Preface: The 2023 annual report of the fund has been disclosed, and China Industrial Securities has selected the core views of billion-dollar fund managers of actively-managed equity funds in the entire market, summarizing them into ten questions that are currently of concern in the market. This explores the views of billion-dollar fund managers on the 2024 market and investment opportunities in hot industries, for the reference of investors. 1. How to assess investment opportunities in 2024? Xie Zhiyu (Fullerton Global Fund): Looking ahead to 2024, economic policy will still be focused on stability. After experiencing the volatility and downward trend at the beginning of 2024, there is a higher probability of gradual stabilization and rebound in the capital market. In terms of market style, undervalued high-dividend and AI sectors are highly focused at the beginning of the year. In terms of specific sectors, new technologies in the AI, semiconductor, communications, and computer sectors are gradually reflecting China's international capabilities in high-end manufacturing. The total export volume of products in fields such as electronics, automobiles, machinery, and new energy has been reaching new highs in recent years, with the global market share of leading listed companies' products increasing. Internally, we will continue to track developments in various sectors while considering risks, hoping to continue to explore investment opportunities in technology transformation acceleration or sub-industry improvement. Source: "Hengquan Suitable Flexible Allocation Hybrid Securities Investment Fund (LOF) 2023 Annual Report" (20240329) Zhou Haidong (Huashang Fund): Looking ahead to 2024, the domestic economy may still be in a relatively low position, influenced by the real estate sector. Currently, market expectations have not yet reached a consensus, but due to proactive fiscal policies, recovery may still be the main theme for the whole year. The international environment also presents significant uncertainties, with disagreements on the pace of rate cuts by the Federal Reserve and the extent of economic slowdown. However, overall, the marginal change in liquidity is moving in a favorable direction. Therefore, on the whole, the market should have a better performance basis in 2024 compared to last year. Source: "Huashang New Trend Preferred Flexible Allocation Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Liu Yanchun (Invesco Great Wall Fund): From the recent Chinese New Year holiday data, the consumption tendency of the resident sector remains at a relatively low level. While there has been a significant increase in tourist visits, tourist income has remained relatively stable. Compared with the growth data of per capita disposable income in recent years, consumer confidence is still insufficient. The real estate industry continues to maintain a weak position. Combined with previously published financial and inflation data, the macroeconomic situation has not shown significant improvement. We always believe that growth and transformation are not contradictory, as development can be more secure. China's rapid development over the past years has accumulated certain problems and risks, so it is necessary to focus on addressing issues and resolving risks at this stage. Consolidation is for better development, and our economic development goals have requirements for quality and speed. Since the second half of 2023, growth-stabilizing policies have been successively introduced, with increasing efforts. The issuance of trillions of yuan in national bonds has been carried out, PSL volume has reached 500 billion, January social financing data exceeded expectations, restrictions on property purchases in first-tier cities are gradually being relaxed, and a surprise downward adjustment of the 5-year LPR interest rate have all been implemented. Interest rate cuts will help stabilize property sales gradually, accumulating momentum for the upcoming peak season of sales in March-April. Monetary and fiscal policies continue to strengthen, and the cumulative effects of policies are expected to gradually show. Data for the start of construction in March is crucial, as good performance in the data would indicate the start of a recovery in endogenous economic momentum, with the potential formation of a positive cycle. Since the second half of 2023, the volatility in the equity market prices mainly stems from the dual adjustment of fundamental expectations and risk preferences. The market is generally underestimating China's policy adjustment space and long-term development potential. The path of transformational development will not be smooth sailing, and the process of risk mitigation will bring short-term pains, but adjustments are only temporary. Economic prosperity will reappear, and we are confident in the prospects for China's economy and capital markets. Source: "Invesco Great Wall Emerging Growth Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Xiao Nan (E Fund): By the end of 2023, the market's pessimistic sentiment seems to have reached an extreme point. It is true that as prices continue to fall, it has a significant impact on consumer and investor expectations. If these expectations are not promptly terminated, it is difficult to generate effective reversal forces. The longer the expectations persist, the greater the cost of reversing expectations, affecting both the real economy and the capital market. However, both historical experience and our own experience tell us that blindly extrapolating along the inertia linearly often misses the most critical stages of investment. In fact, whether it is the policy side or the macro side, many positive signals are accumulating. We will not let emotions blind our judgment. On the contrary, the more solid the fundamentals of the companies we hold, the less likely we will panic. Source: "E Fund Consumer Industry Stock Type Securities Investment Fund 2023 Annual Report" (20240329) Hu Xinwei (Fortune SG Fund): Looking ahead to 2024, China's macroeconomic situation still presents challenges and opportunities. First, the adjustment of the real estate market is expected to continue, and second, the confidence of various economic entities remains low, which will to some extent affect economic growth. However, we must also see that China's economy still has great development potential. At the same time, the government has introduced or will soon introduce a series of measures to promote economic development and boost confidence among various economic entities, which will solidify the foundation of China's economy and help it stabilize and rise. As for the capital market, there may be some improvements compared to 2023. On the one hand, the market has experienced a long period of adjustment, with the valuations and market caps of many companies decreasing. On the other hand, the inflation of major overseas economies is expected to gradually retreat into a rate-cutting cycle, which will decrease the negative impact on global capital markets. Once market expectations for China's economic growth start to change positively, the Chinese capital market will show improvements. Source: "Fortune SG Consumer Industry Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Qiao Qian (Xingzhen Global Fund): Looking ahead to 2024, the core of our attention on the macro level is the changes in global geopolitics, policy changes, and the interactive effects of economic recovery and the variables of various industries. Currently, overall economic conditions and market expectations are generally in the lower range, and we believe that with the launch of corresponding policies, industry expectations for the economy will improve.Repairing, is expected to drive the quantity and price rebound of demand side leading to a reasonable central level. On the other hand, technological innovation brings new markets and new demands, there will be a process from quantitative change to qualitative change in the future, and the related industry chain continues to nurture investment opportunities.Source: Annual Report of Xingquan Commercial Model Selective Hybrid Securities Investment Fund (LOF) 2023 (20240329) Dong Li (Hengzheng Global Fund): Looking ahead to 2024, the trend of stable and positive economic growth will not change, but we cannot ignore the many new difficulties and challenges that come with it, such as insufficient domestic demand, hidden risks in key areas, and complex and severe external environment. The economic work conference in December 2023 also focused on these issues and proposed a series of measures to address them, including focusing on expanding domestic demand, deepening reforms in key areas, and persisting in effectively preventing and resolving risks in key areas. The reserve requirement ratio cut and interest rate cut policies at the beginning of 2024 also show the government's determination to stabilize growth and support economic development. We believe that the policy to stabilize growth in 2024 is likely to be strengthened, and the momentum of stable and positive growth in the domestic economy is expected to continue. The valuation of the capital market is currently in a historically low area, partly due to recent liquidity issues causing a decline in market risk appetite, and also because investors are concerned about the new difficulties and challenges facing future economic operations, leading to increased pessimistic expectations. However, we have seen various protective policies coming out recently in both the economic and capital market sectors, effectively solving liquidity issues, restoring market risk appetite, and limiting the overall downside risk of the market. We are optimistic about investment opportunities in the capital market, particularly in the technology sector where valuations have adjusted, the cost performance ratio is high, and there is long-term development space. We also see potential in pro-cyclical sectors benefiting from policy support for stable growth, as well as in specific areas aligned with national strategic development directions and expected to contribute to stable growth, while also improving the competitive landscape and offering higher dividend yields. Source: Annual Report of Xingquan Trend Investment Hybrid Securities Investment Fund (LOF) 2023 (20240329) Yang Ruiwen (Invesco Great Wall Fund): Market sentiment in the fourth quarter of 2023 has reached a freezing point, with market funds actively avoiding heavily weighted stocks and flowing towards small-cap and low-volatility dividend stocks. This has had a significant impact on growth stocks, with semiconductor valuations dropping to near historic lows. The current market atmosphere is pessimistic, but I remain optimistic. Looking ahead to 2024, the market sentiment has already hit rock bottom, and it may be difficult for very low expectations to face an even weaker reality. If reality is slightly stronger than expected, the market's David Double Hit is likely to arrive; especially since downstream semiconductor companies are heavily correlated with overseas economies, the probability of recovery will be higher with the Fed cutting rates. The domestic situation is unlikely to worsen further, as we have conducted research on many companies in the fourth quarter, and most of them are cautiously optimistic about 2024. They have taken various cost-cutting measures, in complete contrast to the optimism and expansion at the beginning of 2023. These companies are making very conservative forecasts; even if their revenue does not grow this year, they can still achieve high profit growth through cost reduction. If revenue exceeds expectations slightly, the extra gross margin is almost entirely net profit. Most companies are more focused on operational risks, pay more attention to cash flow, and have adopted more cautious sales strategies, significantly tightening accounts receivable policies. The past rough growth has suddenly become more refined, and since last year, the free cash flow of these companies has shown a noticeable improvement, indicating an increase in their real value. Source: Annual Report of Invesco Great Wall Electronic Information Industry Stock Securities Investment Fund 2023 (20240329) Qiu Dongrong (Zhonggeng Fund): Traditional debt models and globalization models are facing challenges, and adaptability, resilience, and breakthroughs are different dimensions of alpha. Countries, enterprises, and individuals will continue to make adjustments to achieve better states as much as possible. Although the market is shrouded in many linearly extrapolated long-term narratives, the subtraction to resolve risks in real estate and local government debt has been underway for many years, and actual risks are dissipating; at the same time, the addition of productivity improvement and breakthroughs to overcome bottlenecks are continuing, with reusable research and technology, more flexible production layout, marketing models, etc., there are still opportunities for entering a better situation and moving towards globalization. We should be more objective, rational, and proactive in facing all these changes, especially at the bottom of the current bear market, actively focusing on industries and companies that are the first to emerge from the trough and keenly capturing future opportunities. Looking ahead to 2024, some uncertainties at home and abroad are expected to be partially resolved, with a higher probability of internal supply and demand adjustments and external pressures being alleviated. At the macro level, we mainly focus on three aspects: 1. Improving the reliability of public finances, resolving supply and demand contradictions, and a moderate return of inflation, making the economy likely to transition from stabilization to growth; 2. Initiating monetary policy tools, starting an interest rate cut cycle, and to some extent clearing key risks, the economy may shift to a positive cycle, with noticeable recovery in consumer and investment confidence; 3. The end of the US interest rate cycle, the shift to inventory replenishment, the rise of capacity building, the global manufacturing cycle is expected to pick up, and the Chinese economy will benefit from this. Source: Annual Report of Zhonggeng Value Leading Navigator-Zhonggeng Value Leading Navigator Hybrid Securities Investment Fund 2023 (20240322) Fu Pengbo (Rayuan Fund): In terms of macroeconomics, important policies supporting equipment upgrades and reducing logistics costs have been introduced since the beginning of the year. The recent focus of the market is on the convening of the two sessions (National People's Congress and Chinese People's Political Consultative Conference) and the specific policies to be rolled out. Data and sentiment after the Spring Festival still cannot prove that the economic growth has slowed down, and variables such as the recovery of real estate sales, the restoration of consumer services, and changes in exports remain important tracking indicators. Overseas, the Federal Reserve has confirmed the end of interest rate hikes, but the timing of the start of rate cuts and the extent of the declines in the next two years are still uncertain and depend on ongoing data. In terms of the securities market, new signs have emerged in January 2024 with social financing data exceeding expectations, specifically M1. M1 is a leading indicator commonly used in economic cycles and market trends, and data exceeding expectations may be due to the Chinese New Year factor or increased fiscal and credit injections, which bode well for economic operations and the capital market. Of course, we need to continue to observe the data in the coming months. Since mid-2023, various policies to protect the market have been introduced, with regulatory authorities responding quickly to market demands and taking appropriate measures. Recently, the chairman of the China Securities Regulatory Commission proposed to improve the capital market.Rule of law, strengthen legal protection. Compared to the past two years, these positive signals have added expectations for a "prosperous" market this year.Content Source: Annual Report 2023 of Reoriented Growth Value Hybrid Securities Investment Fund (20240327) Tan Li (China Asset Management): We judge that the macro economy needs a certain degree of countercyclical adjustment to break free from the deflationary economic environment. In 2024, the economy is expected to enter a phase of inventory restocking, although it will take some time to start a new investment cycle. Currently, both real estate investment and home sales are in a state of extreme downturn. We believe that there will be a certain shift in macro-control policies for the real estate industry, entering the second half of the financial cycle. The function of the real estate industry will also be redefined. However, housing, as a carrier of a good life and wealth accumulation, can mobilize excess savings and help achieve a virtuous cycle of consumption and investment. In 2024, as the prospect of economic recovery gradually becomes clearer, the A-share market will stabilize, with both A and H-share markets trading at very low valuations. The upward risk is far greater than the downward risk in terms of valuation protection. We believe that the expected returns on the Chinese equity market in 2024 can be more optimistic. However, we also recognize that different industries are in different production cycles, and the supply-demand situation is not entirely the same. Overall, there is some excess capacity in the middle and downstream industries. The comprehensive economic recovery will still require a longer process, and the equity market will continue to focus on structural opportunities. Content Source: Annual Report 2023 of China Asset Management Value Selected Stock Securities Investment Fund (20240328) Zheng Chengran (Guangfa Fund): In 2024, the Chinese economy is expected to undergo a moderate recovery. In terms of overall quantity, local congresses have been convened successively, with relatively positive target establishment in various regions, showing strong economic growth demands within the year. In terms of overseas factors, there is a high probability that the U.S. economy will achieve a "soft landing," with inflation trending down, the start of an interest rate cut cycle, and a relatively favorable external environment. Internally, the momentum for economic recovery persists. As the post-epidemic "scars" gradually fade, household savings intentions decline, and consumption inclinations are expected to rise; the real estate investment chain has significantly adjusted over the past few years. Referring to overseas experiences, real estate sales and investment as a proportion of GDP are close to the bottom range; infrastructure and manufacturing investments are expected to maintain resilience in years with strong economic demands; and exports are expected to continue to improve against the backdrop of enhanced global competitiveness in advantageous industries and the U.S. inventory replenishment cycle. More importantly, the Central Economic Work Conference has called for a policy orientation of promoting stability through progress and establishing stability first, indicating a positive policy bias. The growth-stabilizing policy may be further strengthened. It is highly probable that the follow-up monetary policy will continue to be loose, and fiscal policy may also intensify to stabilize growth. Treasury bonds and PSL are likely to continue issuing, and guaranteeing housing, urban-village transformation, and the "dual-purpose" infrastructure under the "three major projects" will become the main focus. Financial regulatory authorities have recently continued to release positive signals for stabilizing the capital market, improving the regulatory environment. It is expected that GDP will show a low-to-high trend for the year under the base effect, making a moderate economic recovery worth anticipating. China has a huge market advantage and domestic demand potential, with a complete industrial chain and stable supply chain. As global industrial competitiveness continues to strengthen, we are confident in China's long-term economic transformation and industrial upgrading. Looking ahead to 2024, after experiencing three years of correction, most industries and individual stocks have entered the three low phases of low valuation, low institutional support, and low price levels; as long as there is a marginal improvement in the industry or company fundamentals, many companies' valuations will recover to normal levels, and stock prices may have a good upward potential. Content Source: Annual Report 2023 of Guangfa High-End Manufacturing Stock Initiated Securities Investment Fund (20240329) Zhang Jintao (China Asset Management): We believe that the core of whether the market can perform well is not the economic growth rate but rather the emphasis on shareholder returns and long-term stable policy expectations. The former determines earnings per share and dividend yield, while the latter determines valuation levels. If listed companies pay more attention to shareholder returns rather than blindly pursuing scale, then there is a chance that the stock market performance will improve. Unlike the optimism of investors in 2023, the current market expectations are not as upbeat. However, we are not pessimistic about the overall market. With the current low valuation levels, there are also many structural opportunities. If the deflation expectations are reversed, both the A-share and Hong Kong stock markets could perform well. Content Source: Annual Report 2023 of China Asset Management Hong Kong Advantage Hybrid Securities Investment Fund (20240328) Zhao Feng (Reoriented Fund): The sharp deterioration in the supply-demand relationship in the new energy industry over the past year has made the issue of oversupply resulting from "overturning" a focus of the market. "Overturning" is essentially a cost competition that reflects a lack of protection and respect for property rights on one hand, and a lack of innovation and differentiation among enterprises on the other hand, leading to cost becoming the primary competitive tool for Chinese companies. Costs are largely determined by scale, so we see that some companies are almost disregarding everything to gain a competitive advantage through expanding their scale, in hopes of surviving in the fierce competition. This inevitably leads to significant irrational expansion of supply in most industries. In addition to companies' expansion impulses, the actions of local governments are also an important driver of rapid capacity growth. In the existing system, a considerable amount of resources are concentrated in the hands of local governments, and in the past, the assessment of local governments was similar to a tournament mechanism. Under the pressure of performance assessment, local governments not only have a strong investment impulse themselves, but also push for increased investment by enterprises through investment attraction and various subsidy policies, especially in industries with heavy assets and significant GDP contributions, the role of local governments in driving growth is more evident. However, this situation has undergone significant changes in the past two years. Based on cautious expectations for the future economy, a considerable number of companies have significantly adjusted their future investment plans; out of competitive pressure, there has been an increase in the exit of small and medium enterprises and obsolete production capacity in the past two years. Meanwhile, local governments, constrained by fiscal pressure, have significantly reduced their support for corporate investment, indirectly raising the cost of investing for businesses and suppressing investment impulses. Since the formation of capacity requires a certain period, we can predict that the growth of supply in many industries will significantly slow down or even contract in the coming years. From the demand perspective, with the decline in economic growth and the decrease in disposable income growth rates, slowing demand growth is an unavoidable issue, and investors are likely to...This leads to a rather pessimistic conclusion. When a country's industry is unable to upgrade to a higher level, existing industries will face competition from countries with similar income levels worldwide, thus labor income cannot continue to rise, leading to a trend towards stagnation in per capita income. China is currently in the process of adjusting its industrial structure, with a simultaneous decline in the competitiveness of traditional industries and industrial upgrading. In this process, there will be structural imbalances in labor matching, widening income gaps, and a slowdown in overall income growth. However, unlike countries that fall into the middle-income trap, China's industries are still in the process of upgrading, as can be seen clearly from the changes in export structure, which also means that labor income and its consumption capacity are still increasing. Even considering the long-term trend of declining population, private consumption may still remain stable in terms of quantity for quite a long time. When considering both supply and demand, the market's expectations of oversupply and shrinking demand may be overly pessimistic currently. If demand remains relatively stable while supply adjusts at a faster rate, the profit growth of some leading companies in the future may outpace income growth significantly, making the implied returns at current valuation levels quite attractive.Source: "Ruifeng Balanced Value Three-Year Holding Period Mixed Securities Investment Fund 2023 Annual Report" (20240327) Second, how to view dividend investment opportunities? Lao Jienan (Huitongfu Fund): Low-value high-dividend assets are still worth focusing on. Look for stocks with stable and sustainable profitability, although growth may not be fast, but there is potential for increased dividends, further improved corporate governance, or asset integration. The logic of potential valuation increase exists. Although dividend assets have generally achieved good excess returns in the past three years, the valuation of high-quality companies is still relatively undervalued, and we need to be cautious about the risk of missing out on uptrend opportunities. Source: "Huitongfu Value Selection Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Fu Pengbo (Ruiyuan Fund): The market performance of operators and high-dividend companies in 2022-2023 reflects the urgency of the market to find "relatively safe" assets in a turbulent and uncertain environment. Excluding industries with significant cyclical fluctuations, these companies can generate sustainable operating cash flow, balancing profit distribution between corporate development and shareholder dividends. During the downward guidance of interest rates, the allocation of such targets requires us to address and choose carefully. Source: "Ruiyuan Growth Value Mixed Securities Investment Fund 2023 Annual Report" (20240327) Yang Jinjin (CICC Schroders Global Fund): If the key word in the market in the past few years is prosperity, the key word in the future market is likely to be "shareholder returns." As the range of high-growth prosperity narrows, the dividend trend in the past year, such as utilities and coal, is likely just a prelude. From foreign experience, any industry with stable demand and structure could achieve sustained shareholder returns through increased shareholder returns; as many industries experienced oversupply in 2023, improvement in the structure and decline in capital expenditure could bring performance improvement if shareholder return is considered. This could potentially bring upward elasticity in both EPS and valuation. Source: "CICC Schroders Global Trend Priority Mixed Securities Investment Fund 2023 Annual Report" (20240329) Wang Bin (Huaxin Fund): Dividend strategy is a type of strategy that the current market is paying attention to. When focusing on this type of strategy, we should avoid a "fixed mindset" and should not statically use high or low dividend yields as the main criteria for selecting industries and companies. We should dynamically select high-quality high-dividend companies based on our judgment of future industry and company profitability and changes in dividend ratios. Source: "Huaxin Anxin Consumer Services Hybrid Securities Investment Fund 2023 Annual Report" (20240327) Wang Keyu (Hongde Fund): In the past year, there has been a significant shift in the market's perception of growth and dividend assets. Dividend assets have become the focus of the market. However, in the current situation where consensus is almost reached, we need to identify the risks that may arise from changes in industry profitability when dividend yields have declined from high to medium-low levels. Source: "Hongde Ruixing Three-Year Holding Period Mixed Securities Investment Fund 2023 Annual Report" (20240328) Third, how to view resource investment opportunities? Han Chuang (Dacheng Fund): Firstly, there are resource products with constraints on supply. In recent years, the domestic economy has been in a phase of transformation and upgrading, while the overseas economy appears to be filled with turbulence. Therefore, many investors do not have a positive view of resource products from the demand perspective, especially for varieties related to macroeconomic factors such as non-ferrous metals. However, based on the actual situation in recent years, resource products with constrained supply have strong relative returns. The reason is that the transformation and upgrading of the domestic economy has actually increased the demand for resource products per unit of GDP, which to a large extent offsets the unfavorable impact of sectors such as real estate on demand. Also, the overseas economy has a certain resilience and has not experienced a significant decline in demand. In a context of relatively stable demand, the influence of the supply side is greatly enhanced. With various uncertain factors, the supply of these resource products is actually very fragile. Resource products with constrained supply have always had a strong fundamental, but market expectations are always skeptical, so the stock pricing of related listed companies is not sufficient, which will continue to bring us opportunities. Of course, we should not focus too much on short-term commodity price fluctuations for these varieties, because stocks are long-term assets, and as long as the central price of relevant commodities continues to rise, it is sufficient. Source: "Dacheng New Industries Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Qiu Dongrong (Zhonggeng Fund): Represented by basic metals, resource companies. 1) The rigidity of the supply side has caused the central price of basic metals to rise, making prices sensitive. Basic metals as a whole exhibit three characteristics of low production capacity elasticity, low inventory, and relatively low prices, which favor the value of existing assets. Once demand improves, prices have elasticity, and currently prices have demonstrated elasticity at the commodity futures level. 2) Intensified domestic policies bring demand recovery, new energy sectors fill demand gaps, overseas industrial demand shows strong resilience and restocking, demand still has elasticity. 3) Valuation pricing is at historical lows, dividend yields are higher than average, corresponding expected return rates are higher. Source: "Zhonggeng Value Leading Hybrid Securities Investment Fund 2023 Annual Report" (20240322) Shi Cheng (Guotou UBS Fund): Upstream with resource attributes, due to the long-term restriction on supply speed, the profit center will continue to rise. We have found that as the active destocking cycle ends, the industry's supply-demand situation quietly improves, and the upward time may advance. Source: "Guotou UBS New Energy Hybrid Securities Investment Fund 2023 Annual Report" (20240330) Shen Yue (Zhongou Fund): Upstream resource products are based on supply-side restrictions and the structural upward trend in global industrialization and China's economic transformation.Source: "China-Europe Abundant Shanghai-Hong Kong-Shenzhen Flexible Allocation Mixed Securities Investment Fund 2023 Annual Report" (20240329)3)5G5G 2023(20240327)The dominance of domestic companies in the sector provides an opportunity to discover some globally competitive companies, offering enormous investment opportunities. This is due to the relatively low valuation levels, insufficient expectations, and numerous high cost-effective targets. With pressure on the traditional electronics industry due to uncertain development and increasing competition, many companies have seen their valuation levels drop to historical lows, leaving potential for undervalued companies with explosive growth potential to be discovered. Therefore, there is an opportunity to invest in low-risk, undervalued, and high-growth targets.Content Source: "Zhonggeng Value Navigation Hybrid Securities Investment Fund 2023 Annual Report" (20240322) Six. How to view new energy investment opportunities? Liu Gesong (Guangfa Fund): From a financial perspective, in the fourth quarter of 2023, many leading companies in the photovoltaic industry chain achieved very impressive results in terms of quarterly and first three quarters revenue and net profit, with profitability significantly increasing as upstream raw material prices declined. From the perspective of profit quality and profit growth, there are not many industries in 2023 that can surpass the photovoltaic industry. However, compared to other primary industries, the photovoltaic sector led the decline for the entire year, largely due to the contradiction between the rapid expansion of industry supply side and stable demand growth. Most investors are concerned that the industry's profitability will rapidly decline in the future. Our view is that in the process of rapid decline in component prices, the speed of industry consolidation may accelerate, and the costs of leading companies with advanced battery technology are also decreasing rapidly. Compared with second and third-tier companies, the profitability of frontline leaders will also be affected, but the impact is not as pessimistic as expected. Overall, we are optimistic about the profitability of leading companies in the new technology sector in 2024, and with industry valuation levels already at historical lows, we remain optimistic about the photovoltaic industry chain. Content Source: "Guangfa Technology Pioneer Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Cui Chenlong (Qianhai Kaiyuan Fund): Overall, the supply of traditional energy sources may remain in a tight balance due to various factors, accelerating the pace of replacement of new energy sources, and it is expected that their cost-effectiveness will further improve. The demand for many industries including photovoltaics and lithium batteries is likely to continue at a high growth rate, and although overseas demand may fluctuate in the short term, the long-term demand certainty is high based on the above factors. There is no need to overly worry about the sustainability of global demand. Concerns over short-term excess capacity in certain segments of the market may be overshadowed by demand growth in the near future. At present, there is great concern in the market about excess industry capacity, but we must recognize that given the high prices of traditional energy sources and the unstable global situation, the cost and supply chain stability of traditional energy sources are inevitable weaknesses, and the long-term trend of new energy sources replacing traditional energy is irreversible. Under the current premise of excess capacity in certain segments, intensified industry competition will further accelerate the rapid development of new energy technologies, and from a medium to long-term perspective, it will better promote their own competitiveness and optimize the industry landscape. Content Source: "Qianhai Kaiyuan Utilities Industry Stock Fund 2023 Annual Report" (20240330) Li Xiaoxing (Yinhua Fund): Inventory reduction and price wars in the domestic lithium battery industry chain gradually came to an end in 2023. The unit profitability of upstream materials remained at a low level, and the turning point in capacity utilization rates of various links is expected to occur around 2024, corresponding to a relatively solid fundamental bottom. After experiencing the troubles of slowing demand growth and oversupply, the competitive landscape in the middle of the lithium battery industry chain is undergoing positive changes. The profitability of leading companies is expected to exceed expectations at the bottom, and our focus is on segments that maintain stable profitability and have a globalized capacity layout after the bottoming out of profitability. The adjustment time of the entire lithium battery sector has been long enough and the magnitude large enough, with most pessimistic expectations being reflected. The expansion of silicon material capacity has driven rapid price declines in the industry chain, with potential demand growing rapidly, but overall facing the same problems of slowing demand growth and unit profit declines due to oversupply in the electric vehicle industry. Wind power, especially offshore wind power, has not reached expected installation and delivery rates, but there are still many projects awaiting installation in the coming years, with considerable industry growth rates. Unlike lithium batteries and photovoltaics, the unit profitability of wind power machinery and components is at a low point, with room for upward recovery in the future, and stock prices are at relatively low levels in terms of valuation history. Content Source: "Yinhua Xinjia Two-Year Holding Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Zheng Zehong (Huaxia Fund): In the long-term perspective of the new energy industry, we remain very optimistic. Whether it is the proportion of clean energy generation or the penetration rate of global smart electric vehicles, there is still a lot of room for improvement, and the industry's ceiling is still high. In the medium-term perspective, that is, from the perspective of the capacity cycle, the prices of many products in various links of the new energy industry chain have already reached the bottom, with many areas such as electrolytes, negative electrodes, photovoltaic battery cells, and components showing low profits for leading companies and losses for second and third-tier companies. If this situation continues, it will inevitably lead to the digestion of industry capacity, and with continued demand growth, the next supply-demand inflection point will also inevitably arrive. The fund manager believes that by 2024 to 2025, many segments may enter a new cycle of upward inflection points in supply and demand, and by then, the profitability of these segments' companies will also enter a new cycle of growth. The performance of stock prices is also worth looking forward to. In addition to electric vehicles, photovoltaics, and wind power that we have always focused on, we also see vigorous development in some emerging subfields. The energy storage industry has crossed the 0-1 development stage and entered a phase of rapid growth. Some new technology fields such as perovskite, sodium batteries, and hydrogen energy also have great potential in the future. Content Source: "Huaxia Energy Innovation Stock Fund 2023 Annual Report" (20240328) Zhao Yi (Quanguo Fund): In the new energy industry, on the one hand, during the rapid growth of the industry in the past 2 to 3 years, capacity has expanded rapidly; on the other hand, due to the influence of the international environment, domestic capacity expansion has been somewhat restricted, leading to significant impacts on both supply and demand, resulting in prices throughout the industry chain falling more than expected. In terms of policy, we have recently seen regulators starting to restrict companies' disorderly financing, meaning that companies will need to rely more on their own operations to achieve steady expansion. Supply has been constrained, and the capital expenditures of the industry chain have also reversed in the middle of the year; at the same time, with recent prices in the industry chain hitting rock bottom, downstream end-demand and restocking demand are expected to start rising.Thus, improvements are seen at both ends of supply and demand. Leading companies have endured the pressure test well in this round of price cuts, and the impact of international environmental fluctuations has also proven that there is a group of companies in China with extremely strong global competitiveness. Considering the significant adjustments in the stock prices of industry chain companies in the past two years, as well as the historical bottoming out of valuations at the industry cycle bottom and the still huge industry space, we are becoming increasingly optimistic about the future performance of new energy industry companies. 2023 is a year to determine the competitive landscape, and the differentiation between companies will be very clear. We would tend to choose companies with overseas expansion capabilities that are already in the process of implementing expansion.Content source: "2023 Annual Report of Quanguo Xuyuan Three-Year Holding Hybrid Securities Investment Fund" (20240329) Xing Junliang (Agricultural Bank Hui Li Fund): There is no need to worry excessively about the new energy sector, as its upward trend is not over. Firstly, with recent market fluctuations and style divergence, the crowding in the new energy sector has eased from its high levels, and risks are being released. Secondly, with the volatility of U.S. bond yields and loose domestic monetary environment continuing, macro liquidity still supports the new energy sector. Thirdly, the strong continue to be strong in the new energy sector, which remains the direction of prosperity. In the long term, the new energy sector, as a key direction for domestic industrial upgrades and overtaking in the international political and economic landscape, maintaining energy security with a "bottom-line thinking" will still be one of the most core allocation directions in the market for the coming years. Looking at specific sectors: Lithium battery sector: With the profitability of the lithium battery industry chain dropping to below reasonable returns for the manufacturing sector, capacity expansion in various segments has started to significantly slow down, and leading companies with strong bargaining power in the steep cost curve segments are likely to have more stable profitability, including leading companies in areas such as power batteries and structural components. Solar panel sector: Currently, profits in various segments of the industry chain are thin or even experiencing losses, increasing pressure on industry profitability. At the same time, companies face increased difficulty in financing, with significant weakening of support from capital markets, local governments, and banks. Based on this, the industry has seen accelerated supply clearance recently. Currently, profits in the solar manufacturing segment have reached their lowest, and the industry chain prices are in a state of irrationality. With demand coming out of the off-season and accelerated supply clearance, prices in some segments are expected to recover. Energy storage sector: Looking ahead to 2024, positive factors are gradually accumulating, with European household storage expected to complete inventory clearance in 2024H1 and resume steady growth driven by economic factors; large-scale storage in the U.S. is notable for its economy under battery price reductions and ITC additions, with subsequent transformer supply and approval acceleration expected to drive growth; domestic energy stor... Content source: "Agricultural Bank Hui Li New Energy Theme Flexible Allocation Hybrid Securities Investment Fund 2023 Annual Report" (20240328) Shi Cheng (National Investment UBS Fund): In the new energy power generation industry, it is estimated that silicon material prices have basically bottomed out, and the price decline in the component segment has also essentially ended. In the future, with the acceleration of solar and energy storage reaching grid parity and replacing traditional energy sources, there is likely to be another investment opportunity. Content source: "National Investment UBS New Energy Hybrid Securities Investment Fund 2023 Annual Report" (20240330) Q7. How do you view investment opportunities in new energy vehicles? Shi Cheng (National Investment UBS Fund): In terms of new energy vehicles, after a year of active destocking, the industry's inventory has reached a relatively extreme state, and the significant price drop is expected to significantly stimulate demand in the next 1-2 years. The worst supply-demand situation may occur in the next quarter. Due to the current low product prices inhibiting expanded production, we believe that supply-demand imbalance may reappear in 1-2 years. During this period, with the recovery in demand, industry leaders are expected to continue to perform well. We are relatively optimistic about the extent of this current upward trend. With the significant price drop and technological advancements in new energy products, the cost-effectiveness of products has greatly improved. Due to the substantial decline in profitability and the slowdown in capacity expansion, most companies have stopped new capital expenditure plans. As the cycles of demand and supply expansion are misaligned, we believe that a new round of demand cycles and future supply-demand imbalances may occur in the next two years. Content source: "National Investment UBS New Energy Hybrid Securities Investment Fund 2023 Annual Report" (20240330) Qin Yi (Hongde Fund): New energy vehicles provide a historical opportunity for Chinese domestic brands to overtake, with domestic brands benefiting fully, increasing their market share, and nurturing a localized supply chain. With changes in the downstream sector, upstream component companies will also experience rapid growth opportunities, with high-quality component companies growing from small to large and moving from domestic to international markets, replicating the brilliance of the smartphone era's industry chain. Content source: "Hongde Ruiyuan Three-Year Holding Flexible Allocation Hybrid Securities Investment Fund 2023 Annual Report" (20240328) Qiu Dongrong (Zhonggeng Fund): The global competitive and growth opportunities for smart electric vehicles have reached a significant turning point. 1) Concentration of smart electric vehicles towards leading brands. Mainstream new energy companies have completed the replacement of old models with new ones, entering a new phase of growth in sales and holdings, increased visibility and brand strength, narrowing down the players, profits are expected to reach a turning point, gradually entering a positive cycle. 2) Important turning point in autonomous driving technology. After 2-3 years of technology research and development, Tesla-led autonomous driving technology has been widely implemented in China, and consumers will gradually perceive it within the next year, becoming an indispensable factor in car purchase decisions. New energy vehicle companies are expected to enhance brand height with autonomous driving technology upgrades, strengthening product strength and R&D barriers, ultimately reflected in both increased sales and profitability. 3) Growth space opened up for exports. Chinese-produced smart electric vehicles are globally competitive in terms of product quality and value for money, making expansion into international markets inevitable. We see leading brands already making arrangements for product certifications, channel expansions, and even local production; 4) Undervalued high expectation returns. The smart car market has always been highly competitive, investmenters being unable to distinguish winners, leading to a high degree of uncertainty in valuations, also implying potential high returns. Content source: "Zhonggeng Value Navigation Hybrid Securities Investment Fund 2023 Annual Report" (20240322) Q8. How do you view consumer investment opportunities? Hu Xinwei (Huatai Fund): For the Chinese consumer industry, it is expected to continue to grow steadily in 2024. Despite the low consumer sentiment due to macroeconomic influences, China has a large population, a vast market, and ample domestic demand potential, driving consumer spending.The room for expansion is still very large, and the resilience of consumption is also very strong. In addition, if the economy gradually moves out of the bottom range, the upward elasticity of consumption will also be relatively large.Intellectual property rights go overseas to developed markets such as Europe and the United States to earn excess profits. The most typical is the innovative pharmaceutical industry. In just a few years, the number of core clinical trials for innovative drugs in China has approached that of the United States, making it an important player in the field. Because the barriers to clinical trials for innovative drugs in Europe and the United States are very high, at present, our overseas expansion in the field of innovative drugs is mainly based on the "license out" model of cooperation with multinational pharmaceutical giants. By 2023, according to incomplete statistics, there have been nearly a hundred license out transactions for Chinese innovative drugs, with a total transaction amount exceeding $40 billion. Another approach is to fully leverage the comparative advantage of China's manufacturing industry and go to regions outside developed countries in Europe and the United States, such as countries along the "Belt and Road" initiative, adapt to local markets, and expand global market share. The most typical is the medical device consumables IVD industry. Compared to traditional large companies in Europe and the United States, our products are cheaper, of good quality, have a fast pace of innovation and update, responsive after-sales service, and can provide various products based on local demand, naturally continuing to increase market share. In conclusion, we believe that the fundamentals of the entire Chinese pharmaceutical industry have gradually entered the right side. Many companies have gradually overcome the most difficult transformation period and are entering a period of innovation output and internationalization. Although the industry's performance has not been good since the beginning of 2024, with many adjustments overall, we believe that the stock price will ultimately reflect the industry's development trend, so we are optimistic about the industry's future performance.Content Source: "E Fund Healthcare Industry Hybrid Securities Investment Fund 2023 Annual Report" (20240329) Zhao Bei (Industrial Bank Rui Xin Fund): Innovative drugs and the innovation industry chain are benefiting overall from the US entering an interest rate cut cycle. We believe that the research and development capabilities of domestic innovative drug companies are rapidly aligning with global standards and gaining global advantages in some sub-fields, gaining recognition from overseas multinational pharmaceutical companies. The "license-out boom" in the industry in the past 2 years is a specific manifestation of this industry trend. We will continue to follow this industry trend, over allocate to the innovative drug sector, and the investment strategy is to select companies with overseas equity authorization and overseas major varieties mapping. At the same time, high-beta innovative drug assets can provide upward elasticity to the portfolio during market rebounds. In the R&D outsourcing service industry, domestic R&D demand is expected to continue to be under pressure in 2024, and overseas R&D demand is expected to gradually warm up as the Federal Reserve's interest rate hiking cycle ends. We are also actively tracking the inflection point of order demand. In the stable growth sector, we focus on traditional Chinese medicine, blood products, and pharmaceutical commercial sectors. The traditional Chinese medicine industry faces pressure from a high base in one quarter, as well as catalysts such as adjustments to the essential drug list and state-owned enterprise reforms. We believe that there are opportunities at the individual stock level as well, choosing targets with high performance realization. The blood product industry belongs to the resource sector, with changes in controlling shareholders of multiple listed companies and industry consolidation accelerating. If product demand continues to remain high, there is potential for sustained growth in blood collection volume and tonnage profit. In the pharmaceutical commercial sector, the concentration of retail pharmacies is expected to increase for 3-5 years, with short-term dividends reflected by individual account reforms and medical insurance coordination. The pharmaceutical commercial sector is the lowest in terms of valuation but has high growth certainty. In the medium to long term, it is expected to continue to achieve growth exceeding GDP, with potential for increased dividend payout ratios. Content Source: "Guangfa Medical Care Stock Securities Investment Fund 2023 Annual Report" (20240329) 10. How to view financial and real estate investment opportunities? Li Xiaoxing (Yinhua Fund): With the gradual introduction and implementation of stable economic policies, the economy may stabilize and rebound. Value stocks in the cyclical sector will see some valuation adjustments, and in the expectation and initial stage of economic recovery, undervalued stocks may have some excess returns. The decline in bank revenue has slowed down, and the provisions accumulated in previous years can effectively support profits, providing guarantees for restructuring dividends. The systemic risk of asset quality in banks is relatively small, so the probability of the valuation reaching a new low is also relatively low. Major banks have a natural advantage in dividend yield, and small banks in strong economic regions will continue to maintain double-digit performance growth. The growth rate of premium income and the new business value of insurance have reached an inflection point, and the insurance industry may usher in a new cycle of 3-5 years. The valuation of securities firms is historically low. We believe that the value of securities firms lies in the accumulated valuation advantages and pulse-like reflection of economic or policy benefits. The current policy supporting the real estate sector is comprehensive, and with the gradual effectiveness of the policy, we believe that real estate sales data will eventually improve. Construction, as a companion to the infrastructure and real estate sectors, is mainly affected by investment intensity and real estate repair efforts. Content Source: "Yinhua xinjia Two-Year Holding Period Mixed Securities Investment Fund 2023 Annual Report" (20240329) Tan Li (Jia Shi Fund): We believe that banks and real estate will face a revaluation of value. Both supply and demand ends of the real estate industry have been fully cleared, and the industry is undergoing improvement in competitive landscape and profit models, shifting from a high-risk model of high leverage and high turnover to a steady model based on products and services. After the risks in the real estate industry are fully exposed, banks will return to the traditional valuation model of PB-ROE, and the current PB is clearly too low. At the same time, we believe that with the stabilization of the economy, some cyclical industries will enter a phase of recovery. Although there is still excess supply, it will take time for supply and demand to balance out, but some improvement in profitability is a high probability event. Content Source: "Value Selected Stock Securities Investment Fund 2023 Annual Report" (20240328) Qiu Dongrong (Zhonggeng Fund): Regarding the real estate sector, 1) The speed of clearance in the real estate sector is very fast, has not evolved into financial risks, and long-term demand is still present, making it an industry with tremendous economic value. Residential sales area has dropped below 1 billion square meters annually, with a decline of over 40% from its peak; residential new construction area has dropped below 700 million square meters annually, with a decline of over 60% from its peak, indicating a shortage of high-quality supply in the future. 2) The policy easing efforts are incremental but slow, real estate companies continue to be under pressure, with only top-tier real estate companies maintaining resilience, with higher demands on profitability and market share. 3) Even high-quality real estate companies have been abandoned by investors, with extremely low valuation levels. Even considering a certain decline in housing prices, the investment potential of high-quality real estate companies is still excellent. Especially Hong Kong real estate stocks are relatively cheaper than A-shares, with faster profit growth, and have a high level of implied expected returns. Content Source: "Zhonggeng Value Leadership Mixed Securities Investment Fund 2023 Annual Report"20240322 This date remains the same in English.Risk warning: This analysis report is only based on historical data and does not constitute recommendations or suggestions for specific industries or individual stocks. This article is reprinted from "Industrial Securities"; Edited by GMTEight: Huang Xiaodong.