Industrial Zhang Yidong: Future trends and investment strategies in the new energy, consumption, and AI sectors.

Investment opportunities in the future of the new energy vehicle industry In the future, the new energy vehicle industry chain will further expand in the fields of technology and new demand areas, extending to humanoid robotics and automation, extending to intelligent manufacturing, especially in two dimensions. One dimension is energy storage, where AI ultimately leads to energy. With the deepening of AI applications in the future, especially the development of various end-side applications and Siasun Robot & Automation, the demand for efficient utilization of new energy will become increasingly strong. The second dimension is intelligent control technology, where the technology of intelligent control in the new energy industry chain, especially in the components industry chain related to new energy vehicles, can be integrated and promoted with the Siasun Robot & Automation industry chain. If one wants to rekindle high growth expectations and high valuations for the new energy industry chain, then this industry chain must undergo new changes, new logic, and new stories. The integration of the new energy industry chain with Siasun Robot & Automation and AI is timely. Performance of the consumer sector in the future First, from a top-down logic, China will intensify efforts to stimulate domestic consumption this year, and the policy combination will be more forceful. As mentioned at the Central Economic Work Conference in December last year, stimulating domestic consumption was prioritized. In fact, first- and second-tier cities, represented by Shanghai, implemented consumption vouchers in the fourth quarter of 24 years, which stimulated consumption in areas such as catering. Policies aimed at expanding demand can be borrowed and further developed overseas. At the end of the year and the beginning of the year, considering that the renminbi exchange rate was under pressure due to the continued high long-term interest rates of US bonds, China's monetary policy did not ease as much as the market expected. After Trump's inauguration, the economic and trade relations between China and the United States were slightly better than the previous market's pessimistic expectations. Moreover, the long-term interest rates of US bonds began to fluctuate downward after mid-January, and the US dollar also began to fluctuate downward, which had a positive impact on the stability of the short-term renminbi exchange rate. It is possible that the period of maximum pressure on the renminbi exchange rate at the beginning of the year is gradually passing. This means that China's monetary policy will become more flexible after the Spring Festival, representing that China's fiscal policy and industrial policy are worth looking forward to, as loose monetary policy can better complement industrial and fiscal policies. By 2025, central decision-makers intend to comprehensively expand domestic demand. We should have confidence in this direction and anticipate stimulus to consumption. In Europe and the United States, especially the United States, after the subprime mortgage crisis, the economy has long been in a period of low growth, low inflation, and low interest rates. However, the US capital market has achieved nearly a decade-long bull market. In this process, the capital market has provided substantial property income to the American people, becoming an important component of their disposable income and forming a mutually reinforcing positive relationship between the capital market and consumption in the United States. Central decisions to boost the capital market and the policy combination from financial regulators that nurture capital market development lead us to sincerely anticipate that this round of Chinese-style bull market can steadily advance and uplift, which would then help expand consumption. Second, traditional consumer sectors need to "seek change", including but not limited to food and beverage represented by liquor, textiles and clothing, and retail trade. In recent years, traditional consumer industries have undergone supply-side adjustments, and supply-demand relationships have gradually rebalanced. We use two indicators, one called the growth rate of capital expenditure, and the other called fixed asset turnover rate. We can see that both indicators are at historical lows because China is currently at a low point in its capacity cycle and inventory cycle. Traditional consumption industries such as food processing, beverage dairy, as well as chemical pharmaceuticals, medical services, home products, and even breeding, lighting equipment and other industries are facing a turning point in the supply-demand structure. Once the capital market becomes more active in the future, the leading companies in these traditional consumer industries will use additional fundraising to promote the integration of the industry's upstream and downstream, improving the industry's competitive landscape. While the actual GDP growth rate in 2025 may still be hovering at low levels, leading companies in excellent traditional industries may be among the first to overcome challenges and achieve double-digit growth. Following this, leading consumer companies can not only undertake mergers and acquisitions, but also generously distribute dividends and repurchase shares, further enhancing shareholder returns. Like some consumer and tech stocks in Europe and America, such as Amazon, Google, and Apple, which were able to break out independently during the economic downturn from 2011 to 2019 in the United States, they did not rely solely on macroeconomic growth, but focused more on providing shareholder returns. The traditional consumer sector will face significant differentiation in the future, industry integration, and improvement in the competitive landscape of leading companies, further enhancing shareholder returns through dividends and share buybacks. Third, the emerging consumer sector, which will be more surprising in 2025, is the new consumer demand. China's per capita GDP has reached $12,000 and is maintained. When learning from others, Europe, America, and Japan experienced significant changes in their consumption structure after reaching $12,000 per capita GDP, with the proportion of service-oriented consumption in their overall consumption increasing as a trend. Even after the burst of Japan's bubble economy in the 1990s, the second dimension of Japan's economy, as well as the emotional consumption represented by games and animation, continued to grow rapidly, fundamentally indicating an increasing trend of service consumption. China is also at this stage now. In recent years, young people in China have shown a strong interest in niche economies, trendy toys, luxury cultural products, and other new consumption formats, scenes, and patterns that require new supplies to meet. New consumer demands are often interesting, as they involve finding new supplies for specific domains that bring about new demand. In the impressive performance of Peter Lynch during the 1980s, when he considered structural highlights even though the overall growth rate of domestic demand in the United States was low, there was a legend that Peter Lynch liked to ask his wife and children what they were buying.He followed to buy relevant stocks. At that time, the United States, as the world's largest domestic market, was always not lacking in structural highlights.2025Investing in companies that cater to new consumer demands for emotional consumption and AI consumption will be worth studying more deeply as well.The competition landscape has undergone continuous adjustments and survival of the fittest in the past few years, and the situation of leading companies is slowly beginning to improve. Although the overall industry is still in a downturn, the cash flow statement and balance sheet of leading companies are starting to improve. By 2025, if the capital market opens up the policy of additional share issuance for leading companies, leading companies can raise funds through additional share issuance to encourage them to integrate the industry upstream and downstream, thereby accelerating the improvement of industry competition landscape, increasing market share and profit-making ability of leading companies, and repairing their profitability.Another dimension is that we need to pay more attention to the optimization of China's industrial policies, such as the construction of a new production factor system and the high-quality development of mature industries. The regulatory orientation for securities companies is to grow bigger and stronger, leading to the emergence of world-class investment banks and national high-quality investment banks. We believe that by 2025, there will be a small climax of industrial policy optimization and mergers and acquisitions in the new quality production factor sector and industries with low business conditions. Performance and investment opportunities in the Hong Kong stock market in 2025 Compared to 2024, the Hong Kong stock market in 2025 saw a smaller increase in index levels, mainly due to a noticeable change in the short selling ratio of Hong Kong stocks. In March 2024, I was bullish on the Hong Kong stock market and predicted a bullish trend. At that time, short selling of Chinese stock assets became one of the world's two most crowded trading strategies, mainly focused on shorting Hong Kong stocks and Chinese concept stocks. In 2024, as expectations adjusted, short cover led to a significant increase in Hong Kong stocks. In 2025, with Trump beginning his second term, external uncertainties have increased. Currently, foreign investment accounts for around 46% of the Hong Kong market's total holdings, down from over 50%, making it a dominant force in the capital market of Hong Kong. The performance of the Hong Kong stock indices, including the Hang Seng Index and the Hang Seng Tech Index, is more influenced by foreign investment style, as well as the diverse short-selling mechanisms present in the Hong Kong stock market. Improvement in fundamentals and a change in market risk preferences are needed for a significant improvement in the performance of the Hong Kong stock market in 2025. The improvement in market risk preference in 2025 is more likely among mainland Chinese investors. Therefore, A shares are relatively more favored in 2025, with the performance of indices represented by the CSI A500 likely to outperform indices represented by the Hang Seng Index. However, despite these trends, Hong Kong stocks still offer unique opportunities. These unique opportunities are suitable for deep value investing assets, such as state-owned enterprise dividend assets. Taking the Hang Seng High Dividend Index as an example, its dividend yield is around 8%, and many of China's traditional industry leaders listed in Hong Kong have dividend yields above 10%. The main investors in these assets are medium to long-term funds, such as mainland insurance funds, that face a domestic risk-free rate of around 1.6%. Therefore, in 2025, the investment style of Hong Kong stocks will lean more towards value investing, suitable for deep value allocation strategies. For short-term explosive growth in technology, A shares may be more appropriate. Performance of the US stock market in 2025 The highlight of the US stock market in 2025 lies in the medium-term fundamentals, relaxed regulations and tax cuts by Trump, combined with technological innovation driven by AI. Attention will be more focused on the medium-term fundamentals rather than macroeconomics. Firstly, the overall macroeconomic situation in the US in 2025 is expected to be a soft landing, indicating that the US stock market may not have a stellar year, with index gains expected to converge but still likely to see upward fluctuations. Compared to A shares, we believe that the CSI A500 index in 2025 will have significantly higher gains than the S&P 500 index. Assuming a neutral scenario, with the US economy experiencing a soft landing and with Trump's tax cuts, as well as further technological advancements driven by AI, relaxation of regulations in energy, finance, and AI, we believe the target level for the S&P 500 may be around 6400, with a roughly 10% rise. Secondly, the pace of fluctuations in the US stock market in 2025 will be higher, which does not necessarily imply a peak or significant risk. The increased volatility in the US stock market is due to relatively cheap valuations and low risk premiums. However, the momentum of the US stock market lies in the medium-term and microeconomic fundamentals. In 2025, the EPS and ROE of leading companies will benefit from relaxed regulations, particularly in the sectors of AI, finance, energy, healthcare, and industry. With further relaxation of regulations, there will be efficiency improvements, accelerated competition, and a wave of mergers and acquisitions. The fundamental highlights of key listed companies in the US market in 2025, traditional sectors benefiting from Trump's deregulation and tax cuts may show more vitality than in previous years, while the application of AI in the technology sector will be a highlight. In addition to large companies in the AI industry chain, the US market in 2025 may also focus on medium to small-sized technology companies, particularly in areas such as energy storage, cryptocurrencies, autonomous driving, space exploration, Siasun Robot&Automation, etc. Additionally, consumer discretionary and real estate-related industries may benefit from tax cut policies in 2025. Overall, the US stock market is primarily driven by fundamentals. Unless there is a major setback in the fundamentals of core US assets, fluctuations will be triggered mainly by expensive valuations. After the volatility, the US stock market still presents opportunities in 2025. In 2025, it is advisable to pay more attention to the opportunities where the Chinese and US stock markets influence each other, such as the mutual impact of the technology trends in the US and China, including mapping effects and substitution effects; and how changes in market expectations regarding trade friction between China and the US will affect the export chains in China, providing opportunities for recovery if the reality is not as dramatic as feared. Finally, it is recommended to learn from the successful experience of the US capital market, especially the focus on shareholder returns. Even in times of economic downturn, core assets in the US market fully utilize low interest rates for debt issuance to repurchase and cancel shares, thereby improving EPS and ROE, and driving a slow but steady bullish market.