Market Overview - A-shares experienced a rebound in April, with significant decline in volatility in May, and analysts expect a strong oscillation in June, focusing on liquidity, policy implementation, and economic expectations [1] - The A-share market currently exhibits a "strong reality, weak expectation" characteristic, with improved economic data due to policies like "two new, two heavy," "automobile replacement subsidies," and "consumption vouchers" [1] Economic Indicators - In Q1, the net profit growth rate for all A-shares excluding financials was 3.4%, reversing two years of negative growth, indicating clear fundamental support for the index [1] - However, internal demand remains insufficient, and asset price declines pose constraints on economic recovery [1] - April's PPI fell by 2.7% year-on-year, with a widening month-on-month decline, and recent social financing growth primarily relies on government debt issuance, with new RMB loan scales being relatively small [1] Future Outlook - The second quarter is expected to maintain basic data without significant decline, while the third quarter will be a critical period to validate the strength of economic recovery [1] - Previously announced government debt quotas may bottom out in Q3, with new policy measures likely to be introduced, making it a key period for index direction [1] Liquidity and Policy Measures - In May, the central bank implemented a series of monetary policies to provide ample liquidity to the market, with significant policies expected to be released by the Shanghai government during the 2025 Lujiazui Forum [2] - The economic data from April and May indicates that US-China trade tensions have not fundamentally impacted China's stable economic development, highlighting the resilience of the economy [2] Long-term Investment Trends - Policies are continuously guiding "long money, long investment," with ongoing updates on insurance fund long-term investment reform trials [3] - The inflow of "long money" is expected to stabilize the market and reduce stock market volatility, with public funds projected to increase their A-share holdings by at least 10% annually over the next three years [3] - The correlation between A-share valuations and medium to long-term RMB loans is significant, particularly for small-cap indices like the CSI 1000, which are notably influenced by liquidity [3] Investment Preferences - Long-term funds tend to have longer holding periods, lower capital costs, and place greater emphasis on the stability of equity assets, benefiting large-cap broad-based indices and dividend low-volatility themes [4]

Core Insights - The joint statement from the China-US Geneva Economic and Trade Talks highlights the importance of bilateral economic relations for both countries and the global economy, emphasizing the need for sustainable, long-term, and mutually beneficial trade relations [2][7] - The statement indicates a commitment to continued dialogue and cooperation, aiming to address economic concerns through open communication and mutual respect [2][7] Group 1: Short-term Market Impact - The recent joint statement serves as a positive signal, alleviating market sentiment and boosting risk appetite, marking a substantial easing of trade tensions since the "reciprocal tariffs" conflict in April [5][9] - Prior to this, the imposition of tariffs as high as 145% and 125% had nearly frozen bilateral trade, significantly impacting supply chain stability, with China's exports to the US dropping by 21.03% year-on-year in April [5][9] - The announcement of a 90-day suspension of new tariffs and the retention of some lower rates is seen as a "cooling" signal, with the Chinese side led by a Vice Premier, indicating a strong commitment to pragmatic negotiations [5][11] Group 2: Medium-term Structural Challenges - Despite the positive tone of the statement, there remain significant structural disagreements, with tariffs unlikely to see substantial reductions in the short term [12][14] - The US has temporarily suspended the implementation of a 24% tariff for 90 days while retaining a 10% base tariff, indicating that if the 24% tariff is reinstated, the overall tariff level on China could remain above 50% [12][14] - The ongoing competition between China and the US in technology, supply chains, and security suggests that expectations for a systematic reduction in tariffs similar to 2019 are significantly more challenging [12][14] Group 3: Investment Recommendations - The easing of trade tensions is expected to boost risk appetite in the short term, particularly benefiting sectors like the Hang Seng Technology Index and export-oriented industries [13][14] - Focus on high-growth sectors such as engineering machinery, power equipment, nuclear power, and non-ferrous metals, which are likely to benefit from global manufacturing expansion [14] - The Hang Seng Technology sector is anticipated to gain from both the AI thematic investment and the easing of US-China relations, presenting a favorable investment opportunity [14]