Recently, the stock market has swept away the gloom and ushered in a wave of "flash bull market". According to Wind data statistics, from September 24th to September 30th, more than 99% of equity funds achieved positive returns, among which 911 funds' net value increased by more than 30%, with the maximum increase exceeding 50%. Investors' investment enthusiasm has been ignited, and equity funds have fully recovered.
Sorting out the performance of the top 10 stock funds in the first three quarters of this year, see the details in the table below. As of the end of the third quarter, the performance of Founder Fubon China Securities Insurance Index Fund has soared in the past year, ranking first in the same category (ranking data source: Haitong Securities, classification: stock type - replicate stock index type, time period: 2023.10.09-2024.9.30). In the first three quarters, its A share increased by 49.72%, and C share increased by 49.3%, far higher than the average level of 9.88% in the same category.
After the holiday, the enthusiasm for a general rise gradually faded. Faced with the A-share market's adjustment, the market trend appeared to diverge for the first time. On the practical level, some investors voted with their feet. As the valuation repair phase comes to an end, the market will also adjust and gradually reduce volatility to welcome the arrival of the performance-driven phase. Market uncertainty is increasing, and there is no clear investment main line. Investors should choose sectors with high certainty and lay out in advance on the left side.
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The Founder Fubon China Securities Insurance Index Fund, ranked at the top of the list, is the only pure insurance theme index fund product in the market. Its top five stock positions are: Ping An China, China Pacific, China Life, New China Life, and People's Insurance, with the top five positions accounting for more than 76% (as of June 30th).
Looking back at the historical performance trend of the fund, it has higher gains than other broad-based indices in a bull market. For example, from February 2016 to December 2017, the insurance theme fund increased by 81.3%, significantly outperforming the Shanghai Composite Index, CSI 300 Index, and SSE 50 Index during the same period. However, from March 2020 to February 2021, the insurance industry faced supply-side reforms and the impact of the epidemic, with a decline in premium growth, which dragged down the insurance liability side.
Compared with other industries, the insurance industry has a stable profit ability. The long-term average ROE level of the insurance industry is high and has small fluctuations. The average ROE over the past decade is 13.2%. Although facing the impact of the epidemic from 2020 to 2023, the average ROE of the insurance sector over three years is 10.3%. The stable ROE indicates the high-quality attribute of the insurance industry's profit growth, which is also the important logic for the insurance index to significantly outperform the broad market in the long run. In three bear markets, it has shown good resistance to falls, with the decline being lower than that of the Shanghai Composite Index, CSI 300, and SSE 50 and other broad-based indices, which can be described as both offensive and defensive.
As a cyclical sector, insurance has long been undervalued, with low institutional holdings and a high safety margin. According to Wind data, as of 2024.9.26, the valuation of listed insurance companies in A shares is in the low range of 0.5-0.9 times P/EV. In the second quarter of 2024, the proportion of the insurance sector's stock market value held by active funds was only 0.24%, an increase of 0.12% month-on-month, and 3.81% lower than the underweight of the CSI 300.
In the long run, with the intensification of population aging, future residents' social security will not be able to meet the needs of the elderly, and commercial insurance is needed as a supplement. Against the background of the industry facing the bottleneck of critical illness insurance sales, commercial pension funds will open up the market and become a driving force for insurance companies to maintain high growth in their business.
In the past decade, the development of China's insurance industry has been rapid. From 2013 to 2023, the total assets of listed insurance companies grew from 7.4 trillion to 22.3 trillion, with an annual compound growth rate of 11.7%. From 2013 to 2023, the premium scale grew from 1.7 trillion to 5.12 trillion, with an annual compound growth rate of 11.5%, showing a good development trend.
With stable cash flow and profit model, the performance is relatively less affected by economic cycle fluctuations, and the high dividend characteristics of listed insurance companies are prominent. Since 2024, this sector has continued to be favored by investors. In a low-interest rate weak recovery environment, the asset-liability matching difficulty of asset management institutions represented by insurance has increased. As long-term funds pursuing stable and sustainable returns, the allocation of insurance funds to China's leading and high-dividend sectors will be a long-term, continuous, and gradual process, and the allocation demand of "long money" is expected to continue to bring incremental funds.Risk Warning: The contract of Founder-Fubon China Securities Insurance Index Fund officially came into effect on January 1, 2021. The net value growth rates of Class A shares for the fiscal years 2021-2023 were -21.73%, -4.82%, and -5.19%, respectively. During the same periods, the growth rates of the performance comparison benchmarks were -24.04%, -7.72%, and -7.73%, respectively. The Founder-Fubon China Securities Insurance Theme Index Securities Investment Fund originated from the termination of the tiered operation of the Founder-Fubon China Securities Insurance Theme Index Graded Securities Investment Fund and its subsequent transformation. The "Founder-Fubon China Securities Insurance Theme Index Securities Investment Fund Fund Contract" officially came into effect on January 1, 2021, and the "Founder-Fubon China Securities Insurance Theme Index Graded Securities Investment Fund Fund Contract" became invalid on the same day. Starting from March 27, 2023, the fund added a Class C share category. The net value growth rate of Class C shares since the fund contract came into effect has been 2.66%, while the growth rate of the performance comparison benchmark for the same period has been 0.39%. The performance data is sourced from the fund's regular reports, up to the second quarter report of 2024.
The Founder-Fubon China Securities Insurance Theme Index Securities Investment Fund is an equity fund, classified as a high-risk, high-expected return fund type, with expected risks and expected returns higher than those of hybrid funds, bond funds, and money market funds. The specific risk rating results are subject to the ratings provided by the fund manager and sales institutions. The fund primarily invests in the constituent stocks and alternative constituent stocks of the target index, and there are risks associated with the deviation of the target index returns from the average returns of the stock market, the liquidity risk of the target index, the volatility risk of the target index, the risk of changes in the target index, and the risk of tracking error control not achieving the agreed target, among other index investment risks.