Core Viewpoint - The article discusses the current state of the A-share and Hong Kong stock markets, emphasizing the importance of corporate earnings growth as a key driver for market recovery and the cyclical nature of economic conditions affecting market performance [6][28][30]. Market Overview - A-shares have shown resilience, with an overall increase and a rating of 4.9 stars, indicating limited downside potential [2][29]. - The Shanghai and Shenzhen 300 indices have seen slight increases, while mid and small-cap indices like the CSI 500 and CSI 1000 have performed better [3]. - The healthcare sector remains strong, while the banking index recently hit a historical high before experiencing a pullback [4]. Economic Cycles and Market Behavior - The duration of bull and bear markets is often linked to economic cycles, with prolonged bear markets typically occurring during economic downturns [8][14]. - Historical examples from the U.S. stock market illustrate that long bear markets can last up to a decade during economic recessions, while shorter bear markets can occur during economic expansions [16][23]. - The article notes that the current economic downturn in A-shares is largely due to significant deleveraging in the real estate sector, which has affected consumer spending and overall economic health [25][27]. Future Outlook - The article suggests that the current economic downturn will eventually end, as economic cycles are characterized by fluctuations rather than prolonged stagnation [28]. - Indicators such as corporate earnings growth are crucial for assessing market recovery, with A-shares showing a year-on-year earnings growth of approximately 4-5% in Q1, while Hong Kong's Hang Seng Index saw a more pronounced recovery with a 16% growth [28]. - Different sectors are expected to recover at varying rates, with technology and healthcare showing early signs of recovery compared to consumer sectors [28][32]. Investment Strategy - The article emphasizes that the market's upward potential relies on corporate earnings recovery, with a need for sustained growth to drive valuations higher [30][31]. - The current market rating of 5 stars suggests a strong valuation floor, with institutional support likely to mitigate volatility during downturns [29].

Core Viewpoint - The article emphasizes the importance of percentile as a reference indicator when investing in index funds, suggesting that low percentile investments may present potential opportunities [1][6]. Summary by Sections Percentile Types - There are two types of percentiles: 1. **Time Percentile**: Indicates the current valuation's position within historical valuations over a specific time frame. For example, if the current valuation is lower than 90% of the valuations in the last five years, it is at the 10th percentile [3]. 2. **Space Percentile**: Represents the current valuation's position between the historical minimum and maximum valuations. For instance, if the historical minimum P/E ratio is 10 and the maximum is 50, a current P/E of 20 would place it at the 25th percentile [4]. Practical Investment Considerations - Time percentiles are more commonly used in actual investments, but relying solely on percentiles carries risks [5]. Risks of Relying Solely on Percentiles - **Risk 1**: Short index launch time can lead to low historical valuation reference value. For example, newly established indices may not provide a reliable bottom valuation due to limited historical data [9][10]. - **Risk 2**: Changes in index rules can significantly alter valuation data. For instance, the change in the China Securities 100 index from a market-cap-based selection to a leading strategy can affect historical valuation references [12][13]. - **Risk 3**: Different weighting algorithms for valuations can lead to changes in percentiles. For example, the China Securities Dividend Index's shift from market-cap weighting to dividend yield weighting has resulted in discrepancies in reported P/E ratios [14][18]. - **Risk 4**: Significant fluctuations in earnings can cause P/E percentiles to become misleading. For instance, if a company's earnings surge, the P/E ratio may appear low, creating a "value trap" scenario [20][21]. Conclusion - Investments with low percentiles are worth researching, but low percentiles do not guarantee undervaluation. Factors such as short historical data, changes in index rules, different valuation algorithms, and earnings volatility can lead to percentile failures, necessitating a detailed analysis of each situation [25][26].