Core Viewpoint - The article discusses the restructuring of the global financial and monetary order, highlighting the challenges faced by the US dollar and the implications for asset allocation strategies in the coming years [1]. Group 1: Dollar and Monetary Policy - The article emphasizes the "Triffin Dilemma" faced by the US dollar due to fluctuating tariff policies, indicating a mid-term rebalancing pressure on dollar assets [1]. - The introduction of dollar stablecoins represents a dual effort by the US government to re-centralize emerging cryptocurrencies while tacitly allowing the decentralization of traditional dollars [3][5]. - The stability of dollar stablecoins is questioned, suggesting that the underlying "dollar credit" may not be reliable, thus favoring decentralized digital currencies like Bitcoin and diversified stablecoins for mid-term growth [6]. Group 2: Renminbi Internationalization - Future directions for the internationalization of the Renminbi include trade settlement, currency swap liquidity, offshore bond financing, and the development of offshore financial markets, particularly in Hong Kong, which is positioned as the largest offshore Renminbi market [8]. - The article notes that there is significant room for improvement in the internationalization of the Renminbi, especially when compared to China's GDP and trade volume as a percentage of global figures [9]. Group 3: Strategic Asset Allocation - The article suggests a focus on non-dollar assets, gold, and Bitcoin as alternative assets that present revaluation opportunities [10]. - Tactical asset allocation for the next 3-6 months includes standard equity positions, underweighting oil and US Treasuries, while overweighting gold; for the next 6-12 months, there may be trend opportunities in global equities and risk assets like copper [10]. - The article highlights that the allocation of funds in Chinese, Japanese, and European stock markets remains low, indicating potential for growth, while US stock market allocations are at high levels and may decrease [10].

Group 1 - The market is currently experiencing a slow application advancement, with new consumption facing price-performance issues, and there is a cautious attitude towards anti-involution [2] - The index center may rise in Q4 2025, with 2026-2027 being the core bull market period, relying on breakthroughs in the technology industry [2] - Three macro narratives are highlighted as strong correlated assets: gold, rare earths, and national defense military industry, with Hong Kong stocks seen as a potential leading market in the upcoming bull market [2] Group 2 - A more robust financial market environment is needed, along with more high-quality RMB assets available for overseas investors, while the A-share market is building the foundation for a bull market through investment function construction [5] - The "New National Nine Articles" in 2024 will focus on optimizing investment functions, enhancing the A-share market's shareholder structure [5] - The computer sector is identified as a low allocation industry within the technology sector, with an absolute under-allocation amounting to 25.6 billion yuan [6]

Core Viewpoint - The short-term risk appetite in A-shares is declining, with a weakening narrative from top to bottom, influenced by domestic economic conditions and increasing overseas disturbances [1][2][3] Group 1: Domestic Economic Conditions - The domestic economic support is in a transitional phase, with early signs of a decline in export demand and expectations for growth stabilization to materialize around September to October [1][2] - The market is currently in a window where policy easing may respond to market concerns, but significant fiscal measures are anticipated to be realized only in the later part of the year [2][3] Group 2: Overseas Disturbances - Increased overseas uncertainties, including the U.S. debt ceiling and geopolitical conflicts, are contributing to a suppression of risk appetite [2][3] - Key dates in July and August will be critical for assessing the outcomes of U.S.-China trade negotiations and other geopolitical tensions [2] Group 3: Industry-Specific Narratives - The A-share market is experiencing a slowdown in AI investment compared to U.S. markets, with concerns about the pace of AI application in China [3] - New consumption sectors are facing challenges related to cost-effectiveness, which, combined with fears of overall consumption weakening, is leading to a noticeable contraction in profitability within these sectors [3][4] Group 4: Market Dynamics and Asset Allocation - Defensive assets are expected to yield absolute returns in the short term, particularly in banking and high-dividend sectors like food and beverage [4][6] - The market is anticipated to remain in a high central tendency oscillation phase through Q2 and Q3 of 2025, with potential for an upward shift in the index central tendency by Q4 [5][6] Group 5: Long-term Outlook - The long-term view remains optimistic, with expectations for a bull market phase between 2026 and 2027, driven by improvements in supply-demand dynamics and increasing market profitability [5][6] - Strategic focus on sectors such as gold, rare earths, and defense industries is emphasized as they align with China's strategic opportunities [6]

Core Viewpoint - The article discusses the current economic situation in China, highlighting the mixed performance of consumption, industrial production, and investment, indicating a potential lack of sustainability in the recent economic recovery [7]. Consumption - In May 2025, retail sales showed a cumulative year-on-year growth rate of 5.0%, up 0.3 percentage points from April, driven by government subsidies and increased consumer travel [7][18]. - The demand for gold and jewelry has increased due to rising gold prices, but this consumption is not stable and may not be sustainable if income does not improve [7]. - The overall consumer sentiment is cautious, with a preference for using savings over loans for consumption, reflecting a weak growth in new short-term loans [7]. Industrial Production - The cumulative year-on-year growth rate of industrial added value in May 2025 was 6.3%, a decrease of 0.1 percentage points from April, indicating a slowdown in industrial production [7]. - The Consumer Price Index (CPI) remained in negative territory at -0.1%, suggesting ongoing deflationary pressures [7]. Investment - Fixed asset investment showed a cumulative year-on-year growth rate of 3.7% in May 2025, down 0.3 percentage points from April, with real estate investment declining by 10.7% [7]. - Infrastructure investment grew by 10.42%, but this was also a decline of 0.43 percentage points from the previous period, indicating a weakening trend across various sectors [7]. - The article emphasizes that the real estate sector requires additional policy support to stabilize [7]. Market Outlook - The bond market is expected to remain in a favorable position due to a loose monetary policy and weak real financing, with a recommendation to maintain duration and wait for positive developments [7]. - The recent strong performance in credit bonds is attributed more to expectations rather than actual capital movement from deposits to non-banking sectors [7].

Historical Evolution of Deposit Reserve System - The deposit reserve system originated in the early 18th century in the UK, evolving from spontaneous interbank clearing needs to a legal risk buffer mechanism in the early 19th century in the US [5][21] - In China, the system was officially established in 1984 when the People's Bank of China began exercising central bank functions, with significant reforms occurring in 1998 to enhance the payment and clearing functions of reserve deposits [5][10] - Since 2015, China's reserve requirements have been assessed using an average method, providing important liquidity management buffers for banks [5][10] International Comparisons and Practices - Internationally, central banks like the Federal Reserve and the European Central Bank have adopted various reserve management practices, including accepting cash reserves and implementing tiered reserve requirements [13][47] - The experience of developed countries shows a trend of lower legal reserve requirements and higher excess reserves compared to China, which currently operates under a framework of structural liquidity shortage [8][13] Future Directions of Deposit Reserve System Reform - Conditions for breaking the 5% experience lower limit for reserve requirements are gradually maturing, with necessary institutional arrangements in place to support the transition [6][14] - The shift from quantity-based monetary policy to price-based policy is a prerequisite for relaxing the legal reserve requirement system, indicating a potential future direction for reform [6][14] Regulatory Functions and Macro-Prudential Management - The deposit reserve system has evolved to include differential reserve requirements and macro-prudential assessments, enhancing the ability to manage systemic financial risks [5][34] - The introduction of the macro-prudential assessment framework in 2016 marked a significant shift in focus from narrow credit growth to broader credit metrics, integrating various financial indicators into the regulatory framework [34][37] Implications for the Bond Market - If the reform of the reserve requirement system is implemented, it may lead to short-term benefits for the bond market, including increased liquidity and potential for larger fund releases during rate cuts [14] - However, the long-term impact on the bond market may be neutral, as the transition to price-based control could diminish the influence of reserve adjustments on market dynamics [14]

Core Viewpoint - The recent fluctuations in the Hong Kong dollar (HKD) exchange rate, transitioning from a strong to a weak peg, are influenced by a combination of external capital inflows, liquidity conditions, and market speculation, with potential implications for the local economy and stock market [5][99]. Group 1: Recent Movements in HKD Exchange Rate - The HKD has experienced significant volatility, moving from a strong peg to a weak peg in just 1.3 months, which is unusually rapid compared to historical transitions [6][10]. - The transition occurred despite a weakening US dollar, which typically correlates with a stronger HKD; the HKD depreciated by 1.3% while the USD fell by 1.9% [6][99]. - The 12-month forward exchange rate for HKD briefly dropped below 7.75, indicating potential market concerns about future HKD strength [6][99]. Group 2: Factors Behind the HKD Weakening - The initial trigger for the strong peg was a liquidity shortage due to significant foreign capital inflows, with HK stock connect inflows totaling 638.6 billion HKD and an increase of 5.1 million USD in foreign investments [2][35]. - Major IPOs and substantial dividend payouts in Q2 further exacerbated liquidity constraints, with HK stock fundraising reaching 206.5 billion HKD, the highest since 2021 [2][35]. - The release of liquidity by the Hong Kong Monetary Authority (HKMA) after the strong peg was triggered led to a rapid decline in Hibor rates, with the 3-month SOFR-Hibor spread rising to 2.6% [2][47]. Group 3: Potential Implications of Weak Peg Trigger - If the weak peg is triggered again, the HKMA may not significantly tighten liquidity, as indicated by the HKMA's president, who suggested that lower interest rates could benefit the current economic environment [3][68]. - A relatively low interest rate environment and a weaker HKD could provide some support for the Hong Kong economy and stock market, potentially aiding in stabilizing the housing market [3][90]. - Historical data suggests that even during periods of USD depreciation, the HKD may remain weak if liquidity conditions are not tightened significantly [3][78].

Group 1 - The US dollar index fell significantly by 1.1% to 98.15, while WTI crude oil surged by 13% to $73.0 per barrel, indicating a volatile market environment [1][50][32] - The S&P 500 sectors showed mixed performance, with energy and healthcare sectors rising by 5.7% and 1.2% respectively, while financials, industrials, and consumer staples fell by 2.6%, 1.6%, and 1.1% respectively [9][15] - The Hang Seng Index and Hang Seng China Enterprises Index increased by 0.4% and 0.3%, respectively, with healthcare and materials sectors rising by 8.8% and 7.0% [15][70] Group 2 - The second round of US-China trade negotiations concluded, focusing on the implementation details of the Geneva agreement, including export supervision mechanisms and rare earth exports [1][70] - The US Treasury auction results were stronger than expected, with the 10-year Treasury yield at 4.421%, which was 6 basis points lower than expected [72] - The US fiscal deficit rose to $316 billion in May, with total revenue reaching $371.2 billion, driven by a significant increase in tariff revenues [75][76]

Group 1 - The article emphasizes that stable capital market policies provide A-shares with a "buffer" against macro disturbances, suggesting a shift in focus from macro analysis to strong sector rhythm judgment for short-term market assessment [3][9]. - It indicates that the improvement in the supply-demand structure of A-shares may be delayed, while the verification process of China's global competitiveness is also a process of optimistic expectation fermentation [3][9]. - The article highlights that Hong Kong stocks are a potential leading market in a bull market scenario, with significant liquidity improvements being a historical change [3][20]. Group 2 - The article discusses the expected global economic conditions over the next 3-6 months, indicating that the global fundamentals will still be affected by tariffs and high interest rates, with a preference for Chinese stocks and technology growth stocks [15][20]. - It mentions that the market may enter a phase where the central tendency is elevated, suggesting that the market is in the final stage before a significant upward movement [5][8]. - The article provides insights into the potential return rates for the Hang Seng Index in 2025, with various scenarios based on earnings growth and U.S. Treasury yields, indicating a high implied equity risk premium [20][21].

Global Asset Price Review - Global political instability continues to rise, with significant events including U.S.-China communications and armed conflict between Israel and Iran, leading to a substantial increase in oil prices [1][6] - Brent crude oil prices surged by 12.80% this week, while gold prices increased by 3.65% [1][8] - Emerging markets outperformed developed markets, with specific performance metrics showing emerging markets at 0.60%, Hang Seng Index at 0.42%, and S&P 500 down by 0.39% [1][6] Global Fund Flows - There was a notable outflow from global money markets and developed market equities, with U.S. equity funds experiencing a significant outflow of $90.8 billion [2][13] - In contrast, U.S. fixed income funds saw an inflow of $54.2 billion, indicating a shift in investor preference [2][13] - Domestic capital outflow from China amounted to $21.46 billion, while foreign capital inflow was $5.95 billion, highlighting a trend of passive inflows and active outflows in the Chinese market [2][13][16] Global Market Risk Indicators - The S&P 500 and Nasdaq indices showed a general pullback, with a rise in the bullish sentiment among retail investors, as the bullish ratio increased to 36.67% [4] - The risk-adjusted return metrics for the A-share market remain significantly higher than those of overseas markets, with the Shanghai Composite Index's ERP at 71% [3][10] Macro Economic Observations - U.S. economic data indicates signs of stagflation, with manufacturing and non-manufacturing PMIs weakening, and the CPI showing a year-on-year growth of 2.4% [5] - The market anticipates a delay in interest rate cuts, with a 71.3% probability of a rate cut in September [5]

Group 1 - The article emphasizes that regional conflicts have escalated, leading to a decline in global risk appetite and a subsequent adjustment in the A-share market. The core reason for this adjustment is that the structural market has reached low-cost performance areas, resulting in decreased internal market stability [1][2] - It is suggested to lower the weight of macroeconomic analysis and increase the focus on strong sectoral trends when assessing the short-term market. This is due to the stabilizing capital market policies acting as a "buffer" against macro disturbances [2][3] - The current market's main downward risk is linked to long transmission chain risks, such as the potential for the U.S. economy to decline more than expected, which could reinforce global recession expectations [3] Group 2 - New consumption sectors (jewelry, trendy toys, new snacks and beverages, beauty products) and leading innovative pharmaceutical companies are still in a favorable narrative, although short-term volatility is increasing [4][5] - The article highlights that the Hong Kong stock market is a potential leading market in a bull cycle, with A-shares increasingly represented in Hong Kong, which is becoming a key segment for China's financial external circulation [5] - The article provides a detailed analysis of the profit expansion indicators across various sectors, indicating that sectors like oil and gas, precious metals, and pharmaceuticals continue to show positive trends, while others like textiles and real estate are experiencing contraction [8]