中国策略：节奏放缓的中国牛市-China Strategy_ A Slow(er) China Bull Market

Summary of the Conference Call on China Strategy Industry Overview - The focus is on the Chinese equity market, specifically the MSCI China index, which has bounced back 80% from its cycle lows in late 2022, despite facing four significant drawdowns [1][10][26]. Core Points and Arguments 1. Market Outlook: A sustained uptrend for China equities is anticipated, with key indexes expected to rise approximately 30% by the end of 2027, driven by a 12% trend profit growth and a 5-10% potential re-rating [1][11][12]. 2. Bull Market Mentality: Investors are encouraged to shift their mindset from selling during rallies to buying on dips, as the bull market unfolds. An alpha-centric approach is recommended, focusing on specific themes such as Chinese Prominent 10, AI, and small-cap A-shares [3][20]. 3. Policy Environment: The pro-market policy window is open, with several measures taken to support equity markets, including demand-side stimulus and easing regulations for private enterprises (POEs) [6][13][27]. 4. Growth Drivers: Key growth themes include advancements in AI, the anti-involution campaign, and the trend of Chinese companies going global, which are expected to enhance earnings growth [14][18]. 5. Valuation Metrics: Current valuations are considered inexpensive, with index PEs at mid-cycle levels and significant discounts to global equities. The fair multiple for H- and A-shares is projected to rise, indicating that investors are not overpaying for potential growth [15][27]. 6. Capital Flows: There is a structural migration of capital towards equities, with an estimated Rmb6 trillion potential asset reallocation from other sectors to the stock market in the coming years [18][28]. 7. Risks and Corrections: While the outlook is positive, cyclical macro slowdowns and external risks may lead to profit-taking and corrections. However, unless these risks intensify, the recommendation is to stay invested and accumulate during corrections [19][20]. Additional Important Insights - Historical Context: The Chinese equity market has experienced significant volatility, with a notable downturn from early 2021 to late 2022, during which over US$6 trillion was lost. The recovery has been marked by four major corrections averaging 22% [10][26]. - Regulatory Changes: The easing of regulations on POEs is seen as a critical factor in reviving investor confidence and stimulating growth in the stock market, where POEs represent 60% of the total market capitalization [13][27]. - Shareholder Returns: Record-high dividends and buybacks are projected, with yields expected to reach approximately 3%-3.3% of current prices by 2025/2026 [28][36]. This summary encapsulates the key insights and projections regarding the Chinese equity market, highlighting the anticipated growth, supportive policies, and the importance of strategic investment approaches.