As the world transitions into an era characterized by high-quality development, the capital market landscape has encountered significant transformations, which necessitate an evolution in investment paradigmsThe new “National Nine Articles” serve as a guiding principle for investors, emphasizing the importance of long-term value investment and returnsIn light of these changes, I would like to share some insights based on my observations and experiences in this shifting environment.

Over the last decade, growth has been the central theme of the Chinese economy, characterized by a rapid ascent and flourishing development across various sectorsHowever, as economic growth begins to decelerate, high-speed growth will become increasingly scarceInvestors are consequently placing a greater emphasis on certainty in their investmentsThe market appears to be shifting its attention towards 'value' itself, alongside a gradual return to the aesthetic standard of “larger is better,” favoring leading companies with competitive advantages as their focal points for investment.

In this evolving market environment, a balanced investment approach can effectively address the uncertainties associated with market fluctuations

This involves diversifying across different sectors and stages of development, aiming to strike a harmonious balance between growth and value, as well as net asset growth and drawdown controlThe objective is to provide investors with long-term, stable returns regardless of the prevailing market styles.

To better illustrate this concept, one might liken a balanced investment strategy to a dumbbellOn one end, we have stable, defensive assets—companies with reliable, sustainable cash flow, a strong commitment to dividends, and solid net assetsOn the opposite end, we find high-growth companies that truly benefit from global industrial trends, leveraging advancements such as AI or the burgeoning potential of emerging markets to deliver impressive returns over timeHowever, caution is warranted, as many so-called 'tech' companies currently face scrutiny regarding their growth potential

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There are growing concerns that they may simply become traps characterized by expensive valuations and sluggish growthTherefore, distinguishing between genuine opportunities and 'pseudo-tech' investments is fundamental to our practical investment endeavors.

The overarching equity market has undergone a substantial correction, with numerous previously mispriced assets potentially presenting attractive entry pointsThis mispricing may stem from weak sectoral beta or temporary performance volatilityIn such challenging circumstances, it is vital to leverage our superior stock-picking capabilities to gradually position ourselves in high-value opportunities, seeking to uncover companies with true long-term growth potential.

The implications of the new “National Nine Articles” on the capital market are profoundAs a pivotal measure in the reform of China’s capital markets, it plays an essential role in enhancing market vitality and promoting the long-term health of capital markets

Chief among its many initiatives is the reinforcement of market regulation, which guides the focus towards long-term investment, a point I consider particularly significant.

Historically, the Chinese capital market has experienced rampant speculation surrounding shell companies and smaller, trend-driven stocksThis chaos can be attributed to a lack of robust delisting mechanisms, which allowed many non-viable companies to inflate their market capitalizations based on mere speculative expectationsFor instance, daily trading volumes of smaller stocks often exceeded that of those with market caps in the hundreds of billionsHowever, with the thorough implementation of the new “National Nine Articles,” the capital market's tolerance for low-quality companies will dramatically decreaseAlthough fluctuations may still occur in the short term, a fundamental reversal of past practices—where investors relied on rumors and speculative rebounds—will likely bring value investment into a new springtime.

Embracing a patient capital mindset while investing in high-quality companies will yield rewards over time

As the saying goes, "slow and steady wins the race." A commitment to long-term returns is, indeed, worth anticipating.

In a post-pandemic world, global political and economic instabilities are intensifying, with great power competition heating up and the survival spaces of smaller nations becoming increasingly confinedEconomic fluctuations, resource competition, and territorial disputes are all potential flashpoints for conflictMoreover, in an era characterized by deepening globalization, turmoil in any single region can quickly escalate into a global disruption.

In such a precarious environment, I believe that the market's demand for certainties in investments will heighten, underscoring the necessity for volatility and drawdown controlVolatility essentially represents a loss of energy; in instances where growth stocks operate under valuations anticipating growth of over 100%, a 20-30% fluctuation might not seem significant

However, as growth opportunities diminish, lower expectations of 10-20% will underscore the value of low volatility, as high volatility can severely erode investment returnsOur long-term objective should be to generate stable, compound growth in returns rather than merely capitalizing on volatile swingsThis approach is essential for fostering healthy growth in net value and enhancing the experiences of investors.

Furthermore, in the present global context, embracing tangible and genuinely valuable resources constitutes another form of certaintyFor example, oil prices benefit from global pricing influenced by a depreciating dollar, while domestically, outstanding publicly listed companies are leveraging the competitive advantage of China's impressive engineering talents to achieve greater efficiency and lower costs, thus yielding exceptional cash flowAs Charlie Munger aptly put it, “The best businesses are those that generate significant cash flow when they stop growing.” By investing in such exceptional enterprises, I am confident we can offer investors with consistent and stable returns over the long term.

As we navigate this high-quality development era, marked by significant changes in market styles, investor demographics, and the global environment, it’s imperative that our investment strategies evolve with the times