The financial landscape in late December 2023 is witnessing a notable rise in bank stocks, with major players like Industrial and Commercial Bank of China, China Construction Bank, Bank of China, and Agricultural Bank of China setting new price records. Other financial entities such as Zijin Bank, Shanghai Pudong Development Bank, Beijing Bank, and Postal Savings Bank are also following this upward trend. This rebound suggests a growing investor confidence in the banking sector.

Investors are beginning to take a closer look at high-dividend stocks, a sector that has garnered significant attention for its potential steady returns. According to analysts from Industrial Securities, the dividend segment is expected to be driven largely by the influx of capital. Notably, insurance funds have emerged as an important source of this incremental funding in the A-share market, favoring stocks with stable earnings and solid cash flow. This trend indicates that high-dividend stocks may serve as crucial fixtures for asset allocation moving forward. At the same time, mutual funds appear to be underweight in this segment, leaving room for growth.

The allure of "high-dividend" stocks sets them apart from more glamorous sectors like artificial intelligence, semiconductors, or lithium batteries. While these high-growth industries often boast remarkable performance, high-dividend stocks present a different story—one grounded in stability. Many banking stocks have long lingered in a state of being undervalued due to their large sizes and previous capital outflows. However, with the decline in market risk appetite and a general downward trend in long-term interest rates, these banking stocks are increasingly appealing to large investors seeking defense and consistent dividend income. Currently, shares from state-owned banks are showing strong performance, and the combination of rising stock prices and dividends is rendering favorable returns for investors.

In the long term, the performance of these banking stocks resembles a slow bull market, with a gradual upward trend evidenced in 2023. For instance, shares of the Ninghu Expressway experienced a modest growth of less than 18% throughout the year, yet strategic investors, such as Blackstone and JP Morgan, have quietly increased their holdings by the third quarter of 2023. Additionally, traditional heavyweight investors like Mitsubishi UFJ Financial Group and Citigroup remain among the top six shareholders, underscoring the substantial institutional interest.

Highway tolls can be compared to running a hydroelectric power station; after initial investments, operating these toll roads transforms them into low-debt, high-margin cash flow machines. The Ninghu Expressway boasts a debt ratio under 50% and an impressive operating gross profit margin of 68%. In the first three quarters of 2023, the net profit attributable to its parent company reached approximately 4.04 billion yuan, reflecting a nearly 30% year-on-year growth. Meanwhile, its dynamic price-to-earnings ratio remains a modest 11 times. Similarly, Sichuan Investment Energy, which reported a profit of 4.4 billion yuan, also exhibits a dynamic P/E ratio exceeding 15 times.

Among stocks hitting new highs, there exist many "hidden champions" in the market. For instance, Hangzhou Forklift Group, specializing in forklift manufacturing, is predicted to achieve a net profit of between 1.6 billion to 1.8 billion yuan in 2023, reflecting an impressive growth range of 61.98% to 82.23%. Asset management firm Invesco Great Wall strategically positioned itself in the second quarter, reaping considerable floating profits.

As we analyze capital movements in recent months, the once-booming lithium battery sector is experiencing a slowdown due to declining growth rates in downstream electric vehicle penetration and excessive production capacity across the lithium supply chain. The outlook for 2024 appears grim, with the industry potentially facing accelerated declines following significant capital outflows. This shift highlights the capricious nature of investment tendencies, leading many to question the sustainability of prior performance trends.

Stocks that once thrived on fandom, such as those associated with the "Mao" index, are now grappling with continual low performance and redeeming pressures from mutual fund investors. For example, Zhang Kun, a celebrated fund manager renowned for heavy investments in consumer stocks, saw his asset management scale plummet to 65.474 billion yuan by late fourth quarter 2023—a staggering fall from its peak at 134.478 billion yuan in 2021.

Fund flows, akin to water currents, will inevitably seek optimal targets. The A-share market lists over 5,000 companies, and the current trading volume is insufficient to trigger widespread bullishness. Rather, capital is likely to flow toward undervalued positions amidst a structural market environment.

The historical trend reveals a pattern of style-switching in the A-share market, heavily influenced by retail investors who often chase trends and create volatility. This behavior frequently yields shorter bull periods followed by prolonged bear phases—mounting frenzies during price surges and dire declines when sentiment falters. Transitions between sectors occur as one reaches its peak and another begins to rise, revealing a cyclical nature prevalent around year-end when institutional investors base their end-of-year assessments and portfolio realignments.

This timing coincides with the emergence of micro-cap stocks—the lesser-known companies ranked in the lower 400 by market capitalization. The concept of "one big drop, everything flourishes" encapsulates this moment; however, after two years of substantial growth leading to the end of 2023, micro-cap stocks collapsed while undervalued, high-dividend segments rose quietly. What’s more, this unique "teeter-totter" effect in the A-share environment has once again come into play.

While the uptrend in emerging high-tech and new energy sectors continues, uncertainties tied to market fluctuations present notable challenges. Among countless high-quality firms exists a myriad of risks; thus, investors must maintain a balanced approach without fostering excessive attachment to individual stocks. Emphasizing long-term gains over fleeting short-term profits will prove beneficial in navigating this landscape.

Moreover, the policies regarding "specialized value" and state-owned enterprises' market capitalization management are steadily gaining traction. In November 2022, the China Securities Regulatory Commission emphasized a "Chinese characteristic valuation system." This proclamation prompted a call for a deeper understanding of active market valuation theories and the formulation of a distinct valuation framework for categorizing listed companies throughout China.

The year 2023 commenced with an exploration of "specialized value" investment narratives, though this theme experienced a lull after initial excitement. Yet, on January 24, 2024, the State-owned Assets Supervision and Administration Commission introduced plans to incorporate market capitalization management within performance evaluations for leaders of central enterprises, breaking from the previous encouragement-focused policies.

As the landscape shifts post-market reforms, it's critical to acknowledge that managing market valuation remains an essential component of state-owned enterprises' reform efforts, representing a critical pathway for enhancing their core competitiveness and industry impact.

For example, Deutsche Bank highlights the "seven tech giants" in the U.S. stock market—Microsoft, Amazon, Nvidia, Meta, Apple, Alphabet, and Tesla—whose combined market values surpass that of Japan's stock market, making them America’s fourth-largest market in terms of market capitalization. This success is akin to a testament to their pivotal role in a global context.

To further emphasize the importance of shareholder returns, the U.S. SEC implemented the "10b-18 Rule" back in 1982, which encourages firms to buy back stocks while regarding total shareholder returns as a critical measure for assessing management performance.

With these two significant policies converging, the likelihood of increased share repurchases and dividends from central state-owned enterprises rises. Thus, emphasizing market capitalization management will take a more prominent seat among executive responsibilities in state-owned listed companies.

From the "Mao index" to the lithium new energy and artificial intelligence segments, the stage is set for the resurgence of "low valuation, high yield" investments in 2024.