The Euromoney China A-share market: from volatility to maturity


Since February 2021, the Chinese A-share market has become more volatile after a strong performance last year. The cooling in investor confidence has also significantly slowed the issuance of new products by Chinese mutual funds. Despite this, the growing fund industry in China has become an extremely important investment force in the A-share market.

At the end of the first quarter of 2021, the scale of actively managed equity investments by mutual funds exceeded 6 trillion yuan, reaching an all-time high, according to China Fund News.

In the volatile A-share market, mutual funds are often expected to act as stock market stabilizers. This forces fund management companies to continuously drive the A-share market to adopt long-term investments and value investments by adjusting development strategies and strengthening communication with investors. In this process, it is one of the important tasks to guide investors to see short term returns in a rational way.

“Over the past two years, investors have achieved relatively high returns. Such returns are not sustainable over the long term, ”says Shi Bo. “For investors, because of their linear thinking, falling yields often come as a shock.”

Shi Bo believes that the A-share market is characterized by rises and falls, but in the long run, the market continues to grow at a relatively healthy rate. As such, he believes investors should stick to a long-term investment philosophy instead of just buying up and selling down.

In addition, Shi Bo said that Chinese fund investors are gradually becoming more mature. Indeed, he believes the A-share market will show signs of reaching true maturity when more investors rebalance their asset allocation when prices fall and dare to “go against the grain”.

“Investor confidence in the Chinese capital market is improving, but more can be done to support this. Institutional investors need to adopt longer-term valuation models to play their role as the backbone of the market,” Shi Bo said.

Looking ahead, Shi Bo believes that the national monetary policy trend is one of the key factors impacting the market. If credit is tight, for example, some stocks with higher valuations early on may come under downward pressure. He also believes that commodity prices can be used to observe the strength of the global economic recovery, and also to help predict the profitability of companies in related industries.

At the same time, Shi Bo says that although the US Federal Reserve’s monetary policy has little impact on the domestic real economy, the emotional impact it triggers may have a short-term impact on the stock market. . “Emerging markets may have concerns about capital outflows, and even a marginal decline could affect investor sentiment,” he said.

China is one of the must-see markets for investors focusing on growth investment opportunities

Shi Bo Deputy Managing Director and CIO (Equities), Southern Asset Management

However, even in the face of uncertainties in the macroeconomics, Shi Bo says the “bottom-up” approach is still very effective for investors. He believes that investors should focus on the fundamental factors that can support the long-term success of the business, including the management of the businesses, the market space of the main activity and the basic financial indicators such as operating income, gross profit margin and net profit. ratio and carefully analyze the information behind the numbers.

Shi Bo also says that matching valuations with growth is another key to investors’ ability to earn good returns. Even for companies with good fundamentals, it is still difficult for investors to profit from high valuations. In the medium to long term, Shi Bo believes that the innovative and entrepreneurial capacities of Chinese entrepreneurs will bring a constant flow of investment opportunities in the capital market. “China is one of the must-see markets for investors focusing on growth investment opportunities.” he says.

To help investors stabilize their confidence, Shi Bo believes that mutual funds can continuously promote a concept of long-term investment and provide a better investment experience for investors by increasing the proportion of blocked products and strengthening communication with investors.

Southern Asset Management has a history of approximately 23 years in equity investing and is one of the first Chinese asset managers approved by the China Securities Regulatory Commission (CSRC). Since Southern Asset Management issued the first “Kai Yuan” fund in 1998, it has been one of the leading equity investors in China.

With the continued development of fintech, Southern Asset Management is trying to expand its investment advisory business. Based on investors’ risk preferences, Southern Asset Management provides investors with more comprehensive asset allocation recommendations through a rebalancing adjustment strategy.

“We are quite optimistic about the investment advisory business as our clients are difficult to select fund products and make rational asset allocation,” says Shi Bo. “Therefore, we hope to be able to use fintech to promote the depth of investment advisory business, and provide a wider range of wealth management services through multi-department cooperation. “

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