CMS·2025-05-25 04:33Core Insights - The report highlights a significant shift in the A-share market, with quality indices such as the 300 Quality Growth beginning to outperform small-cap indices like the CSI 2000 since May [2][5][7] - As the economy stabilizes, leading listed companies are experiencing stable cash flow growth and decreasing capital expenditures, leading to an increase in free cash flow yield [2][33] - The report anticipates a revaluation of A-share weight indices over the next two years, driven by the performance of core assets represented by the 300 Quality Growth index [2][39] Market Dynamics - The report notes that the trading concentration of small-cap factors has reached its peak, with new quantitative regulations set to be implemented, which may help the market return to large-cap and quality stocks [2][42] - The report indicates that the net cash flow of non-financial construction companies in the CSI 300 is expected to expand further by the end of the year, enhancing the free cash flow rate [35][39] - The report discusses the impact of the regulatory environment, including stricter penalties for market manipulation, which may suppress speculative trading in small-cap stocks [42][45] Investment Strategy - The report emphasizes the importance of investing based on long-term intrinsic value, particularly in high free cash flow yield and high SIRR (Sustainable Internal Rate of Return) stocks, with the 300 Quality Growth index being highlighted as the best option [6][39] - The report outlines that the highest SIRR and ROE (Return on Equity) are found in the 300 Quality Growth index, which has shown the best performance since the end of April [38][39] - The report suggests that the A-share market may see a significant upward revaluation, with estimates indicating a potential increase of 22% to 61% for the CSI 300 over the next two years [39] Sector Performance - The report identifies sectors with improving performance, including home appliances, industrial robots, and consumer goods, indicating a recovery in consumption [4][33] - The report notes that the overall valuation level of the A-share market has declined, with the TTM PE (Price to Earnings) ratio for the Wind All A Index at 15.0, which is at the 48.7% historical percentile [4][33] - The report highlights that the AH premium has decreased, with the Hang Seng AH Premium Index reaching a new low, suggesting a narrowing price gap between A-shares and H-shares [6][39] Regulatory Developments - The report discusses the China Securities Regulatory Commission's (CSRC) release of the "Action Plan for Promoting the High-Quality Development of Public Funds," which aims to enhance the focus on long-term performance over scale [46][47] - The report outlines specific measures in the action plan, including the establishment of a floating management fee mechanism linked to fund performance and the promotion of innovative equity fund products [48] - The report indicates that these regulatory changes are expected to influence the product layout and investment behavior of public funds in the medium to long term [48]