Exploring New Long-Term Value in Broad Market Investing

As market sentiment is lifted and liquidity is restored, the China Securities A500 ETF, as a new representation of core assets, has attracted widespread attention from investors. On October 10th, the first batch of ten China Securities A500 ETFs announced that they would be listed collectively on the Shanghai and Shenzhen stock exchanges on October 15th. As one of the fund companies launching the first batch of China Securities A500 ETFs, Southern Fund is actively exploring new layouts for long-term investment in the broad-based market. Recently, based on a series of issues such as investor concerns about the China Securities A500, market environment and economic conditions, and the characteristics of the China Securities A500 Index, Zhu Henghong, the fund manager of Southern Fund's China Securities A500 ETF (short for: China Securities A500 ETF South; code: 159352), has provided investors with in-depth analysis.

Steady growth policies continue to strengthen, focusing on new opportunities for high-quality development

Faced with the current market environment and economic conditions, Zhu Henghong stated that the country has introduced a series of policies this year to stimulate consumption, and domestically, it is a key moment for steady growth policies to continue to exert force. In addition, by looking at the current domestic economic state through economic statistical indicators, Zhu Henghong and his team predict by observing the current state of the PPI index, finding that the recent year-on-year decline in PPI is continuously narrowing, which also indicates that the profits of the entire industrial enterprise are in a state of robust repair. According to predictions, the net profit attributable to A-shares is also at the inflection point of the basic surface, and in the future, as PPI continues to narrow, A-shares net profit is also expected to continue to rise.

At present, the country is at a critical period of economic transformation, and various representative industries and new quality productive force industries are gradually shifting towards a high-quality development model. At the same time, the Federal Reserve's interest rate cuts have had a positive impact on China's equity market. With the start of the Federal Reserve's interest rate cut cycle, the space for domestic interest rate cuts can be further opened up, and subsequent liquidity is expected to remain more abundant. Loose monetary policy will also provide a very good liquidity foundation for the future rise of the entire domestic equity market.

Focusing on the core assets of leading industries and anchoring new trends in the growth of new quality productive forces

In terms of the characteristics of the China Securities A500 Index, Zhu Henghong stated that the China Securities A500 reflects the attributes of industry distribution in the compilation plan, and has made a balance in terms of industry and market value. From the perspective of the compilation plan, the China Securities A500 uses a method of compilation sampling selection to limit the sample stocks to 500; secondly, it also maintains a benchmark against the China Securities Comprehensive Index in terms of industry, and relatively speaking, these 500 stocks are the most refined microcosm of the entire market, and also provide investors with a choice for one-click configuration of the equity market. Again, the China Securities A500 covers 92 third-level industries, and compared to the Shanghai and Shenzhen 300, the China Securities A500 has a more evenly dispersed low-weight allocation in the financial industry to some new quality productive force industries, making the index more reflective of new quality productive force characteristics and more representative of the overall performance of the current A-shares core assets.

In addition, the launch of the China Securities A500 at the current time point is also very well in line with the current socio-economic development goals, because in the compilation plan of the China Securities A500, the index has made a balance in terms of market value and industry, making it more inclined towards the large-cap direction, and its industry distribution is relatively consistent with the industry distribution of the entire equity market. At the same time, in the index compilation plan, the China Securities A500 has kept pace with the times by incorporating some newer concepts. The China Securities A500 has integrated ESG factor screening in the compilation plan, which is more in line with the current rapidly developing ESG investment concept. At the same time, the interconnectivity factor is included, which is more convenient for the allocation of domestic and foreign medium and long-term funds.

Multi-dimensional analysis of balanced configuration, exploring new opportunities for stable investment

Regarding how to configure related products of the China Securities A500 Index, Zhu Henghong analyzes from three aspects: index situation, index performance, and team situation. When investing in ETFs, Zhu Henghong stated that the characteristics of the index are the basis for investors to choose. When investing in a broad-based market, an important consideration is its representativeness and its investability. A very important point when choosing an index is that the representativeness of the index must be strong. The China Securities A500 has made a good balance in terms of industry distribution, and its industry market value distribution is consistent with the trend of changes in the national industrial structure, which is stronger in economic representativeness compared to traditional broad-based indices.

From the perspective of investability, the China Securities A500 not only maintains the industry configuration ratio of the China Securities Comprehensive Index but also maintains the simplification of samples to leading companies in the industry, which also ensures that the liquidity of the index components is good and can accommodate a larger trading scale. On the other hand, its industry distribution and weight distribution characteristics are relatively dispersed, which also further improves its investability.Additionally, when selecting an index, it is also important to consider its historical performance or valuation. In terms of historical performance, the CSI 500, as a broad-based large-cap index, shows that, according to Wind data, as of September 30, 2024, the index's historical annualized return over the past 20 years is approximately 8.4%. In terms of valuation, the current equity market valuation is at a relatively low level, with limited downside risk, indicating that the cost-effectiveness of the current equity market allocation is very high. (Historical performance of the index does not predict the future.)

Lastly, when investing in ETFs, it is crucial to choose a professional team. Zhu Henghong believes that ETFs, as team-managed products, actually place a strong emphasis on the construction of back-end systems and team development. As an established ETF operator, Nanfang Fund has a very mature accumulation in team-managed products, back-end systems, and team development. Firstly, their product layout is quite comprehensive, with nearly a hundred types of ETF products offered by Nanfang Fund, providing investors with a rich variety of choices. Secondly, in terms of management, Nanfang Fund has independently developed a professional system to monitor products, ensuring the stability of fund operations. At the same time, Nanfang Fund's extensive coverage in index research provides a very practical and effective foundation for the stable operation of the entire fund in the future.