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under the basic assumption that the september rate cut is a done deal and the us economy is on a "soft landing", all parties are optimistic about the outlook for risky assets. historically, after the fed cuts interest rates, the median return of asian stocks is 9% in a non-recession environment in the united states, and -5% in a recession.

however, adjustments in funds are also gradually taking place. will the rotation of us stocks from large-cap technology stocks to small- and medium-cap stocks continue? how will the rebound of the yen affect the japanese stock market? how do international funds view the chinese stock market, which has been falling for three consecutive years and has a low valuation?

in this regard, kees verbaas, head of global fundamental equity investment at robeco, one of the largest asset management institutions in the netherlands, recently accepted an interview with a reporter from china business news. he said that he is still optimistic about the us and japanese stock markets, but the allocation to us technology giants has become more rational, and the appreciation of the yen has also caused funds to shift from export-oriented companies to domestic demand-oriented companies. he believes that although india has a good prospect, its stock market valuation is expensive, while there are still bottom-up opportunities in the chinese stock market, especially some manufacturing leaders focusing on overseas markets, and internet platform companies whose valuations are already quite cheap.

overweightus stocks butdowngrading the “big seven”

currently, it is expected that the us will cut interest rates by 25bp in september, and the cumulative rate cut may exceed 200bp. mainstream global fund managers are overweight on us stocks. september is often an unfavorable time period for us stocks, especially because of the performance vacuum period and the important interest rate meetings that usually gather in september, but after the election, us stocks tend to rise.

kees verbaas said that he is currently optimistic about the us stock market in the long term, but the allocation to large technology companies such as the "big seven" is more rational. "we currently prefer high-quality defensive sectors, especially companies with abundant cash flow and high roi, but considering the market capitalization weight of companies such as the "big seven", they are still attractive in the long run."

in his opinion, the ai ​​craze has driven the performance of technology stocks, but now more investors are beginning to pay attention to the input-output and profit realization of ai, so the upward trend of stock prices has been temporarily slowed.

the reporter also learned that since june, overseas hedge funds have begun to take profits on technology giants, which has also led to the recent consolidation of the nasdaq. as early as june, goldman sachs released a report on ai. the report is titled - generative ai: too much spending, too little gains. the core idea is that technology giants and other companies will invest more than $1 trillion in ai capital expenditures in the next few years, but so far, there has been little success. investors are concerned about whether these huge expenditures will pay off? in the past four quarters, the four largest hyperscale companies (amzn, meta, msft, googl) spent $357 billion on capital expenditures and r&d. analysts estimate that a large part of the incremental investment is attributed to ai, and hyperscale companies alone now account for 23% of the total capital expenditures and r&d of the s&p 500. nvidia pointed out that large cloud service providers (nvidia's main customers are technology giants) account for more than 40% of its data center revenue.

in contrast, kees verbaas believes that u.s. mid-cap stocks also have room to rise because many of these companies do not have long-term financing and are therefore very sensitive to changes in interest rates and are more subject to changes in consumer confidence.

previously, an overseas investment manager mentioned to reporters that, taking home depot as an example, similar retail companies were quite cautious about guidance in earnings calls because of the decline in consumer spending. but overall, such mid-cap stocks will still benefit from lower financing costs.

overweightjapanese stock market but need to pay attention to yen appreciation

turning to asian stock markets, kees verbaas believes that if the fed starts to cut interest rates, emerging market central banks can resume the process of cutting interest rates. for example, markets like brazil have a lot of room for rate cuts. the current inflation rate is below 4% and the interest rate is above 10%, so the real interest rate is as high as 6%.

the situation is similar in asia. on the one hand, overall earnings growth remains strong, with overall earnings growth in emerging markets currently at 22%, much higher than in developed markets. if the fed starts cutting interest rates, the dollar could weaken. historically, a weaker dollar has been good for emerging markets. currently, robeco is also optimistic about southeast asian markets, such as indonesia and vietnam.

it is worth mentioning that japan is undoubtedly the darling of the past two years. since last year, international funds have poured into the japanese stock market, mainly due to the favorable conditions of governance reform and the prospect of rising inflation and wages in japan. however, the surge in the yen and the plunge in the japanese stock market in august caught international investors off guard.

at present, the market expects that japan will most likely continue to raise interest rates. oxford economics previously told reporters that given the hawkish attitude of the bank of japan in july, japan is expected to raise interest rates by 15bp in october and again at the beginning of next year. the ultimate interest rate may be around 1% next year (-0.1% before the interest rate hike began in march). data released on september 5 showed that the actual wages of japanese workers rose for two consecutive months, with a year-on-year increase of 0.4% in july and the first increase in 27 months in june.

kees verbaas told reporters that he is also optimistic about the japanese stock market, and the japanese stock market as a whole is expected to maintain steady revenue growth. "but considering the appreciation of the yen, we have shifted our focus more to japanese local brands, especially retailers, manufacturing, banks, pharmaceutical companies, etc., and reduced export-oriented themes. because the appreciation of the yen may impact the export sector." he also mentioned that he is no longer hedging the yen exposure. according to reporters, before the yen soared in august, many institutions cancelled their yen hedging exposure and made a profit.

a foreign exchange trader told reporters that usd/jpy fell below the important support level of 144 last week, and the dollar bears have successfully kept the exchange rate below this level so far this week. if the us data is weak, the 142 level may be tested. once it falls below 140, 135 may be the next target.

kees verbaas believes that the japanese stock market as a whole will continue to maintain steady revenue growth. some also believe that the expected 8% profit growth, 2% buybacks and 2% dividend growth will bring investors more than 10% returns.

goldman sachs data shows that emerging markets excluding china have only recorded inflows of $4 billion so far this year, after net foreign sales of $18 billion from the july high. however, it is expected that capital inflows may recover after the start of the interest rate cut.

like many long-term investors, kees verbaas is optimistic about india's macro fundamentals, but the stock market is still overvalued, so it is necessary to look at this market with a longer-term perspective. he believes that india has made great progress, such as trends such as mobile phone assembly and mobile payment, and the banking sector is also a favorite theme for investors, which is also related to the prospect of financing growth under economic development; another major driving force is the growing interest of domestic investors in india, and as the indian middle class increases, more funds are beginning to flow into the stock market.

it is reported that under india's production incentive program (pli), in the next three years, india aims to expand its mobile phone production scale by three times to us$126 billion and its exports by five times to us$55 billion with the support of the pli program.

optimistic about china's internet and "going global" themes

currently, the allocation of global long-term funds to the chinese stock market is still at a historical low, and the market has also tested a periodic low recently. however, kees verbaas said that he is optimistic about the chinese market but is more selective, and prefers to invest in export-oriented leading enterprises.

after the mid-year report season, investment bank research also showed that in the first half of 2024, the earnings growth of the msci china index (mxcn) and the csi 300 index were 12% and 0%, respectively. 41% of the companies in terms of market value performed better than expected, while 35% performed worse than expected. revenue growth was dragged down by low inflation, with revenue growth in the first half of 2024 falling to its lowest point in 20 years, down 1% year-on-year. however, the momentum of "going out" remains strong. in the post-epidemic era, foreign sales continued to grow, mainly driven by private enterprises, which also highlighted the advantages of china's manufacturing industry. china's exports in august grew 8.7% year-on-year, better than expected, with the most significant growth in exports to the european union, up 13.4% year-on-year, while the growth of exports to the united states slowed down.

specifically, kees verbaas said that taking the manufacturing sector as an example, a chinese forklift leader ranks among the top ten in the world, and its products are exported to many countries and regions around the world. the company has enhanced its competitiveness in the international market by continuously improving product quality and technical level. in addition, he is also optimistic about some chemical manufacturing companies, which have global pricing power and competitiveness and are more susceptible to global cycles rather than being subject to china's domestic economic situation. at the same time, chinese companies dominate the new energy field, and institutions are also optimistic about some battery suppliers and leading electric vehicle companies.

it is worth mentioning that the previous wave of hong kong stock market rebound was driven by some internet giants, whose profits began to recover the earliest and carried out large-scale repurchases. at present, their price-earnings ratio is less than 10 times. in the medium and long term, international long-term funds are also interested in such companies.

kees verbaas also believes that the "new nine articles" encourage listed companies to increase dividends and repurchases, which is welcomed by investors. relevant data show that as of the first half of 2024, the cash balance of listed companies reached 17 trillion yuan, accounting for 20% of the total market value. in the past five years, more than 480 companies have announced their first interim dividends. this year's total dividends and repurchases are expected to reach a record 3 trillion yuan.