Lei CAI: the Next 30 Years is Gold Time for Equity Investment
2012-05-30
“Equity investment may control or avoid to a great extent humanities’ weakness, i.e., greed and fear, which is very difficult to be controlled in the secondary market.”
Recently, in the “Investment Banks Creates Value” Summit hosted by Securities Times, Lei CAI, partner of Jiuding Capital Co., Ltd., expressed that Chinese economy is capable of keeping 6%-8% fast increase speed in the next 10 to 20 years.
Under the promotion of economic development and industry integration, the next 20 or 30 years is gold time for equity investment in China.
Confident about the trend of A-share that is based on economic growth
Lei CAI thought the above judgment were mainly from two motives: one is economic growth, as in the next 20 or 30 years China’s economy will still keep constant growth; and the other is industry integration, as the current Chinese industries or sectors will face with a trend of great integration in the future, bringing to leading enterprises huge development and investment opportunities.
He thought that share prices of the secondary market will continue to keep relatively high in the future and shows a status of certain bubbling. He explained that the relative prices of stock, as an investment instrument, should be determined by the rate or return of one investment instrument that the stock can substitute. To small investors, the most important alternative instrument is saving. Under the situation that saving will be in a negative interest rate, even though stork price is a little high, investors can bear it.
When talking about market expansion, Lei CAI thought that since Chinese securities market was born, its basic function has been swaying between financing and investment, while to provide fund supports to enterprises has been its priority. Although this phenomenon has changed a lot, its function of financing has still surpassed its function of investment.
“Appeal of financing scale has always been surpassing appeal of stock price. Consistent, fast and large market expansion will still be a normality of Chinese securities market in a relatively long time”, Lei CAI said.
Avoiding greed and fear by equity investment
Lei CAI was optimistic about the future development of China’s economy. He pointed out that VCs must pay attention to the change of development mode of the economy in a long term, particularly in a circle of 5-10 years.
“China’s economy has a internal motive, i.e., its GDP level lags far behind the world average level, which is an original motive for supporting long-term and fast development of China’s economy, for big difference will bring simulation effects and appealing effects and support consistent growth of the economy”, Lei CAI said.
When talking about firm operation, Lei CAI pointed out that Jiuding Capital had always been pursuing disciplined development, and in the aspect of fund sources Jiuding Capital had formed a comprehensive multi-source capital structure comprised by three sources, i.e., private capital, which is the main source, and the SOE capital and overseas large institutes’ capital.
In the field of investment, he explained, Jiuding Capital had a due diligence team of nearly 100 persons and did not depend a lot on other intermediaries. Besides, Jiuding Capital had independent assessment teams, and had established operation templates and completed knowledge accumulation by large number of project investment practices. In the aspect of investments, Jiuding Capital emphasized providing value-added service according to characteristics of the enterprises’ stages in terms of short-term, medium-term and long-term.
“At present, Jiuding Capital strictly focuses on investment by a role of small shareholder in mature enterprises, adopts the mode of appropriate centralization and portfolio investment to all the funds under management, and comprehensively controls risks by mutual checking”, Lei CAI said.