China Equity Strategy：A~Share Sentiment Fell Sharply Amid Domestic and Global Uncertainty

Investment Rating - The report maintains a cautious stance on the A-share market due to rising global volatility and uncertain domestic policies, indicating a negative sentiment shift [2][5][12]. Core Insights - A-share investor sentiment has significantly declined, with the MSASI dropping to 36% (weighted) and 28% (simple), reflecting a 12ppt and 13ppt decrease respectively compared to the previous cutoff date [3][6]. - Northbound capital flows have experienced accelerated net outflows of US$2.4 billion during the first week of August, while Southbound flows have continued to show positive inflows for 24 consecutive weeks, totaling YTD net inflows of US$56.8 billion [4][11]. - The report highlights the weak export data from China, with nominal exports growing at 7.0%, below the consensus estimate of 9.5%, and a month-on-month contraction of -3.2% [5][11]. - Domestic deflationary pressures persist, particularly in the housing market, where contracted sales of major developers fell 38% year-on-year and 28% month-on-month in July [5][11]. Summary by Sections Market Sentiment - The weighted and simple MSASI indicators have dropped to 36% and 28%, indicating a notable decline in investor sentiment [3][6]. - Average daily turnover for ChiNext decreased by 12%, while A-shares and Northbound flows saw increases of 8% and 3% respectively [3][4]. Capital Flows - Northbound net outflows reached US$2.4 billion in early August, while Southbound inflows amounted to US$3.3 billion during the same period [4][11]. - Year-to-date net inflows for Northbound have declined to US$0.9 billion, contrasting with the robust Southbound inflows [4][11]. Economic Indicators - China's nominal exports data missed expectations, with a growth rate of 7.0% and a month-on-month decline of -3.2% [5][11]. - The housing market remains under pressure, with significant declines in sales and prices across major cities [5][11]. Investment Recommendations - The report suggests focusing on single stock ideas and thematic investing, particularly in SOE reform beneficiaries and high-quality dividend plays [13]. - A-shares are preferred over offshore investments, with a cautionary note on valuation premiums that have risen to 26% compared to MSCI China [13].