Core Viewpoint - The rise of free cash flow strategies is becoming a new investment choice amid low interest rates and increased market volatility, highlighting the importance of real earnings quality and sustainable returns for investors [1][3][22]. Summary by Sections Definition and Importance of Free Cash Flow - Free cash flow (FCF) is defined as the cash remaining after a company meets its operational and reinvestment needs, indicating financial health and profitability [5][8]. - The calculation formula for FCF is: FCF = Net cash flow from operating activities - Cash paid for capital expenditures [5]. Characteristics of Free Cash Flow Index - The free cash flow index focuses on real earnings quality and has a more balanced industry and market capitalization distribution compared to traditional dividend indices [6][10]. - The index's selection mechanism requires constituent stocks to have positive operating cash flow for several consecutive years, enhancing its value attributes [9][12]. Policy Impact and Market Trends - The "anti-involution" policy is expected to positively influence the index by optimizing supply and demand dynamics, particularly benefiting cyclical industries like coal, agriculture, and chemicals [19][21]. - The index's focus on high cash flow and low expansion aligns with current policy trends, enhancing the quality and dividend capabilities of its constituent stocks [20][21]. Historical Performance and Risk Mitigation - Historical data shows that the index has achieved an annualized return of over 19% since its inception, with a Sharpe ratio significantly higher than that of the Shanghai and Shenzhen 300 Index [9][12]. - The index's design incorporates mechanisms to mitigate overfitting risks by ensuring a broad sample base and dynamic adjustment of selection criteria [16][17]. Investment Appeal - The appeal of high free cash flow assets is driven by their defensive characteristics in uncertain economic conditions, as evidenced by the index's performance during market fluctuations [22]. - The current low interest rate environment enhances the attractiveness of the index, as it offers a higher yield compared to government bonds [22]. New Fund Launch - A new fund tracking the China Securities All Index Free Cash Flow Index is being launched, aiming for minimal tracking error and significant investment in stocks [23].

Group 1 - Significant interest in cash flow strategies has increased since August, with over 1.8 billion yuan net inflow into the 300 Cash Flow ETF (562080) on August 8, marking a historical high in trading volume exceeding 200 million yuan [1] - The 300 Cash Flow ETF (562080) has achieved net inflows for 10 consecutive trading days, totaling over 2.2 billion yuan [1] - The ETF passively tracks the CSI 300 Free Cash Flow Index, which selects 50 "cash cow" companies from the CSI 300, excluding financial and real estate sectors, and is the first listed free cash flow strategy ETF in the Shanghai market [1] Group 2 - According to Guosen Securities, in the current low interest rate and loose monetary environment, companies with abundant free cash flow will see stronger valuation increases compared to those with weaker cash flow, based on the discounted cash flow model [1] - In a tightening credit environment, high-quality companies with endogenous free cash flow generation capabilities have a safety margin, providing stock price resilience [1] - This analysis suggests that funds are likely investing in the 300 Cash Flow ETF (562080) and its connecting funds (Connecting A: 024367; Connecting C: 024368) to allocate towards high cash flow quality companies [1]

Group 1 - The liquidity of the Free Cash Flow ETF has shown a turnover of 7.55% during the trading session, with a transaction volume of 17.41 million yuan, and an average daily transaction volume of 32.81 million yuan since its listing [2] - The Free Cash Flow ETF tracks the CSI All Share Free Cash Flow Index, which selects 100 listed companies with high free cash flow rates, reflecting the overall performance of companies with strong cash flow generation capabilities [2] - As of April 30, 2025, the top ten weighted stocks in the CSI All Share Free Cash Flow Index account for 65.37% of the index, including companies like China Shenhua, Midea Group, and China National Offshore Oil Corporation [2] Group 2 - The LPR has experienced its first decline of the year, with the 5-year LPR dropping to 3.5% from 3.6% and the 1-year LPR decreasing to 3% from 3.1% [3] - The China Securities Regulatory Commission has emphasized the importance of cash dividends, share buybacks, and mergers and acquisitions to enhance investment value, with A-share companies implementing a record 2.4 trillion yuan in dividends and 147.6 billion yuan in share buybacks in 2024 [3] - In a low interest rate and loose monetary environment, companies with abundant free cash flow are expected to see a stronger valuation increase compared to those with weaker free cash flow, presenting a certain investment cost-effectiveness [3]