How do foreign investors view the current rebound? Insights from the Singapore roadshow.

Roadshows in Singapore have a much different style compared to Hong Kong. In Hong Kong, roadshows are mostly conducted in Chinese, and after meetings, people directly scan QR codes to add contacts on WeChat, which is not the case in mainland China. In Singapore, even though many clients can understand and speak Chinese, it is not their first language. Therefore, about 60%-70% of the communication in roadshows is done in English. This year, the overall sentiment is better than last year, as the market performance has been positive. Many clients attending the roadshow are old friends and familiar faces who have attended multiple roadshows over the past few years. However, there are also some who have left or changed tracks during the downward cycles in the past two to three years. 1. How are positions? Who is buying? From discussions, it is understood that clients in Singapore, whether long-term investors or hedge funds, are already well-exposed to China, possibly even slightly overweight. This is likely similar in Hong Kong. Therefore, it can be concluded that investors in the Asia-Pacific region are already well-exposed, if not slightly overweight. Some increased positions after the Chinese New Year, while others had already had exposure by the end of last year. This raises a question: if investors in the Asia-Pacific region are already well-exposed, but global investors, based on EPFR data, are still underweight (by 1-2 percentage points as of the end of January), then it indicates that Western investors have not taken much action this time. This can be verified from several perspectives: some clients with American backgrounds mentioned that some hedge funds in the US are buying, but long-term funds are mostly unchanged. This aligns with my own experience, where there were fewer inquiries from American and European investors this time compared to the rebound in September. Recent market performance also supports this observation. The source of funds in this rebound is likely short-term trading funds, with a focus on rotation within the Asia-Pacific and emerging markets. 2. Who can still buy in the future? Recently, there has been a surge in southbound capital (accounting for over 30% of trades), which is influencing the short-term market direction. However, there are concerns that this capital may include retail investors or short-term trading funds, which are easily influenced by market trends. Interestingly, many foreign clients in Singapore are also interested in how much more southbound capital is available, how much they can allocate, and whether they have pricing power, akin to how domestic clients are concerned about the return of foreign funds. Everyone wants teammates. When asked if clients in Singapore would continue to increase positions at the current levels, almost all responses were negative. Investors generally feel that it's difficult to buy in the short term and prefer to hold and observe at these levels. If there is a pullback, some investors may consider further increasing positions. The sentiment and valuation recovery seem to have reached a peak, and there is still uncertainty about future expectations and assumptions that need verification. However, there is no rush to sell or short, as the risk of being squeezed in a liquidity and sentiment-driven market remains high. If the smart money from Asia-Pacific institutions, who are already well-exposed or slightly overweight, choose not to increase positions in the short term, where will the future incremental funds come from? One possibility is the buying from retail investors and trend-following trading funds in the short term, such as the recent surge in southbound capital. This may temporarily amplify sentiment but could also lead to an overextension of emotions, potentially inviting short selling by institutions. Several rounds of overly excited highs followed by pullbacks have demonstrated this pattern. Another potential source is the still inactive long-term funds from Europe and America. If these funds start to move, it could lead to a larger and longer revaluation. However, feedback from clients suggests that the likelihood of this happening needs further observation, for various reasons. In conclusion, the buying power of institutional investors in the Asia-Pacific region is slowing down in the short term, with some hedge funds possibly opting for temporary short positions. Southbound capital and retail investors are currently dominating the market in the short term. Looking ahead, the inactive long-term funds from Europe and America could be a significant potential force, but expecting a substantial inflow in the short term requires more observation. 3. Views on the current tech-led market rally? During discussions, there was a consensus that the current AI technology trend is positive for improving Chinese assets, but there is a cautious sentiment regarding the extent of this improvement. Only about 20-30% of the participants were particularly optimistic about the industry trend, believing that the current AI trend could continue to materialize in terms of investment, profitability, and the entire industry chain.Hola, cmo ests?More customers recognize and approve of this direction, and also feel that the situation in the Chinese market is more optimistic than last year. However, they are cautious about how far it can develop, without making strong assumptions. Some customers also question whether it can successfully convert into revenue. This divergence also exists domestically, with a higher proportion of domestic customers being optimistic about industry trends, but many are also taking a wait-and-see attitude. Furthermore, from the questions raised by some customers during discussions, it can be indirectly felt that some long-term funds have not taken advantage of this wave of technology market trends. Either they are too diversified in their allocation and have not focused on technology internet, or they are holding positions with high costs from the past, and the recent rise has only made up for some losses. For these customers, their attention is focused on two points: first, what is the visibility of profit realization in the current AI industry? This question will directly determine whether these long-term funds choose to enter at this point, as the first round of valuation correction has been largely completed. For them, whether profits can be realized is crucial as they will not frequently operate in the short term after buying in. However, there are significant differences in opinions on this question, with many having strong assumptions or even "faith-based" components. Some customers believe that even in the US, after three years, there has not been a large-scale rollout and profitability in end-side applications. Currently, most customers believe that they can see: 1) the known infrastructure that directly benefits from increased capital spending in AI, but even in this chain, some investors are worried that some may not income, and more may be unfulfilled orders; 2) improvement in profitability through cost saving for some large factories. On the contrary, there are more doubts about the prospects on the application side. Second, the overall macroeconomic and macro policy situation, such as the prospects for real estate recovery, which is also a concern for long-term funds. Their logic is that the beta of the overall economy and market should not cause too much drag. If this round of market trends is still limited to a few narrow industries and stocks, and cannot spread to other industries that have not risen, it may not lead to a sustained overall market trend. Therefore, customers will focus on how much boost AI can bring to the overall economy. Many investors are also concerned that the recent heat in the AI industry and capital markets may instead delay the introduction of incremental policies, which could harm sentiment. Therefore, they will consider the Two Sessions as an important window for verification and observation. Lastly, how do the prospects of China compare with other emerging markets and US stocks? As mentioned above, overall, customers are more optimistic about the Chinese market compared to last year, and there has been a clear rotation from other Asia-Pacific markets to the Chinese market in recent times. However, some customers still keep an eye on other markets. For example, they still have a positive view of India as a whole, but the currently high valuations and downward profit cycle put pressure on the overall market, but if it falls to a certain level, there is still a willingness to intervene. They have not completely turned pessimistic about US stocks and acknowledge that there is some short-term pressure and uncertainty. Their main focus is on the sustainability of the technology trend, whether AI technology profits can be realized, and whether the reduction in fiscal spending will affect the capital spending willingness of large companies. In terms of industry selection, in addition to the high level of attention on technology internet, many customers ask about dividend styles, such as the banking sector. Some customers may choose to moderately rotate to dividend styles at this point in time, for balance and hedging purposes. Many customers also ask whether dividends can still be configured. Additionally, many customers inquire about the status of real estate and consumption recovery, private enterprise forums, bank capital replenishment, geopolitical situations, tariff impacts, expectations for the Two Sessions, and China's new consumer trends. This article was originally published on the "Kevin Strategic Research" WeChat account, GMTEight editor: Chen Xiaoyi.