The annual national “two sessions”, referring to the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), are important events attracting much attention from the capital market. Over the past year, the market declined from the high level of 5,000 points. This comes as a serious blow to the investors’ confidence. Can the forthcoming “two sessions” send the smell of the spring to the market, and cultivate strong themes such as “Internet Plus” and “environment protection” as last year?
Before the “two sessions” this year, hot spots on the market have already emerged. Funds have started to deploy their favored investment themes. A number of fund managers are unanimously optimistic about six investment themes such as consumption upgrading, and reform, security and health are what most fund managers believe to be the key words at the “two sessions”.
Theme 1: consumption upgrading sector
Chinese consumers’ urgent need to improve the quality of life, which is evidenced by the total box office amounted to 44,069 million yuan, the nationwide fitness rising as national strategy, buying spree for milk powder overseas and shopping for toilet lid in Japan which upsets “made in China”, have shown to the secondary market huge potential of consumption upgrading. “With the increase of national income and change of demographic structure, there is huge potential in the consumption upgrading sector. The prospects of consumption themes of the generation after 90s (electronic sports, animation and television and films) and emerging sectors such as education, supporting the aged and healthcare services are optimistic,” said Peng Haiwei, a fund manager with China Asset Management
“China promotes supply-side reform, the goal of which, from the perspective of creating demand, is to advocate new types of consumer services. Culture and media, sports and education, entertainment and recreation, medical treatment and healthcare sectors all have growth opportunities,” said Li Daoying, a fund manager with Yimin Asset Management. Chen Guoguang, a fund manager with Tianhong Asset Management, is also rosy on segments of media sector such as film and internet TV series. He believes these segments will be more prosperous with rapid growth.
Theme 2: supply-side reform
The Central Economic Work Conference convened last December proposed to moderately expand the total demand from 2016 and a period afterwards, and meanwhile emphasize on supply-side structural reform. It also proposed five missions including cutting overcapacity, deleverage, reducing excessive housing inventory, lowering costs and enhancing shortcomings. It is anticipated that supply-side reform will be the focus of government work in a long period in the future. Li believes that when the central government backed supply-side reform is implemented, coal, iron and steel, nonferrous metal and construction material sectors in the secondary market will see investment opportunities in certain periods.
Theme 3: technology innovation areas, such as virtual reality (VR)
As smart phones and tablet computers become increasingly popular, products with excellent app experience are expected to expand rapidly. VR is an innovative technology gradually realized until 2015, but in addition to its application to entertainment and games, demands from simulation teaching, online tourism and shopping experience are also expected to burst.
Chen believes that 2016 will be the first year of VR. A large amount of financing gained by VR in 2015 enables the industry to develop fast. It is expected that hardware and content of VR will see explosive growth in 2016. Li also indicated that VR, cloud computing, big data, unmanned driving, mobile payment are all thematic opportunities in technological innovation areas.
Theme 4: high-end equipment and artificial intelligence (AI)
In the context that the globe has entered Industry 4.0 era, made in China has also ushered into the golden era of policy support. Made in China 2025 Plan has been issued. It primarily aims to improve the overall competiveness of China’s manufacturing industry, and starts China’s Industry 4.0 development. As the core of Industry 4.0, AI is also the eye catcher of the secondary market.
Peng is in the view that along with rising labor costs, equipment manufacturing industry upgrading resulted from replacement of labor, increase of the proportion of high value-added industries, high-end equipment manufacturing, and AI are worth of long-term attention.
Chen also indicated that AI will lead a new round of scientific and technical revolution. In-depth learning, mode recognition and machine recognition technologies have achieved great progress. Technological giants in the world are actively researching and developing AI, and the demand is expected to continue explosive growth.
Theme 5：environmental protection sector
Environmental protection was once a hotspot for investment on the secondary market after the two sessions last year. As people raise higher requirement on life quality and ecological capital, it becomes increasingly urgent for China to maintain sustainable development. Insiders of the Ministry of Environmental Protection indicated at end 2015 that China’s total social investment in the environmental protection industry might reach 17 trillion yuan during the “thirteenth five-year” plan period. As local two sessions are successively held across the country in 2016, many provinces and cities have arranged their key environmental protection work in 2016 to boost the development of local environmental protection industry. It can be seen that the demand on building upgraded green economy will further heat up later.
Peng believes that the transformation of economic development surely will reduce pollution discharge and the prosperity of energy-saving and environmental protection industry will remain in place. 2015 only saw the signing of the Public-Private-Partnership (PPP) agreement and the performance will be realized later. The environmental protection sector is worthy of attentions.
Theme 6: Internet sector
Chinese Premier Li Keqiang first mentioned the “Internet Plus” action plan in the government work report stated in the “two sessions” of 2015, aiming to push the combination between modern manufacturing industry and mobile Internet, Cloud computing, big data and the Internet of things and to facilitate the healthy development of e-commerce, industrial Internet and Internet finance. “Internet Plus” represents deeper integration between Internet and traditional industries, gives full play to Internet in the allocation of social resources, and shapes new economic development forms taking Internet as infrastructure and tool.
Peng holds that “Internet Plus” conforms to future economic transformation. Internet will bring further impact to enterprises. Cloud computing and big data will take a turn for the better and relevant stocks might embrace sound performance.
Chen also indicates that both policies and the improvement of industrial fundamentals drove the hiking of the “Internet Plus” theme last year. Only theme investment with the support of fundamentals can sustain.
Translated by Adam Zhang
Latest comments