At the 2025 Analyst Conference held on November 28, Li Bei, founder of Banxia Investment, delivered a keynote speech highlighting the investment appeal of A-shares and H-shares. She argued that major indices in these markets currently offer globally competitive returns, with core indices' ROE (Return on Equity) having bottomed out despite ongoing economic pressures and deflationary trends.
Li Bei presented a valuation comparison: "From a static perspective, A-share and H-share indices demonstrate significant return advantages among global assets. For instance, the CSI 300 Index trades at a PE (Price-to-Earnings) ratio of around 13x, implying a return of 7%, while some H-share indices offer even higher implied returns." She noted that while concerns about sector-specific bubbles persist, the median valuation across the broader market remains at a moderate-to-low level, suggesting most risks have been priced in.
Addressing fears of earnings collapse amid economic slowdowns and deflation, Li Bei clarified: "Even if economic conditions remain weak, core indices' ROE will not decline further." Historical data supports this view—during past crises (2008 financial crisis, 2015 market correction, 2018 trade tensions), ROE stabilized near current levels, forming a strong floor.
Explaining ROE resilience during downturns, Li Bei emphasized the divergence between leading firms and weaker competitors: "When industries face stress, smaller players exit, absorbing downward pressure. Market leaders, with their improving margins and shrinking impairments, see earnings rebound." She cited the building materials sector as an example, where top players maintain profitability while most rivals struggle with losses.
"Even in the toughest sectors, leading firms’ profits are recovering from lows around 6%, while second-tier players barely break even," Li Bei noted. This dynamic, she argued, underpins the stability of core indices' ROE.
Her analysis, combining valuation appeal with earnings resilience, sparked discussions on undervalued core assets. The speech underscored how industry consolidation bolsters investment opportunities in market leaders.