All the past is a preamble.
The year 2022 has finally passed, and we have experienced the volatility of the stock market decline and the dawn of the rebound in late November.
We are looking forward to a brand new life and a new horizon for our investment in 2023.
Carrying the dreams and hopes of many people, the picture of 2023 is unfolding. This is evident from the titles of the annual strategy reports of mainstream securities.
GF Securities used the word "dawn" to express their strategic outlook on the A-share market in 2023; Galaxy Securities used the literary and contradictory 8 words - "time contains new life, the year of layout ". Some other securities expressed their vision for the A-share market in 2023 with words like "the year of turnaround" and "recovery calf".
What is the core logic of research institutions' bullishness on A shares? As individual investors, how should we lay out the much-anticipated 2023?
Looking ahead in the new year, investment has expectations
The year 2022 has been a remarkable one. Global asset prices have experienced significant volatility due to overseas inflation, domestic epidemics, international geopolitical conflicts and other factors. Standing at the crossover point, it is important to look back at where we have come from to summarize the successes and failures of the previous year but more importantly, to think about where we are going to look ahead and take action.
As the saying goes, let the people who can hear the sound of the gun make decisions. investors are the people who hear the sound of the gun in the capital market, and their decisions may not be accurate, but full listening and learning will help us better grasp the future.
As mentioned in the opening paragraph, a number of head securities firms are optimistic about the market opportunities in 2023. For example, GF Securities' Dai Kang team, their judgment on the equity market is "A and H shares dawn, Hong Kong stocks will be a bull market, A-share will be a restoration market", on the grounds of "this and that" - China recovery, overseas recession. In terms of sector allocation opportunities, it is recommended to focus on economic "bottoming out" and confidence "rebuilding" in the first half of the year, and structural "transformation" and competitiveness "breakout" in the second half of the year. "Breakout" in the second half of the year.
Yinhe Securities, on the other hand, analyzes the real estate (Kuznets) cycle, the equipment renewal (investment) (Juglar) cycle and the inventory (Kitchin) cycle, and predicts that 2023 will be the year of transformation and the economy will start a weak recovery trend, and the A-share market will also become the year of layout. But it is worth noting that it also pointed out that the period may also be a twist and turn.
In addition, CITIC Securities believes that A-shares will gradually gather strength to the upside. CITIC Capital said that the A-share market has stood at a new historical starting point and so on. Moreover, not only domestic securities firms are bullish on the market opportunities in 2023, overseas institutional investors also believe that A-shares have investment value.
Goldman Sachs believes that since November 2022, the Chinese stock market has seen a relatively strong bullish signal, and this wave is expected to continue. 2022 is not an isolated phenomenon for foreign investors to increase their holdings in A-shares, and the logic behind this is that A-shares provide a relatively safe haven in times of global market turmoil.
Russell Investments suggested in late 2022 that for long-term investors, A-shares are currently extremely attractive with a very high margin of safety. On a vertical comparison, A-share valuation levels have returned to the very bottom of their history, second only to the more extreme valuation period of 2012~2014. In a horizontal comparison, the latest 10-year treasury bond yield minus the CSI 300 dividend yield is already near "zero", meaning that the cost performance of stocks relative to bonds is at an all-time high.
Worry about volatility, choose "fixed income +"
Although institutions have expressed bullishness on A-shares, investors who have experienced market volatility in 2022 and are aware of the resilience of A-shares may still be worried. Because even if the road ahead is bright, the road is mostly winding, and no one is sure if they are willing and able to endure the volatility of the journey in the future.
CIMB's recently released "2023 Asset Allocation White Paper" shows that bank deposits grow by $15 trillion to $115 trillion in 2022. Among securities products, the ratio of equity (direct holdings and equity funds) to fixed income (including money funds, bond funds, bank wealth management and trust wealth management) falls back to 66% from 80% in 2021.
As can be seen, the market volatility in 2022 has caused many investors to withdraw from equity investments and even switch from investment to savings. However, sensible analysis shows that in the long run, the return of deposits is significantly lower than that of securities-based products, so the optimal allocation from time deposits to equity and debt securities portfolio is still a long-term trend.
So, is there a better way for investors who want to share the long-term returns of equity assets but do not want to bear the large market volatility to participate? A mixed allocation of equity and debt, "Fixed Income Plus", may be a good choice. Let's look at a 20-year long set of data.
As of December 31, 2022, the general equity fund index has risen 1,213.54% over the past 20 years, while the bond hybrid fund index and the bond secondary fund index have risen 352.49% and 363.03%, respectively, over the same period, and the medium- and long-term pure bond fund index has risen 131.19%.
From the long-term return dimension, the general equity fund index is undoubtedly the "best looking boy", but it is also the most volatile. Moreover, in extreme bear market environments or shock markets, such as 2008, 2012, 2015, 2018 and 2022, there have been significant retracements. Combining the performance of returns and retracements, the bond-biased hybrid fund index and the bond secondary fund index have achieved better returns with significantly lower retracements than the common equity fund index.
In other words, compared to equity funds and pure bond funds, "Fixed Income Plus" can provide a better investor experience by reducing volatility while taking into account returns. Therefore, if you want to lay out the A-share in 2023, but are worried about potential market volatility, "Fixed Income Plus" funds are worth considering.
It is reported that the proposed GF Steady Run One-Year Holding Period Hybrid Fund (Class A: 017096, Class C: 017097), managed by Yao Qiu, is recently on sale at China Merchants Bank and GF Fund's website/APP and other channels. As a debt-oriented hybrid fund, the portfolio invests 10%-30% in equity assets such as stocks and convertible bonds (including deliverable bonds).
It is worth noting that the product takes each open day to subscribe, but investors are required to hold each subscription for one year before they can redeem the fund shares.
Why is a one-year holding period necessary? We would like to briefly share our views here.
For fund investors, a one-year holding period helps us fight against "human weakness" by locking in fund shares and avoiding short-term market fluctuations and redeeming the fund at the low point of pullback. For the fund manager, if the fund size remains stable, it is more conducive to the development of medium and long-term investment strategy, and strive to pursue better long-term returns.
Therefore, investors who want to start steadily and lay out 2023 are recommended to pay attention to GF Stable Run One-Year Holding Period Hybrid Fund (Class A: 017096, Class C: 017097) and let's start again in the New Year.
(Note: The above is the fund manager's current bullish direction, does not represent the fund's long-term inevitable investment direction)

Disclaimer: The copyright of this article belongs to the original author, the content represents the author's personal views, and has nothing to do with GF Fund Management Co. Its originality as well as the text and content of the text statement is not confirmed by the Company, the authenticity, completeness and timeliness of this article and all or part of it, the text of the Company does not make any guarantee or commitment, please refer the reader only for reference, and please verify the relevant content yourself. Funds have risks, investment needs to be cautious.
Risk warning: Fund has risk, investment needs to be cautious. This information does not constitute promotional material, investment advice or guarantee for any business of the Company, nor does it serve as any legal document. The Fund Manager undertakes to manage and apply the Fund's assets with honesty, credit and diligence, but does not guarantee that the Fund will make a profit, nor does it guarantee a minimum return. The Fund's past performance and awards are not indicative of future performance. Before investing in a fund, investors should carefully read the fund contract, prospectus, fund product information summary and other fund legal documents, fully understand the risk-return characteristics of the fund products, make independent decisions on fund investments and select suitable fund products based on their own risk tolerance, investment horizon and investment objectives after understanding the products and listening to the appropriateness opinions of the sales institutions. The above information does not constitute a stock recommendation, past performance of stocks does not represent future performance, the market has risks, investment must be cautious.