Home Business Morgan Stanley Huaxin Fund Shi Tongliang: Convertible Bonds Brings Rich Investment Opportunities to “Fixed Income+”

Morgan Stanley Huaxin Fund Shi Tongliang: Convertible Bonds Brings Rich Investment Opportunities to “Fixed Income+”

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Original title: Morgan Stanley Huaxin Fund Shi Tongliang: Convertible Bonds Brings Rich Investment Opportunities to “Fixed Income+” | Fund Manager Information Station Source: Morgan Stanley Huaxin Wealth Exchange

Most of 2021 has passed, and the bond market has quietly emerged from a wave of bull market. Since the Lunar New Year holiday, the 10-year Treasury bond yield began to fall from a high of about 3.28%; the economy experienced downward pressure in the second quarter, and bond yields continued to decline simultaneously; superimposed on July’s RRR cut, funding was loose, and the market’s expectations for the economy tended to be marginal. Weak, bonds are favored by institutional investors as a hedging tool. As of September 17, the 10-year Treasury bond yield has fallen to about 2.88%.

Looking ahead,How to treat the macroeconomic, capital environment and interest rate trends, and what strategies will be adopted in investment?With these questions in mind, we consulted Shi Tongliang, the fund manager of the company’s fixed income investment department, and let’s take a look at his answers.

Shi Tongliang

Master of Mathematics, Tsinghua University

11 years in securities industry, 4 years of fund management experience

Joined the company in December 2014 and served as credit analyst, fund manager assistant, and current fund manager

ServedChina SecuritiesBond Analyst, Chief Bond Analyst of Bank of China International

Mr. Shi Tongliang has a background in mathematics and finance, has both buyer and seller research experience, and has a solid research foundation. His research fields cover credit bonds and convertible bonds. He has a more comprehensive perspective. He is good at capturing investment opportunities from the perspective of macro interest rates and micro enterprise analysis. .InvestingPay attention to data and logic support, make rational decisions, and have a sound style. They tend to have investment opportunities with a higher risk-to-return ratio and a higher margin of safety.

The economic growth rate is high and low, facing certain pressure

In the first quarter, the overall economy improved. The prices of cyclical products such as coal and chemicals remained high. Industrial production was prosperous. At the same time, real estate was also in a relatively high level of prosperity. The growth rate of real estate investment and sales remained high.

The economy experienced downward pressure in the second quarter, manifested in the slowdown in investment and consumption. Especially for consumption. After the May Day and Dragon Boat Festival holidays, the consumption data did not return to the pre-epidemic level as expected by the market, and per capita consumption expenditure was weak during the holidays. This has a certain relationship with changes in the global epidemic. After the epidemic, the debt burden of various countries has increased, government debt has risen, and China’s macro leverage ratio and corporate leverage ratio have also been rising. At the same time, the real economy is weak, the virtual economy is booming, and asset prices are rising, which has led to asset bubbles. This is reflected in the rise in stock and property prices, but the per capita consumption and per capita income of residents are still low. The gap between the rich and the poor and debt problems have led to weak consumption. .

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In the long run, the development of real estate needs to remain stable. After the second quarter, the state has introduced a series of regulatory measures to curb the excessively rapid rise in housing prices and prevent potential risks. The real estate has begun to see downward pressure. While exports remain strong as a whole, we are very pleased to see that China’s export industry chain has gained more and more trust from other countries, and then penetrated into foreign economies, and export resilience has improved. This is also a bright spot in the economy. In summary,This year’s economic growth rate has been high and then low, and there will still be a certain downward pressure on the future trend.

The loose funding environment is relatively beneficial to the bond market

In terms of monetary policy, the overall RRR cut in July was originally intended to ease the pressure on small and medium-sized enterprises. The July State Council also mentioned that the rise in commodity prices has brought greater pressure to SMEs to increase costs. Therefore, the direction of economic transformation must maintain stable operation of SMEs.At present, the downward pressure on the economy is great, we thinkIn the future, the interest rate of funds will remain at a low level to maintain the basic stability of the economy.

But according to the results of empirical judgment and logical analysis,The possibility of continuing to cut interest rates is unlikely. The current economy is more of a structural problem, and we must fully understand the pressure of debt and asset bubbles. Last year, the macro-leverage ratio increased significantly. High leverage has brought greater pressure. At the same time, the government is constantly emphasizing the stability of controlling the macro-leverage ratio. From this perspective, it is unlikely that interest rates will continue to be cut. At the same time, real estate is still under pressure from price regulation. If a full-scale interest rate cut is transmitted to the decline in mortgage interest rates, it will also have a negative impact on real estate regulation.

The current low interest rate environment is relatively favorable to the bond market. Different from individual investors, institutional bond transactions are conducted in the inter-bank market, and the inter-bank market inter-bank lending rates remain low, indicating that bond funds can carry out appropriate financing and use certain leverage strategies to increase returns.

Maintaining the cost of capital at a low level is not only conducive to the stability of the bond market. According to historical experience, loose liquidity also supports growth companies. Overall, the funding environment in the second half of the year was relatively good.

Bond market yields are at a short-term low

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But the long-term downward trend is relatively established

The bond yield is currently at a low level. The 10-year Treasury bond yield has remained at around 2.8%, and the lowest yield during the epidemic last year was around 2.6%. If the rate of return continues to fall sharply, it may mean that the economic trend is weak, such as economic stagnation caused by the re-eruption of the epidemic, and an extreme slowdown in investment, but this is unlikely.The probability of a short-term rate cut is relatively small, and the room for capital gains brought about by a decline in the rate of return is relatively small. In the short-term, it is necessary to reduce the expectation of income and make basic allocations.

In the long run, in an environment of low global interest rates,China’s bond market yields are still relatively attractive compared to foreign countries, Many overseas investors are racing to enter the Chinese bond market. The current deterioration of the global economic structure has not improved significantly. Asset bubbles and debt bubbles will continue, and it will be difficult to exit the global low interest rate environment in the next few years. Although domestic bond yields are currently at a low level, they are still attractive in the long run.We continue to be optimistic about the long-term downward trend of interest rates and the long-term return potential brought by bond investment

“Fixed income +” strategy: bottoming out credit bonds

The equity part focuses on retracement control and strives for excess returns

The first thing to do in the investment strategy of “fixed income +” products is the allocation of large-scale assets, which is the main difference from equity funds. “Fixed income +” investment faces many choices. It is necessary to first consider the allocation of major types of assets, comprehensively analyze which types of assets have higher value or investment winning rate, and determine the proportion of equity and debt allocation.

Second, choose factors such as the duration and variety of bond assets.In the current market environment, since interest rates are at a low level, there is not much room for swing trading operations with downward interest rates, so they will still doThe underlying configuration based on credit debt.

For equity and convertible bonds, on the basis of determining the overall position ratio, we pay more attention to individual stocks (bonds) opportunities. The trend of individual stocks (bonds) is divergent, which will test the ability to select stocks and convertible bonds. We will use a bottom-up strategy to choose. At the same time, compared with equity funds,The equity asset part will pay more attention to drawdown control, through diversified investment, select assets with lower correlation, and strive to increase returns while reducing portfolio drawdowns

Convertible bond market will be “fixed income +” products

Provide a wealth of investment opportunities

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At present, there are more than 400 convertible bonds in the market, covering various industries, and the varieties are very rich. The focus of investment is on the selection of convertible bonds, including the analysis of underlying stocks.

From the micro level, we are optimistic about several types of opportunities. The first isTrack-type opportunities brought about by economic transformation. The growth driven by traditional infrastructure and cyclical industries has passed, and policies have turned to vigorously support the new energy industry. New energy is not only related to the increase in photovoltaic installed capacity and the increase in electric vehicle production, but also to drive the country’s industrial chain from energy demand side reform to supply side reform, and then to the rise of the manufacturing industry. This will be a huge volume. The process of economic transformation.We are long-term optimistic about industries that are in line with the direction of economic transformation, such as new energy, photovoltaics, wind power, semiconductors, electronics and other industrial chain links that must be perfected during the rise of national manufacturing industries.

Second, global monetary easing is difficult to withdraw, we are optimisticInflation trading assets. Although the market expects a recovery in the US economy, the Federal Reserve raised interest rates and implemented a tightening monetary policy. However, we see that the US bond yields have returned to 1.2%-1.3% from 1.5%-1.6% at the beginning of the year, reflecting the difficulty of the Fed to completely withdraw from the current round of monetary easing.The tightening of U.S. monetary policy is a tortuous process, which will leave global liquidity in a long-term looseness that exceeds expectations. The loose liquidity brings about a situation in which commodity prices and asset prices are easy to rise and difficult to fall, so weWe are optimistic about the opportunities that high commodity prices will bring to related cyclical industries, such as non-ferrous metals, petrochemicals, etc., and price increases will bring opportunities for profit restoration and growth, as well as the transformation of traditional companies to the direction of growth (such as the direction of new energy). Growth opportunities coming to the second curve

Third, we are optimisticDue to the differentiation of market performance, it brings opportunities to repair low-valued sectors. At present, the market is showing a structural quotation, and the industry sectors are differentiated. But the reincarnation of market styles will also provide us with opportunities to tap value in low-value industries. This is also the focus of the “Fixed Income +” product, which is based on sound investment and taps the value of the industry and the company.

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