Is This Rebound the Start of a Long-Term Bull Market?

The Chinese stock market, commonly referred to as A-shares, has experienced a significant rebound since late SeptemberOver the past month, the market has maintained a volatile trend, with frequent shifts between hotspots like technology, finance, and consumer sectors, making it increasingly challenging for investors to navigateAs the end of the year approaches, many eyes are on future market conditions.

In an exclusive interview, Chen Ying, the Chief Investment Officer of Golden Eagle Fund and the general manager of its Growth Investment Department, shared his optimistic outlook on the market for the coming yearHe believes that with various policy stimuli, the economy will show signs of further recoveryFrom a mid- to long-term perspective, he views this rebound as the starting point for a prolonged uptrend, particularly favoring technology and consumption sectors.

Chen Ying asserts that the A-share market has already begun to demonstrate signs of a bottom

He suggests that economic fundamentals often lag behind market movements, indicating that a sharp market pullback is unlikely in the near futureInstead, he anticipates that the market will largely maintain a fluctuating state within the year, characterized by structural differentiation and thematic speculation.

Looking ahead, he expressed confidence in a turn of China's economic policies that will yield a plethora of positive signals in monetary policy, fiscal policy, and various industrial sectorsHe believes that this accumulation of smaller changes could lead to a significant transformation, ushering in a gradual rise in the Consumer Price Index (CPI) as the economy re-enters an expansion phase, providing upward momentum to the market.

As December trading begins, Chen forecasts a year filled with opportunities across multiple sectorsHe outlines three primary sectors to watch in 2025: first, strong cyclical industries represented by finance, which will benefit from economic recovery, including areas like brokerages, insurance, and banks

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Second, as CPI trends upward, there will be fresh opportunities in the consumer sector, spurred by policies aimed at stimulating consumption, such as the replacement of old productsThird, the coming year will likely be pivotal for AI applications, bringing forth numerous investment opportunities in various tech areas, including autonomous driving and robotics.

Throughout this rebound, smaller-cap indices like the CSI 1000 and CSI 2000 have significantly outperformed larger-cap indices, including the CSI 300 and SSE 50. Chen argues that given the current market dynamics, both growth and value stocks stand to benefit in the coming years, even as their performance may vary over different stagesAs the economy reenters an expansionary phase, he expects value stocks to enhance profits and valuation, while growth stocks will thrive amid loosened monetary policy and improving market expectations, particularly those aligned with significant industrial trends.

In terms of sector allocation, Chen has placed particular emphasis on technology and consumption

He predicts a substantial rebound in the consumer sector as the economy improves, alongside an anticipated increase in CPI which could reach around 2%. Recent government discussions have frequently highlighted the need to stimulate consumption, which will play an essential role in supporting economic growth amidst rising geopolitical uncertainties and trade tensionsMany consumer-related indices and companies currently exhibit low valuations and subdued market expectations, indicating that the consumer sector could become a focal area over the next few years.

On the technology side, Chen is particularly optimistic about the consumer electronics supply chainHe notes that many related companies are expected to have price-earnings ratios below 20, with some dipping even below 15, providing strong value in comparison with other sectorsAs the economy recovers, sales in AI-related products should experience a significant uptick, potentially resulting in a considerable rise in valuation by 2026. He highlighted the performance of AI-enabled terminals, remarking that companies involved in SOC (system on chip) have consistently exceeded expectations since the beginning of the year, showing promising trends in both chip design and financial reports

However, he did caution that their valuations are relatively high and require careful assessment of their cost-effectiveness.

Regarding AI applications, the recent two months have seen a rally in TMT (Technology, Media, Telecommunications) growth stocks, especially on the Science and Technology Innovation Board and the ChiNextThis sector incorporates fields such as computing, electronics, and communication, raising questions about future investment opportunities in light of these developmentsChen suggested focusing on large-scale industry application software developers, particularly as local government financing improves, thus enhancing fiscal expenditure capabilitiesNotably, industry application software tends to possess extensive industry data, which could open avenues for data monetization and services through AI technology.

Chen also commented on the global artificial intelligence surge, which has gained tremendous momentum since last year

He noted that while overseas counterparts have established foundational infrastructure and advanced computing capabilities for model training, the spotlight now shifts to creating disruptive applicationsOver the next couple of years, we might witness the emergence of "blockbuster" applications in AI.

However, Chen highlighted that China still faces significant gaps in computing power and model sophistication compared to the international stageYet, he is confident that as these global resources mature, China will be able to bridge that distance next yearChina's advantages lie in its diverse and robust application scenarios, coupled with abundant data, which, alongside enhancements in computational infrastructures and large model integrations, will facilitate rapid development in AI.

Chen identifies three key areas to explore within AI investments: first, autonomous driving, poised to make substantial strides as Tesla's Full Self-Driving capabilities mature; second, the integration of humanoid robots with large AI models, which will enable these machines to perform complex tasks in factories; and third, internet-like applications in AI, such as those leveraging smartphones' capabilities, reminiscent of Siri’s functionality.

Turning to renewable energy, the photovoltaic and electric vehicle sectors faced substantial challenges over the past two years, including excess capacity and falling prices, significantly impacting their stock performances

Recently, however, there seems to be a reboundChen feels that while the photovoltaic and EV industries are still struggling with overcapacity and price wars, companies with advanced technologies and high-quality products are likely to emerge from this slump first.

Currently, Chen believes that stock prices in these sectors generally lead industry trends by about half a year to a yearMost companies in these fields have likely reached a bottom stage, and he continues to monitor trends in production capacity, pricing, and technological advancements closely.

As key contributors to China's global competitiveness, the future potential for photovoltaic and electric vehicle industries remains considerable, according to ChenHe draws attention to the opportunities arising from new technologies that can improve solar efficiency and actively observes their implementation in the marketplace

In the realm of electric vehicles, he emphasizes that the electrification trend will continue, but with a greater focus on enhancing vehicle intelligence.

Leading the way for Golden Eagle Fund's "Technology Team," Chen has successfully overseen substantial growth in its technology fund this year, boasting a nearly 40% net value increase within the first eleven monthsDrawing from his seven years of experience in the telecommunications and computing industries prior to his investment career, Chen adopts a deeper understanding of emerging technologies and maintains prudent risk assessmentsHe strategically allocates investments based on thorough research while also remaining composed amidst market frenzies, avoiding impulsive decisions.

In historical context, growth stocks have experienced considerable valuation shifts, akin to the swings seen in the electronics sector's price-to-earnings (PE) ratios oscillating between 20 and 50. Observing how investors can navigate these dynamics is crucial