In our view, the pressure that some investors feel, tethered to US bond yields, is likely to ease after the interest rate differential narrows. There may not be dramatic changes or sudden shifts, so it may be prudent to focus on finding suitable companies for investment rather than being swayed by short-term market fluctuations.

China’s stock market is substantially huge and policy changes now have a more delayed impact compared to the past. The real estate sector, which used to be the primary driver for economic regulation, has already undergone adjustments, in the past, the probability of changing one’s faith and belief overnight has decreased. To the extent that the pursuit of high-quality development, the probability of sudden policy shifts has decreased. However, our view is that a gradual recovery and improvement in the market are highly likely. Over the course of three years, the overvaluation from 2019-2020 is gradually being absorbed. Furthermore, certain industries for instance electronics are showing signs of bottoming out. The profitability of Chinese stocks is expected to gradually recover, which will be the most effective way to attract both domestic and foreign investors.

During times of real change, production capacity is the true reflection of productivity, rather than the monetized prices. Prices often experience disorderly fluctuations. For example, during a pandemic, the ability to manufacture masks and vaccines reflects actual capacity, not the amount of nominal currency held. The productivity of the Chinese economy will ultimately be reflected in prices.

In August, during the previous weekend, the China Securities Regulatory Commission (CSRC) introduced regulations to standardize share reduction measures, coordinate the balance between the primary and secondary markets, and the stock exchanges lowered the financing margin requirements.

Firstly, I will introduce the changes in our company and the investment process and fund’s performances of the first half of the year. Then, I will report on our current views of the market, and finally, I will answer any questions you may have. We have a topic for our discussion today that reflects our current view of the market – “Calmness, But Not Lying Flat”. Investing in Chinese assets has entered a new stage that is in line with the development of the Chinese economy and capital markets. At the same time, we do not agree with the very pessimistic views that have been prevalent in the market recently. We still believe that Chinese assets are rooted in the most creative Chinese economy and have bright potential. While the Chinese economy faces challenges, most of these challenges already existed before, and our ability to solve them is stronger ever than before.

In July, the market experienced a major turning point. As per our mid-term investors’ calls lately titled "Calmness, But Not Lying Flat", we believed that the market was too pessimistic, and that much of the pessimism was self-reinforcing and self-fulfilling, as different interpretations and assumptions about objective difficulties determine various emotions. We believe that in the next stage, with the improvement of the market, many things will also be reversed.

The market in June remained challenging, but we maintained a high position and our portfolio continued under pressure.We believe that the market is overly pessimistic, and our portfolio is built on the following considerations

The market in May remained very challenging, and investors’ confidence was even more fragile than in April. The market is full of various concerns about the Chinese economy. Our portfolio continues to be under significant pressure. However, we believe that the market may be overly pessimistic about the Chinese economy, and investors' views on Chinese stocks have implied too many negative expectations, which may have overlooked some important information. Our view is that for the Chinese economy to recover, it may only need some more time.