Report Industry Investment Rating - Not provided Core Viewpoints of the Report - In the second half of 2025, with a series of policies taking effect, the economy is likely to remain stable and inflation is expected to rise continuously. The seesaw effect between core assets and dividend assets may switch, and the two are expected to enter a stage of resonant growth. The convertible bond market is expected to continue its upward trend, and the style may shift to core assets [3][4][6]. Summary by Relevant Catalogs Economic Possibilities in the Second Half of 2025 - **Scenario 1: Economic stability and inflation recovery** - In this scenario, the heavy - weight stocks of various industries are expected to benefit from economic stability and inflation recovery, and core assets are likely to have an upward trend. If market liquidity is abundant, core assets and small - cap stocks may rise in resonance; if liquidity is limited, funds may rotate from small - cap stocks to core assets. For example, from 2016 - 2017, the economy was stable and inflation recovered, but market liquidity was limited, resulting in the rise of core assets and the decline of small - cap stocks [7]. - **Scenario 2: Economic slowdown and no inflation recovery** - Similar to the period from 2022 to September 2024, small - cap stocks may lead the rise initially, but they will experience a supplementary decline later because their rise cannot deviate from the economic fundamentals for a long time. For example, in April 2022, February 2024, and August - September 2024, small - cap stocks showed such trends [8]. - **Scenario 3: Economic slowdown, inflation decline, but market expectation repair** - Similar to the second half of 2014, core assets are expected to follow up and rise, like from November to December 2014 [2]. Seesaw Effect between Core Assets and Dividend Assets - From 2019 to April 2025, there was an obvious seesaw effect between core assets and dividend assets. From 2019 to January 2021, core assets rose while dividend assets fluctuated; from February 2021 to April 2025, dividend assets continued to rise while core assets declined significantly. However, in the second half of 2025, the seesaw effect may switch, and the two may rise in resonance [3][4]. - The rise of dividend assets from 2022 to April 2025 was mainly due to the certainty of high dividend yields. But as the valuation repair is gradually completed, the driving logic of dividend assets may shift to the profit factor. For example, the coal industry stopped rising after 2024, and the bank's yield has been low since July 2025, indicating a shift in the market's focus to the profit logic [4]. Convertible Bond Views - Considering that the economy is expected to remain stable in the second half of 2025 and inflation is expected to rise under the anti - involution policy, convertible bonds are expected to continue their upward trend. In terms of style, the economic stability in the second half of 2025 is conducive to the rise of core assets. Also, as the logic of dividend assets may change, dividend assets, as leading companies in some fields, are expected to become generalized core assets, and the two types of assets may rise in resonance [6]. Small - Cap Stock Market - The small - cap stock market is mainly driven by industrial trends. For example, in the new energy industry from 2021 - 2022, despite a short - term adjustment in the first quarter of 2022, it rose significantly again later due to the good development of the industrial trend. However, the industry began to decline continuously after the supply - demand pattern changed in the fourth quarter of 2022 [5].

Core Insights - A-shares reached a historic milestone with a total market capitalization exceeding 100 trillion yuan, marking a new high in history [3][7] - The Shanghai Composite Index closed at 3728 points, the highest level in nearly a decade [3][12] - The North Shenzhen 50 Index surged by 6.79%, also achieving a historical peak [3] - Both the Shenzhen Component Index and the ChiNext Index surpassed their previous highs from October 8 of the previous year [3] - The total trading volume in the Shanghai and Shenzhen markets reached 2.76 trillion yuan, the highest for the year and the third highest in history [3][7] Market Performance - A-shares experienced a broad-based rally, with the Shanghai Composite Index briefly breaking through the key resistance level of 3745 points [7] - The market saw significant upward movement, with 4034 stocks rising and a strong market sentiment reflected in a rise-to-fall ratio of 213.2 [7] - High-volatility small-cap stocks were favored, particularly in sectors like liquid cooling servers, film and television, consumer electronics, and rare earth permanent magnets, while coal, precious metals, oil and gas extraction, and steel sectors saw declines [7] Investor Sentiment - Investor sentiment is a crucial indicator of market confidence, with 33,235 users participating in a survey on August 18 [5] - The survey indicated a mixed sentiment among retail investors, with a high entry enthusiasm but a cautious approach towards high-volatility small-cap stocks [9] - Institutional investors displayed a dual strategy of maintaining core assets while exploring growth sectors, with insurance funds increasing allocations to technology stocks [9] Trading Dynamics - The trading volume has significantly increased, with margin financing balances exceeding 2.06 trillion yuan, the highest in a decade [7] - If trading volumes continue to exceed 2.5 trillion yuan, there is potential for the index to challenge the 3800-point mark [7] - Retail investors showed a strong inclination to enter the market, contributing to heightened market activity, although there were notable signs of capital diversion [9]

Group 1 - The core viewpoint emphasizes that investors should avoid blindly chasing high prices above 3700 points and should not use leverage for such operations [1] - Investors are advised to stay away from poorly rated stocks and to focus on quality investments, particularly during market downturns [2] - The recommendation includes starting with funds for those unfamiliar with stock investments, and gradually moving to quality stocks once confidence is built [2] Group 2 - The analyst suggests that investors should initially "embrace 985," which refers to investing in high-quality blue-chip stocks or core assets, before expanding to other quality investment targets [2]

Market Overview - The Shanghai Composite Index experienced fluctuations in the morning session, briefly surpassing 3700 points, with a total market turnover of 1.4 trillion yuan [1] - The CSI 300 Index rose by 0.5% and the ChiNext Index fell by 0.2% by midday [1] - The CSI A500 Index increased by 0.3%, while the STAR Market 50 Index saw a significant rise of 1.8% [1] Sector Performance - Digital currency and large financial sectors showed upward movement, while military equipment and CPO sectors underwent adjustments [1] - The pharmaceutical sector in Hong Kong demonstrated strength amid market fluctuations [1] Fund Flows - According to Wind data, the CSI 300 Index-related ETFs saw a net inflow of 1.1 billion yuan yesterday, with the E Fund CSI 300 ETF (510310) attracting nearly 400 million yuan, ranking among the top in its category [1]

Group 1 - The MSCI China A50 ETF (560050) has shown a majority of its constituent stocks rising, with the AI chip sector leading the gains, particularly Cambricon Technologies rising over 12% and Haiguang Information over 11% [2] - Notable performers include China Pacific Insurance rising over 5%, Northern Huachuang over 4%, and CATL over 2%, while Zijin Mining rose over 1% [2] - The top ten constituent stocks of the MSCI China A50 ETF include CATL, Cambricon Technologies, and Kweichow Moutai, with CATL having a weight of 7.12% and a recent increase of 2.72% [3] Group 2 - Recent strong performance of A-shares is attributed to several factors, including improved market liquidity due to increased household savings and a shift in investor sentiment towards equities [4] - A forecasted end to four consecutive years of declining earnings growth for A-shares is expected, with an upward revision of the 2025 earnings growth prediction to 3.5% [4] - External uncertainties have decreased, with a recent joint statement from China and the US suspending tariffs, which is seen as a positive development for Chinese assets [4] Group 3 - The current A-share market is characterized as a "systematic slow market," driven by improved risk appetite and declining risk-free rates, suggesting a potential long-term upward trend [5] - The MSCI China A50 ETF tracks the MSCI China A50 Connect Index, which focuses on leading companies across various sectors, reflecting China's economic strength and providing a solution for global investors to access quality Chinese assets [5][6]

Market Overview - A-shares experienced fluctuations in the morning session but showed significant recovery before noon, with total market turnover exceeding 1.2 trillion yuan, an increase of over 130 billion yuan compared to the previous day [1] - The semiconductor and medical device sectors saw gains, while the CRO and small metal sectors underwent adjustments [1] - The Hong Kong market rebounded from a dip, led by semiconductor stocks [1] Index Performance - By midday, the CSI A500 index decreased by 0.1%, the CSI 300 index increased by 0.1%, the ChiNext index fell by 0.5%, the STAR Market 50 index rose by 0.7%, and the Hang Seng China Enterprises Index increased by 0.4% [1] ETF Composition - The ChiNext ETF tracks the ChiNext index, which consists of 100 stocks with high market capitalization and liquidity, with a significant proportion in strategic emerging industries, including electric equipment, pharmaceuticals, and electronics, accounting for over 55% [3] - The STAR Market 50 ETF tracks the STAR Market 50 index, composed of 50 stocks with high market capitalization and liquidity, prominently featuring technology leaders, with semiconductors making up over 60% and combined with medical devices, software development, and photovoltaic equipment industries accounting for over 75% [3]

Core Viewpoint - The total margin financing balance in A-shares has surpassed 2 trillion yuan for the first time in ten years, indicating a significant shift in market sentiment and potential investment opportunities [1][3]. Group 1: Market Dynamics - The margin financing balance, which reflects the total amount investors borrow to trade stocks, has reached 2 trillion yuan, a level not seen since the peak of the 2015 bull market when it hit 2.27 trillion yuan [3]. - Current margin financing accounts for only 2.29% of the circulating market value, compared to 3.89% during the 2015 peak, suggesting that there is still room for growth in the market [3]. - A surge in trading activity has been observed, with A-share trading volumes consistently exceeding 1.7 trillion yuan since July, and net purchases by margin traders exceeding 40 billion yuan weekly [3]. Group 2: Institutional Behavior - Institutional investors are gradually reallocating their portfolios, with data from CITIC Securities indicating an acceleration of fund inflows from individual investors since July, alongside increased allocations to equity assets by insurance funds and private equity [3]. - The emergence of the Beijing Stock Exchange (北交所) as a new investment arena is noted, with its margin financing balance currently at 6.2 billion yuan, expected to grow as the number of eligible stocks increases and margin requirements decrease [3]. Group 3: Investment Opportunities and Risks - The current surge in margin financing is characterized by a concentration of funds in popular sectors such as new energy vehicles and robotics, with major stocks like CATL and Industrial Fulian dominating the net purchases [4]. - There is a growing divergence in market behavior, where core assets like Moutai and CATL see simultaneous increases in financing balances and stock prices, while small-cap stocks experience capital outflows [4]. - The increase in margin financing is viewed as the beginning of a new market cycle, with potential opportunities in niche sectors, particularly in specialized enterprises on the Beijing Stock Exchange that have not yet seen price increases [5].

Market Overview - The A-share market experienced an overall upward trend, with total trading volume exceeding 1 trillion yuan, an increase of 86 billion yuan compared to the previous day [1] - Over 3,300 stocks rose, with notable gains in sectors such as PEEK materials, military equipment restructuring, and photolithography machines, while the pharmaceutical sector saw a correction [1] - The CSI A500 index and the CSI 300 index both rose by 0.3%, while the ChiNext index and the STAR Market 50 index fell by 0.3% and 0.1% respectively [1] - The Hang Seng China Enterprises Index increased by 0.2% after a volatile session [1] Index Composition - The ChiNext index consists of 100 stocks with high market capitalization and liquidity, with a significant representation from strategic emerging industries, particularly power equipment, pharmaceuticals, and electronics, which together account for over 55% [3] - The STAR Market 50 index is composed of 50 stocks from the STAR Market, characterized by leading technology firms, with semiconductors making up over 60% and combined representation from medical devices, software development, and photovoltaic equipment exceeding 75% [3]

Market Overview - A-shares experienced mixed fluctuations in the morning session, with military equipment, precious metals, gaming, gas, and high-speed rail sectors leading in gains [1] - Conversely, innovative drugs, silicon energy, retail, and dairy sectors saw the largest declines [1] - The Hong Kong stock market rebounded, with technology stocks showing significant recovery while pharmaceutical stocks continued to adjust [1] Index Performance - By midday, the CSI A500 index fell by 0.1%, the CSI 300 index was nearly flat, the ChiNext index dropped by 0.5%, while both the STAR Market 50 index and the Hang Seng China Enterprises index rose by 0.5% [1] ETF Tracking Indices - The ChiNext ETF tracks the ChiNext index, which consists of 100 stocks with high market capitalization and liquidity, with a significant proportion in strategic emerging industries, particularly power equipment, pharmaceuticals, and electronics, accounting for over 55% [3] - The STAR Market 50 ETF tracks the STAR Market 50 index, composed of 50 stocks with high market capitalization and liquidity, prominently featuring technology leaders, with semiconductors making up over 60% and medical devices, software development, and photovoltaic equipment industries collectively exceeding 75% [3]

Market Performance - The A-share market has shown strong performance recently, with the Shanghai Composite Index returning to a relative high of 3600 points [1][2] - As of May 27, the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index closed at 3608.85, 14897.19, and 3226.11 points, with daily increases of 0.43%, 0.7%, and 0.92% respectively [2] Fund Performance - Equity fund returns have significantly rebounded, with some star fund managers seeing their products' year-to-date returns turn positive and continue to rise [1][2] - Notable fund performances include E Fund's Blue Chip Select Mixed Fund with a year-to-date return of 8.43%, Invesco Great Wall Dingyi Mixed Fund at 8.48%, and China Europe Medical Health Mixed A Fund at 16.68% [2] Investor Sentiment - Many investors have expressed relief at recovering their investments, with some stating they have "broken even" after previous losses [4] - However, a portion of investors remains in a loss position, particularly those who entered the market during high net asset values before the recent downturn [4] Market Recovery Factors - The recent market recovery is attributed to a temporary easing of liquidity and a reduction in commodity price pressures [3] - As of May 26, the number of equity funds with negative year-to-date returns decreased to 1170, representing less than 20% of the total, indicating a significant recovery in fund performance [3] Future Outlook - Industry experts maintain an optimistic outlook for the market, suggesting that high-quality blue-chip stocks will continue to attract investment [5] - There is a consensus that while market sentiment may fluctuate, structural opportunities for growth remain, particularly as systemic risks have decreased [5]