Core Insights - As of March 2022, China's foreign exchange reserves stood at $31,880 billion, a decrease of $25.8 billion or 0.8% from the end of February 2022, primarily influenced by valuation factors [1] - The overall cross-border capital inflow in March showed a recovery, with the foreign exchange market maintaining a basic balance in supply and demand [1] - The U.S. dollar index rose by 1.7% to 98.3 in March, while major non-dollar currencies such as the euro, pound, and yen experienced declines of 1.4%, 2.1%, and 5.5% respectively [1] Summary by Sections Foreign Exchange Reserves - China's foreign exchange reserves decreased by $25.8 billion in March 2022, attributed to valuation changes and asset price fluctuations [1] - The reserves are primarily denominated in U.S. dollars, and the decline was influenced by the depreciation of non-dollar currencies when converted to dollars [1] Market Conditions - The international financial market is experiencing increased volatility due to factors such as major countries' monetary policies, geopolitical tensions, and the ongoing COVID-19 pandemic [2] - The S&P 500 index rose by 3.6%, while the Eurozone's STOXX 50 index fell by 0.6%, and the Nikkei 225 index increased by 4.9% in March [1] Future Outlook - The foundation for maintaining stable foreign exchange reserves remains strong, supported by China's resilient economy and long-term positive outlook [2] - However, ongoing geopolitical conflicts and rising prices of commodities may lead to increased volatility in global financial markets, necessitating proactive macroeconomic policies to stabilize market expectations [2]

Core Viewpoint - The report emphasizes that a single factor is insufficient for long-term success in industry comparisons, advocating for a comprehensive evaluation that incorporates multiple factors, particularly focusing on valuation metrics [3]. Valuation Analysis - Directly using valuation for industry comparisons yields poor results, as the absolute value perspective shows that valuation has an insignificant impact on stock prices. Historical data indicates that both PE and PB valuations have unstable influences on industry stock prices [4]. - Standardizing valuations improves the effectiveness of comparisons, yet the results remain inconsistent. Different industries have unique characteristics and developmental stages, making absolute valuation comparisons potentially misleading [4]. Market Sentiment Impact - The effectiveness of valuation improves significantly when combined with market sentiment. High or low valuation factors struggle to maintain consistent performance, as short-term stock performance is often influenced by marginal changes in fundamentals and market events rather than valuation alone [5]. - Market sentiment plays a crucial role in determining investor preferences for high or low valuation stocks. During periods of rising sentiment, investors favor high valuation sectors, while in declining sentiment, they gravitate towards low valuation sectors [5]. Enhanced Distinction with Market Sentiment - When market sentiment is considered, the distinction in industry performance based on absolute valuation improves significantly. Both PE and PB valuations show enhanced differentiation, with a stable upward trend in the performance of various groups [6]. - However, standardized valuation scores do not perform as well when combined with market sentiment, showing less clear differentiation and unstable performance trends [6]. Best Performing Valuation Metric - Among various valuation metrics, PE valuation combined with market sentiment yields the best scoring results. The investment strategy based on PE valuation from January 2013 to February 2025 shows annualized returns of 16.3%, 11.7%, 4.3%, 0.9%, and -4.7% for different groups, with a total annualized return of 20.9% for the long-short portfolio and a Sharpe ratio of 1.08 [7].