Bosera Investment Class | The Best Bottom-Fishing Candidate - ChiNext Index?

Since May, the market has seen a 'growth wave,' with China's ChiNext Index$Chinext Price Index (399006.SZ)$rising rapidly, outpacing other mainstream broad-based indices in terms of gains.So what are the characteristics of the ChiNext Index, what might its future trend look like, and how can one seize opportunities within the ChiNext?, today we are going to have a discussion with everyone on this topic~

High growth attributes lead to greater gains during bull markets

The Growth Enterprise Market (GEM), also known as the second board market, refers to the second stock trading market. It is another securities trading venue outside of the main board market of the stock exchange, aimed at promoting innovation-driven enterprises and other growth-oriented startups.

Companies listed on the GEM mostly engage in high-tech businesses, possessing high growth potential and independent innovation capabilities. However, they often have shorter establishment times, smaller scales, and less prominent performance. The US Nasdaq represents a typical GEM, known as the 'cradle of high-tech enterprises,' nurturing many tech giants like Microsoft and Apple. On October 30, 2009, China's GEM officially launched.

On June 1, 2010, the Shenzhen Stock Exchange released the GEM Index, which is one of the core indices of the SZSE's multi-level capital market. Composed of the 100 most representative stocks of companies listed on the GEM, it reflects the performance of the GEM.The GEM Index has a high proportion of new industries and high-tech enterprises, demonstrating strong leading effects and remarkable growth characteristics.Of course, the earnings of such companies fluctuate significantly, thus,the volatility of the GEM is relatively higher compared to other sectors, but during bullish market conditions, more individual stocks rise, and the gains are more significant!

Comparison of daily performance distribution of indices

Although the ChiNext Board experienced a significant decline in Q1 2022,Butsince 2011, the ChiNext Board has been the best-performing sector. According to WIND data, since 2011, the ChiNext Indexhas risen cumulatively by 124.55%, while during the same period, the Shanghai Composite Index$SSE Composite Index (000001.SH)$and the CSI 300 Index$CSI 300 Index (000300.SH)$only increased by 15.44% and 33.59%, respectively. Therefore,investors should be mentally prepared for volatility when investing in the ChiNext Board. When the market exhibits growth-oriented trends, a key characteristic of the ChiNext Index is its rapid rise, making it arguably the 'best choice for bottom-fishing.'

Comparison of major index returns from 2011 to present

The ChiNext Index's current valuation is at a historically low level

After the significant decline from January to May 2022, the ChiNext’s PE ratio is now at a relatively low historical level. According to WIND data,As of June 7, 2022, the ChiNext Index is valued at 51.1 times earnings, already below the historical average. From a long-term historical trend perspective, it currently offers relatively good value.

Historical valuation trend of the ChiNext Index

Resumption of work and production + release of policy benefits are positive for ChiNext

Since 2022, the two major factors affecting ChiNext have been domestic pandemic control measures and Federal Reserve interest rate hikes. Currently, the domestic economy is reopening comprehensively with improving economic conditions, while the Federal Reserve has already raised rates twice and provided guidance on further increases in June and July.Market pessimism has been partially alleviated.

At the same time, domestic policies aimed at stabilizing the economy are being introduced successively. The State Council Executive Meeting and the meeting to stabilize the economic landscape held at the end of May introduced a series of policy measures, reflecting an increased impetus and proactive stance towards supporting growth. In addition,Multiple policy benefits are supporting small and medium-sized enterprises, especially new energy and technology companies. The ChiNext board has started a rebound from oversold conditions, with gains exceeding 8% last week.

As the domestic pandemic situation gradually comes under control, cities like Shanghai and Beijing have resumed work and production in an orderly manner. The impact of the pandemic on the economy is gradually diminishing, combined with continuous efforts from 'stabilizing growth' policies, the long-term positive trend of the economy remains unchanged.Currently, the overall investment opportunity in the ChiNext board is worth looking forward to.

Recently, BOCI Fund (International) Co., Ltd. launched the BOCI China ChiNext Index Daily Leverage (2x) product (Stock Code: $Bosera SZSE ChiNext Daily (2x) Leveraged Product (07234.HK)$）. As the first China ChiNext leveraged product in Hong Kong, it tracks twice the performance of the China ChiNext Index, using leverage to achieve returns equivalent to twice the daily index performance. Additionally, the investment threshold is low, allowing investors to gain exposure to the most valuable stocks in the ChiNext for less than HKD $1000, helping them grasp China's economic pulse in a simple and transparent way. Last week, $Bosera SZSE ChiNext Daily (2x) Leveraged Product (07234.HK)$the increase exceeded 19%.

Risk Warning:

Investment involves risks. Past performance is not indicative of future results. Investment product prices and their returns can go up or down and are not guaranteed in terms of future performance or capital value. Investors should not rely solely on this material to make investment decisions and should read the relevant prospectus and product data summary carefully (including the product features and risk factors contained therein). Investment value may also be affected by exchange rates. Investors should seek professional advice.

This material is for reference only and does not constitute an offer or commitment to buy or sell any investment products. When preparing this material, BOCI Fund (International) Co., Ltd. ('BOCI International') believes the data sources to be accurate, complete, and appropriate. However, BOCI International does not guarantee the accuracy or completeness of the information contained in this material. BOCI International does not assume any legal responsibility arising from the use of this material. This material may contain 'forward-looking' information and is not purely historical. Such information may include forecasts, projections, income or return estimates, and possible portfolio compositions. This material does not constitute an estimate, research, or investment advice regarding future events, nor should it be considered as a recommendation to buy, sell any securities, or adopt any investment strategy. The opinions expressed in this material reflect only BOCI International's judgment as of the date of compilation and are subject to change at any time due to subsequent circumstances without prior notice.

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Important Information:

The BOCI China ChiNext Index Daily Leverage (2x) product tracks the performance of leveraged index positions daily. The target investors of this product are only suitable for those who are proficient in investment and trading, monitor their holdings daily, and possess the financial capacity to bear the risks associated with derivative investments.

Index Disclaimer

Please refer to the index disclaimer within the prospectus of the relevant product.

The above risk warnings do not disclose all involved risks. Prior to trading or investing, investors should be responsible for their own data collection and research. Comprehensive risk factors can be found in the relevant sales documents. Investors should carefully consider whether trading or investing is suitable based on their own financial situation and investment objectives. BOCI recommends that investors seek independent financial and professional advice before engaging in any trading or investment. If investors are uncertain about or do not understand any part of the above risk disclosure statement or the nature and risks involved in trading or investing, they should seek independent professional advice.

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