On April 26, at the Quanguo Fund's 2024 annual strategy seminar, Wang Guobin, founder and general manager of Quanguo Fund, and Quanguo Fund manager Zhao Yi, just expressed their views. Wang Guobin said that now all enterprises in China must enter into differentiated competition, so Chinese enterprises and entrepreneurs are becoming more and more outstanding. With the implementation of the new national nine measures of supply-side and demand-side reforms, although the current market is still like a dormant dragon, the space is definitely infinite. Zhao Yi believes that, in the current situation, domestic infrastructure construction, especially the demand for domestic computing power, will rapidly increase. The increasing urgency of domestic computing power demand is the reason why Quanguo Fund believes that the future demand for domestic computing power or domestic substitutes will rapidly increase. At the same time, some commercial applications, including the music and film industries, can be seen. This means that as AI large models are released, more and more industry application scenarios are beginning to show explosive demand and applications. Quanguo Fund believes that in addition to the domestication of domestic computing power, some subdivision industry application scenarios, with the intelligentization of AI computing power and the acceleration of iteration speed, may bring a lot of industry application scenario demand. Therefore, one aspect that Quanguo Fund pays attention to is the domestication of computing power in infrastructure construction, and the other aspect is some subdivision application scenarios after the development of AI, which may be investment directions. Zhao Yi also pointed out that the new energy industry includes two main areas, photovoltaics and electric vehicles. Although they are both called new energy, their business models have significant differences. Overall, the proportion of new energy in the Quanguo Fund's investment portfolio is relatively high for three reasons that Quanguo Fund believes support this allocation. Firstly, from the demand perspective, demand is divided into long-term and short-term. In the long term, the application scenarios of new energy are constantly expanding. Zhao Yi recalls that a leading company mentioned in its annual report two to three years ago that they are not just an electric vehicle company, but an energy company. It can be seen that the application scenarios of new energy are constantly expanding, from electric vehicles to energy storage, including heavy trucks, sanitation vehicles, and more applications. In the short term, in 2023, the prices of photovoltaic modules and lithium batteries fell significantly due to the rapid decline in raw materials such as silicon and lithium carbonate. This led to a nearly halving of end-product prices compared to the end of 2022. Once the prices stabilize, demand may quickly be released. This is also something that Quanguo Fund observed after the Spring Festival, especially the rapid growth in production and demand in the photovoltaic module and lithium battery industry chain. Another issue is supply. During the rapid development of the industry in 2020 and 2021, on one hand, local governments increased their investment in the field of new energy; on the other hand, many companies diversified into the new energy industry and transformed; at the same time, new energy companies themselves rapidly expanded through re-financing. This resulted in excess capacity starting from 2023, with global entry into a stage of deglobalization, and the problem of excess capacity emerging. Of course, since the end of last year, Quanguo Fund has seen some major changes. On one hand, the central economic work conference began to emphasize the limitation of excess capacity. Various levels, including the central bank, have placed restrictions on financing for excess capacity. Government investment, bank loans, and secondary market financing have all been greatly restricted. From a financial perspective, starting from the third quarter of 2023, the capital expenditure of the entire industry experienced a rapid decline of about 30% for the first time. By the first quarter of this year, it is expected that the further decline in overall investment may reach around 50%. Considering the rapid growth in demand and the beginning of supply tightening, Quanguo Fund believes that the industry's supply and demand will gradually reverse. Thirdly, in the process of deglobalization, the core competitiveness of these companies has continued to strengthen in the supply and demand mismatch of the past two to three years, which is reflected in several aspects. On one hand, even with restrictions or constraints from the government, local leading companies still choose Chinese companies as their partners, reflecting their competitiveness. On the other hand, many companies have already undertaken globalization layouts in the past few years. For example, when Quanguo Fund conducted research in Vietnam last year, it was found that many companies had already started global layouts when land and labor costs were low. This led to a gradual increase in the proportion of overseas factory revenue from 2023 to 2024, despite facing deglobalization, they achieved globalization through the design of overseas factories. This is also reflected in the third aspect of competitiveness: product competitiveness and competitiveness strengthened through the advancement of overseas layouts and supply-demand mismatches. Even in the process of deglobalization, their competitiveness has been strengthened. This is one of the important reasons why Quanguo Fund is very optimistic about the new energy industry. Secondly, through overseas layouts and internal cultivation during the supply-demand mismatch process, their competitiveness has been enhanced. Therefore, Quanguo Fund believes that starting from the second half of this year, these companies may gradually demonstrate the advantages they have accumulated in their financial statements. This is another important reason why Quanguo Fund is very optimistic about new energy. Therefore, in the selection process, Quanguo Fund prefers companies with deep enough barriers and high enough moats. These companies may receive lower valuations or higher risk compensation due to concerns about oversupply or deglobalization. Once overseas demand and supply reverse, these companies, because they are already at relatively lower valuation levels, may experience a relatively quick recovery process. Secondly, for companies with relatively lower barriers, Quanguo Fund will be relatively cautious. Because their competitiveness may not be as strong as we advocate. For these companies, it is necessary to decide whether to continue investing during the observation process. Therefore, Quanguo Fund prefers to choose investment targets from the perspective of individual stocks or company competitiveness. Just Dengfeng believes that this round of real estate adjustment has two important characteristics. The first characteristic is that the depth of the adjustment is particularly deep. I think everyone around us can feel this kind of adjustment, which includes an important industry indicator we pay attention to. For example, the industry's sales area, including the starting area of the industry, has declined by nearly one-third from its peak, and the starting area has even declined by more than half. The overall adjustment depth is basically the deepest among the adjustments in the same economic entity. The second characteristic is that the speed of this round of industry adjustment is particularly fast. If we talk about the depth of the adjustment of indicators like the one mentioned earlier, in otherThe economy may take approximately 3 to 5 years, or even longer. But in China, it basically happened in the past two years.However, Quanguo Fund also studied some of these indicators. Gang Dengfeng felt that the adjustments of most indicators should be considered adequate, and some indicators have even been over-adjusted. Compared to other horizontal information, these indicators in these industries have undergone significant adjustments. Moreover, from some indicators, it is highly probable that they have been over-adjusted, and from observing the past period, with the introduction of certain policies and adjustments in various industries and cities, there have been some positive changes. This is mainly reflected in the second-hand housing market, where there has been a noticeable rebound in sales volume. However, the biggest issue so far is that the first-hand housing market has not shown any obvious improvement. If the first-hand housing market does not show significant improvement, the negative impact on upstream and downstream activities may not be completely eliminated. Therefore, next, we need to observe when the first-hand housing market can stabilize, considering the warming up of data in the second-hand housing sales. At that point, we can roughly determine that the adjustment and process of the real estate industry are likely to have ended.