Multiple fund firms stay optimistic on Q4 equities at autumn strategy meetings, eye AI, overseas expansion, dividends

Source: China Fund News

Several fund management companies, including China Universal, Fullgoal, Hwabao, CCB Principal, and HSBC Jintrust, have recently held autumn strategy meetings or mid-term client exchanges. During these sessions, fund managers discussed hot topics such as equity market trends, technology, and fixed income.

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

Optimism for Q4 Equity Assets

Looking ahead, Yuan Jianjun, Deputy General Manager of China Universal Fund, highlighted four key areas of opportunity:

1. Artificial Intelligence: AI has far-reaching implications. China can provide a complete AI supply chain, and the process of self-reliance is accelerating, creating related investment opportunities.
2. Global Geopolitical Shifts: 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 like automobiles, electromechanical, and chemicals, but also in service trade such as innovative drug CDMOs.
3. Resources and Energy: Long-term prosperity may be on the horizon due to supply-demand imbalances. Chinese mining companies are leveraging their manufacturing advantages to become the main drivers of global production growth.
4. High-Dividend Assets: These are becoming scarce resources in a low-interest-rate era.

Jiang Yanze, Fund Manager and Deputy General Manager of the Research Department at CCB Principal Fund's Equity Investment Department, believes a barbell strategy may return. This involves holding onto the AI main line while also favoring sectors like chemicals, new and traditional energy, and power equipment, alongside allocating to high-dividend assets to manage short-term market liquidity fluctuations.

"In the medium to long term, dividend-yielding assets are expanding. This is driven by a downward shift in the central tendency of long-term capital gains returns, an increase in the central tendency of dividend returns, and a reduction in the volatility of investment returns, which should improve stability. The central tendency of government bond yields is at a relatively low level. Comparatively, high-dividend stocks are also attractive in terms of asset allocation across major asset classes. The Hong Kong stock 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 Fund, noted several directions to watch in the Hong Kong market:

• Strong Growth with High Visibility: Industrial opportunities such as overseas AI components and supply chains, domestic computing power alternatives, AI applications, and innovative drugs.
• Undervalued Sectors with Potential Turning Points: Industries with low expectations where fundamentals may be at an inflection point, such as leading internet companies and consumer sectors.
• High-Dividend Yield Assets: Sectors like telecom operators, finance, utilities, and energy.

Bond Yields Expected to Remain Range-Bound at Low Levels

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

• September-October: Observe changes in supply-demand dynamics.
• November-December: Focus on changes in allocation forces and the potential year-end rally, which could present good tactical opportunities.
• Next Year: An improved supply situation for ultra-long-term bonds, coupled with falling inflation, could lead to significant room for a decline in the 30-year government bond yield.

Li Wei, Fund Manager at China Universal Fund, stated that bond yields are likely to remain range-bound at low levels, with a "ceiling above and a floor below." Current interest rates are already at historically low levels. Combined with a weak economic recovery and moderate inflation, this suppresses further rate declines. However, weak social financing demand and supportive monetary policy mean rates are unlikely to rise sharply and persistently.

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

Leung Yee-chun, Head of Multi-Asset Investments for Asia at HSBC Asset Management, believes that for government bonds, yields remain relatively high amid increased inflation volatility, heightened geopolitical risks, and a hawkish stance from the Federal Reserve. However, this also enhances the potential coupon attractiveness of fixed-income assets. For corporate bonds, supported by relatively stable fundamentals, investment-grade credit spreads remain narrow. High-yield credit may be affected by diverging US economic growth and geopolitical factors.

Editor: Huang Mei Proofreader: Ji Yuan Production: Lu Mi Reviewer: Xu Wen Note: The cover image for this article was generated by AI.