Economic Overview - The economy in July shows signs of weak recovery, with a potential trend of high-to-low performance throughout the year, indicating increased volatility due to external uncertainties[1] - The nominal GDP is projected to reach around 140 trillion yuan, with limited elasticity in growth rates and GDP deflator index in the second half of the year[12] Industrial Growth - In July, the industrial added value increased by 5.7% year-on-year, slightly below market expectations, while month-on-month growth was 0.38%[14] - Manufacturing demand is recovering but showing signs of marginal slowdown, with the new orders index at 49.4%, indicating a decrease in manufacturing market demand[16] Consumer Spending - The retail sales of consumer goods in July grew by 3.7% year-on-year, down from 4.8% in June, with a notable decline of 1.1 percentage points[19] - Factors affecting retail sales include reduced funding for the "old-for-new" policy, which decreased from 162 billion yuan in the first half of 2025 to 138 billion yuan in the second half[21] Fixed Asset Investment - From January to July, fixed asset investment (excluding rural households) totaled 288.229 billion yuan, growing by 1.6%, which is below market expectations of 2.7%[29] - Infrastructure investment grew by 3.2%, while real estate development investment saw a significant decline of 12.0%[29] Employment Trends - The urban surveyed unemployment rate in July was 5.2%, slightly up from the previous month, reflecting seasonal pressures from the graduation season[6] - Employment policies are being implemented to mitigate youth unemployment, including support for job creation in various sectors[6] Investment Outlook - Manufacturing investment growth was 6.2% year-on-year, but July recorded a negative growth of -0.3%, the first negative reading since July 2020, primarily due to high base effects and uncertainties from trade tensions[45] - The overall investment environment remains cautious, with private investment declining by 1.5% year-on-year, particularly in the real estate sector[29]

Group 1 - Central Huijin significantly increased its holdings in core broad-based ETFs such as CSI 300, SSE 50, and CSI 500 during Q2, with total investments amounting to 202.47 billion yuan [1] - The Huatai-PineBridge CSI 300 ETF saw the largest increase, with Central Huijin purchasing 10.874 billion units, amounting to approximately 42.21 billion yuan, raising its shareholding from 29.78% at the end of last year to 40.26% [3] - Central Huijin also made substantial purchases in multiple CSI 1000 ETFs, including 5.655 billion units of Southern CSI 1000 ETF (approximately 13.42 billion yuan) and 3.805 billion units of Huaxia CSI 1000 ETF (approximately 9.07 billion yuan) [3] Group 2 - Additional purchases included 8.183 billion units of Huaxia SSE 50 ETF (approximately 22.22 billion yuan) and 3.366 billion units of Southern CSI 500 ETF (approximately 18.91 billion yuan) [3] - In April, Central Huijin expressed a strong outlook on the development of the Chinese capital market and committed to continue increasing its ETF holdings [3] - The announcement in April also included a clear positioning of "quasi-stabilization fund" and a statement from the central bank regarding support for relending [3]

Group 1 - The report emphasizes that under the current weak replenishment cycle, A-shares are expected to outperform other asset classes, with a recommendation to increase the allocation to A-shares while reducing commodity assets [2][24][25] - The report predicts a weak recovery in A-share earnings, with a projected growth rate of 0-5% for the second half of 2025, and a valuation contribution of 0-7%, leading to an expected median increase of 7% in A-shares [39][40] - The report identifies small-cap stocks, strong reversals, high valuations, and high profitability as the dominant market styles for the second half of 2025, with a particular focus on TMT (Technology, Media, and Telecommunications) sectors [46][47][48] Group 2 - The technology sector is highlighted as a high-probability choice for index breakout, supported by stable capital market commitments and sufficient policy reserves [54] - The report outlines two scenarios for industry allocation: one under a fluctuating market and another under a potential upward breakout, indicating the need for strategic planning [54] - The report suggests that the AI and humanoid robotics industries are expected to experience significant growth, with a focus on high-growth and consumption styles in the top ten recommended industries for the second half of 2025 [24][39]

Core Viewpoint - The performance of the small-cap indices, particularly the CSI 2000 and CSI 1000, has outperformed larger indices like the CSI 300 and ChiNext, indicating a strong preference for small-cap stocks in a market characterized by ample liquidity and moderate economic fundamentals [2][4]. Group 1: Index Performance - The CSI 2000 index has achieved a year-to-date increase of 13.49%, while the CSI 1000 index has risen by 5.36%, outperforming U.S. stocks [2]. - The CSI 2000 Enhanced ETF (159552) has surged by 28.93%, exceeding the CSI 2000 index by 15.44%, and the CSI 1000 Enhanced ETF (159680) has increased by 13.56%, outperforming the CSI 1000 index by 8.20% [4]. Group 2: Market Conditions - The strong performance of these indices is attributed to multiple interest rate cuts and a clear stance from the central bank on maintaining a moderately loose monetary policy, which has enhanced market liquidity and favored technology growth [7]. - The CSI 1000 index is closely linked to concepts such as "specialized and innovative" and "new quality productivity," while the CSI 2000 index, with its smaller market capitalization, has greater elasticity, making it a favored target for funds in the absence of major market trends [7]. Group 3: Investment Strategies - The CSI 2000 Enhanced ETF has set 18 new historical highs this year, with a remarkable increase of 71% from last year, indicating strong excess returns [7]. - The ETFs utilize a three-layer enhancement mechanism to amplify returns: 1. Industry rotation through a quantitative model that captures hotspots like AI and high-end manufacturing [9] 2. Stock selection using a multi-factor model to identify undervalued small-cap stocks [9] 3. Risk control measures to limit industry deviation and manage tracking errors [9]. - Recent inflows into these ETFs suggest a market shift towards a more aggressive investment stance, making small-cap index-enhanced ETFs worthy of consideration for portfolio inclusion [9].

Group 1 - China's economic data for May indicates a shift in growth momentum from exports and investments to consumption, with retail sales growth reaching a high point since 2024, exceeding market expectations [2] - The A-share market has shown a significant reduction in trading volume, with the major indices collectively declining, reflecting a lack of incremental capital [2][3] - Defensive sectors, particularly liquor and banking, have demonstrated stronger performance amidst market adjustments, with notable gains in companies like China National Heavy Duty Truck Group and Shanxi Fenjiu [2] Group 2 - The recent adjustment of the "Everyday Brand 100 Index" included nine new companies, with Gujing Gongjiu showing a remarkable weekly increase of 4.4% [4] - Gujing Gongjiu's chairman emphasized the need to address long-term industry challenges while maintaining sustainable growth, aiming to keep its market share in Anhui above 60% [4] - Vipshop, another new entrant in the index, has seen a slight increase in stock price, focusing on providing high-quality products and services to enhance shareholder returns [5] Group 3 - The liquor industry is currently in a valuation recovery phase, presenting short-term investment opportunities as defensive sectors regain investor interest [6] - The liquor ETF has experienced a decline of 9.42% in 2025, underperforming the broader market, yet its share count has increased by 15.07 million, indicating continued investor interest [7] - The index tracked by the liquor ETF focuses on companies involved in the production of various alcoholic beverages, with major stocks like Kweichow Moutai and Wuliangye accounting for over 50% of the index weight [7]

Economic Data and Market Performance - May economic data indicates a shift in growth momentum from exports and investments to consumption, with retail sales growth reaching a high point for 2024, exceeding market expectations [4] - The A-share market has shown a significant decrease in trading volume, with the average daily turnover falling below 1.3 trillion yuan for five consecutive days [1] - The major indices experienced collective declines, with the Shanghai Composite Index down 0.51% and the Shenzhen Component Index down 1.16% as of June 20 [2] Defensive Market Sentiment - Defensive sectors, particularly liquor and banking, have shown strong performance amidst market adjustments, with companies like China National Heavy Duty Truck and Shanxi Fenjiu seeing weekly gains exceeding 5% [2] - The banking sector, including China Bank and Construction Bank, saw significant market capitalization increases, with China Bank's market cap rising by 229.14 billion yuan [2] New Index Components - The recent adjustment of the Every Day Brand 100 Index included nine new companies, with Gujing Gongjiu showing a notable weekly increase of 4.4% [5] - Vipshop, another new component, also experienced a slight increase in stock price, highlighting its strong position in the discount retail sector [5] Investment Opportunities in the Liquor Sector - The liquor industry is currently in a recovery phase, with potential investment opportunities as defensive sectors regain investor interest [6] - The liquor ETF has seen a year-to-date decline of 9.42%, but its share count has increased by 15.07 million, indicating continued investor interest despite market challenges [6] Key Stocks in the Liquor Index - Major stocks in the liquor index, such as Kweichow Moutai and Wuliangye, account for over 50% of the index's weight, reflecting their significant influence on market performance [9]

Economic Performance - In May, the industrial added value above designated size increased by 5.8% year-on-year, slightly exceeding market expectations[2] - The service industry production index rose by 6.2% year-on-year in May, indicating positive service sector performance[13] Consumer Trends - The total retail sales of consumer goods in May grew by 6.4% year-on-year, up from 5.1% in April, driven by the early "618" shopping festival[19] - Major categories such as home appliances and communication equipment saw significant growth, with home appliance sales increasing by 53.0% year-on-year[23] Investment Insights - Fixed asset investment (excluding rural households) grew by 3.7% year-on-year from January to May, below the market expectation of 4.0%[4] - Infrastructure investment increased by 5.6% year-on-year, while real estate development investment declined by 10.7%[4] Employment and Labor Market - The urban surveyed unemployment rate in May was 5.0%, a decrease of 0.1 percentage points from the previous month, indicating a stable employment situation[6] - The job market remains sensitive to external economic conditions, with policies aimed at supporting key demographics such as graduates and migrant workers[6] Market Outlook - The second quarter is expected to see a slight economic slowdown compared to the first quarter, with potential non-linear characteristics due to external uncertainties[1] - A dual bull market in stocks and bonds is anticipated in the second half of the year, supported by easing U.S.-China trade relations and risk mitigation funds[1]

Group 1: Economic Outlook - The US economy is expected to grow at an annualized rate of 5.2% in Q2 2025, with domestic demand contributing significantly to this growth[8] - The unemployment rate in the US is currently at 4.2%, indicating a state of full employment[19] - The US fiscal deficit is projected to increase by approximately $1.76 trillion over the next five years due to recent fiscal policies[27] Group 2: Monetary Policy and Interest Rates - The Federal Reserve is anticipated to maintain the federal funds rate between 4.25% and 4.50% as of May 2025, with a potential for rate cuts in September and December 2025[64][65] - The Fed's balance sheet has decreased from $9 trillion to $6.7 trillion, reflecting a reduction in monetary stimulus[67] Group 3: Inflation and Consumer Prices - The Consumer Price Index (CPI) in the US was reported at 2.3% in April 2025, showing a slight decline from previous months[61] - Core CPI remained stable at 2.8% in April 2025, indicating persistent inflationary pressures despite recent policy measures[61] Group 4: Trade and Tariff Policies - The US has implemented tariffs on steel and aluminum, raising rates to 50%, which may impact inflation and trade balances[46] - The average tariff rate on imports from China is currently around 16.80%, reflecting ongoing trade tensions[45] Group 5: Market Trends and Asset Performance - The stock market is expected to remain in a state of fluctuation due to weak catalysts and stable economic fundamentals[7] - Bond yields are projected to decline slightly if the central bank resumes purchasing government bonds[7]

Core Views - The market is expected to remain in a "top and bottom" scenario, with attention on the upcoming Lujiazui Forum and FOMC meeting for further guidance [2][3] - The recent trading volume of micro-cap stocks is approaching levels seen in November 2023, indicating a crowded market, but the odds of participating in small-cap trends are currently low [2][5] - With the current trading volume not significantly increasing, the speed of sector rotation may remain rapid, with themes like innovative drugs and new consumption already fully played out [2][4] Market Dynamics - The short-term market lacks clear upward momentum, with increased divergence near key levels, but strong support exists at the market bottom [3] - Structural pressures on the macro economy persist, with manufacturing and domestic demand needing improvement, with potential for trend improvement in the second half of the year [3] - The financing balance remains stable at around 1.8 trillion, indicating a baseline scenario of stock game [3] Sector Rotation Opportunities - Recent adjustments in innovative drugs and new consumption sectors suggest a need for investors to reassess their positions [4] - The current internal rotation within innovative drugs and new consumption is relatively sufficient, with a decline in cost-effectiveness [4] - The TMT sector's trading volume has dropped to a low since 2023, presenting potential excess return opportunities in low-positioned technology sectors with industrial catalysts [4][6] Investment Strategy - The report emphasizes the importance of "odds thinking" in investment strategy, suggesting a focus on relatively low-crowded technology sectors such as AI computing chips, storage chips, optical fibers, and smart driving [6] - Mid-term focus should be on core assets represented by A50, consumption, and finance, especially considering the potential for RMB appreciation due to "de-dollarization" [6]

1. Report Industry Investment Rating - No specific industry investment rating is provided in the report. 2. Core Viewpoints - **Stock Index**: The A-share market showed a mixed performance with most indices closing higher. The TMT sector recovered while the consumer sector declined. The internal policy drive is the main theme for the stock index in 2025. Various policy measures are expected to help companies repair their balance sheets, promote stable economic development, and gradually increase stock market valuations. The overall view is that the stock index will be in a volatile state [1]. - **Treasury Bonds**: Treasury bond futures showed different trends, with some contracts rising and others falling. The central bank's operations affected the bond market, and after macro - disturbances, the bond market followed changes in the capital market and economic fundamentals. The bond market is expected to remain in a sideways volatile pattern in the short term [2]. 3. Summary by Directory 3.1 Research Views - **Stock Index**: On June 5, 2025, most A-share market indices closed higher. The Wind All - A index rose 0.42% with a trading volume of 1.32 trillion yuan. The CSI 1000 index rose 0.72%, the CSI 500 index rose 0.54%, the SSE 50 index rose 0.05%, and the SSE 300 index rose 0.23%. The TMT sector recovered while the consumer sector declined. April economic data showed a slight decline compared to March but remained resilient. Social retail sales increased by 5.1% year - on - year, supported by the "trade - in" policy. Social credit demand was weak in April, with a cumulative new RMB loan of 10.06 trillion yuan, a year - on - year increase of 2.86%, and M2 growth of 8% year - on - year. The Sino - US joint statement and domestic policies such as RRR and interest rate cuts, and measures to encourage long - term funds to enter the market are expected to boost the stock market [1]. - **Treasury Bonds**: On June 5, 2025, the 30 - year Treasury bond futures main contract fell 0.16%, the 10 - year main contract fell 0.01%, the 5 - year main contract rose 0.02%, and the 2 - year main contract rose 0.04%. The central bank conducted 1265 billion yuan of 7 - day reverse repurchase operations, with a net withdrawal of 1395 billion yuan. The capital market was generally loose. The central bank's upcoming 10000 - billion - yuan outright reverse repurchase operation led to a slight decline in Treasury bond yields. After adjustments, the bond market is in a sideways volatile pattern [2]. 3.2 Daily Price Changes - **Stock Index Futures**: On June 5, 2025, compared with June 4, IH rose 0.01%, IF rose 0.25%, IC rose 0.61%, and IM rose 0.79% [3]. - **Stock Indices**: The SSE 50 index rose 0.05%, the SSE 300 index rose 0.23%, the CSI 500 index rose 0.54%, and the CSI 1000 index rose 0.72% [3]. - **Treasury Bond Futures**: TS rose 0.03%, TF remained unchanged, T fell 0.04%, and TL remained unchanged [3]. - **Treasury Bond Yields**: The yields of 2 - year, 5 - year, 10 - year, and 30 - year Treasury bonds changed by - 1.45bp, - 0.46bp, 0.59bp, and 0.7bp respectively [3]. 3.3 Market News - The central bank announced that on June 6, 2025, it will conduct a 10000 - billion - yuan outright reverse repurchase operation with a 3 - month term using a fixed - quantity, interest - rate tender, and multiple - price winning method [5]. 3.4 Chart Analysis - **Stock Index Futures**: The report presents the trends of IH, IF, IM, IC main contracts, and the corresponding basis trends [7][8][11]. - **Treasury Bond Futures**: It shows the trends of Treasury bond futures main contracts, Treasury bond yields, basis, inter - period spreads, cross - variety spreads, and capital interest rates [14][16][18]. - **Exchange Rates**: Charts display the trends of the US dollar against the RMB, the euro against the RMB, forward exchange rates, the US dollar index, and cross - currency exchange rates [21][22][25].