valuations are undervalued and fundamentals may be at an inflection point with low expectations, such as leading internet companies and consumer sectors.
• High-dividend yield assets, including telecom operators, financials, utilities, and energy.

Bond Yields Likely to Remain Range-Bound at Low Levels

Looking ahead to the Q4 fixed-income market, Chen Wenpeng, Head of Fixed Income Investment at Hwabao Fund, believes that the overall downside for the bond market is limited, with a greater need to focus on tactical and structural opportunities. Key areas to watch include:

• Observing changes in supply-demand dynamics in September and October.
• Monitoring shifts in allocation forces and the potential for a year-end rally in November and December, which may present good tactical opportunities.
• With an improvement in ultra-long-term bond supply next year and a decline in inflation, the 30-year government bond yield may have significant room to decline.

Li Wei, Fund Manager at China Universal Fund, stated that bond yields are likely to remain range-bound at low levels, exhibiting a "ceiling above and a floor below" pattern. Current interest rates are already at historically low levels. Combined with a weak economic recovery and moderate inflation, further downward pressure on rates is limited. At the same time, weak social financing demand and continued monetary policy support mean rates are unlikely to rise sharply.

Jiang Yanze added that against the backdrop of a moderate domestic economic recovery, the lower bound for bond yields still awaits new rate-cut signals. Meanwhile, with credit spreads widening, he sees investment value in medium- to long-term credit bonds.

Leung Yee-ching, Head of Multi-Asset Investment Specialists for Asia at HSBC Global Asset Management, noted that on the government bond front, yields remain relatively high amid increased inflation volatility, heightened geopolitical risks, and a hawkish Fed stance. However, this also enhances the potential coupon appeal of fixed-income assets. On the corporate bond side, investment-grade credit spreads remain relatively narrow, supported by broadly stable fundamentals. High-yield credit may be affected by diverging U.S. economic growth and geopolitical factors.