Abstract: Southern Fund believed that the real throughout the year or longer-term theme is the appreciation of the renminbi. The economic slowdown in the United States context, the context of the appreciation of the domestic demand, consumption and manufacturing enterprise development, will be a number of years the domestic A-share market is the most important investment focus.

GUANGZHOU (Fund China) - China’s stock market has experienced a sharp increase in 2006, in 2007 the trend of particular concern. Southern Fund Management Companies in the just released 2007 annual report, the investment strategy, A-shares in reaching prosperity ago, the external market volatility, and administrative control, are not adequate to reverse the upward trend in A-shares, will be the stage in the buying opportunities. Operation of the huge capital as institutional investors, it is important to determine the apex of prosperity.

Southern Fund believed that the real throughout the year or longer-term theme is the appreciation of the renminbi. The economic slowdown in the United States context, the context of the appreciation of the domestic demand, consumption and manufacturing enterprise development, will be a number of years the domestic A-share market is the most important investment focus.

The report describes the investors are facing a market phases: the A-share market has been static valuation relative back to a reasonable level. And since the fourth quarter due to the current domestic macro background of ample liquidity and low interest rates for deposits, as well as funds to make money this year since the effect of incremental funds will continue to attract influx driven equity risk premium rapid decline in the value of promoting the return of the stock market towards prosperity from the stage. Towards prosperity in the process of inflow of funds rate, macroeconomic, earnings growth of listed companies, a decision reached when the sustained prosperity and the prosperity level.

The apex of prosperity and how far are we from? The report pointed out that from the theory and historical experience, the current vertex from the A-share prosperity there is still a considerable distance markers. Under the sustained surplus situation of excess liquidity in the medium term to change, since the last quarter of the stock market wealth effect actually started and has tremendous inertia, the A-share market since 2006 is from the value of the return to prosperity stage, can be taken unless a means of extreme economic downturn and the wealth effect .

From the theoretical and historic experience, the following signs once, would mean the end of prosperity: the economy beyond the expected stall; Inflation rise; Valuation seriously overestimated; The company announced the formation of the bubble profits and the real profit seriously out of line, and eventually caused the company marks a major scandal.

The report said the United States deep economic impact of the rate of China’s export sector down, and even drag the overall economy is still the risk of next year focus on one. However, after the mid-year report on the economy’s soft landing greater confidence.

Southern Fund close attention to the appreciation of the renminbi on the market. The report predicts that the Chinese government will continue to adhere to the long-term viability of the appreciation strategy NDF forward rate trend also reflects this point, expected in 2007 to maintain the RMB 4% -5% annual appreciation rate of less than 4% or 5% higher than the possibility of very small.

The fixed assets investment and industrial production growth, the report, the domestic economy still strong growth momentum, the next period of time, investment and growth of industrial production was expected to remain at historical high level.

Profit from the enterprise perspective, Southern Fund judgment in 2007 the first half of the A-share stock assets overall profit growth will occur highs and peaked down, but annual growth rate remains the same period last year more than 20%. From businesses, the performance of the growth in 2007 will come mainly from the manufacturing and consumer services sector contribution.

The report said that the bull market with a certain amount of financing scale and prosperity. 2006 designated as the new and old fractured resume issuing new shares in the first year, the banking shares issued to dominate year. The next stage will be a large number of high-quality market shares landing the A-share market, but similar 2006 issued by the impact of the banking sector to dominate it is difficult to return. From the perspective issue, involving a larger impact on the financial industry, railways, energy, telecommunications, and other industries, especially the insurance and banking.

Pay close attention to the industry’s stock index futures, the report said that the subject securities financing Securities Lending choice, as well as the introduction of stock index futures, stock index weights of the pricing influence of the highlights will help improve the liquidity of the market heavyweights, and the valuation level.

Southern Fund report highlighted the revaluation of the manufacturing sector, manufacturing enterprises that have inherently weaker than the consumer business defect, only to gradually increase profit levels or maintain long-term good cash flow manufacturing enterprises, the consumer can have similar long-term revaluation of the stock.

As the industry configuration, Southern Fund continue to be optimistic about this year, financial services (including insurance, securities, banking), real estate, manufacturing (except military, electrical equipment) and consumer goods, commercial, pharmaceutical, petrochemical, iron and steel, utility and other industries.

Copyright Fund China 2008.

You Might Like: