Group 1 - The A-share market continues to show strong performance, with the Shanghai Composite Index closing at 3883 points, just shy of the 3900-point mark [1] - Major stock index futures have also risen, with the CSI 300 index futures (IF) leading with a 2.29% increase, followed by the SSE 50 index futures (IH) at 2.14%, the CSI 500 index futures (IC) at 1.8%, and the CSI 1000 index futures (IM) at 1.27% [1] - The total open interest for IF reached 289,600 contracts, with a daily increase of 12,400 contracts, while IC had an open interest of 244,500 contracts, increasing by 10,900 contracts [1] Group 2 - Since July, the discount on stock index futures has gradually narrowed, with the IF contract's discount to the spot market reducing from over 56 points in early July to around 25 points in August, and it has shifted to a slight premium [2] - The narrowing of the discount typically indicates improving market expectations for future indices [4] - The current market is in an "accelerating sentiment" phase, characterized by strong capital inflow intentions and rapid rotation of hot sectors, with investors reacting more sensitively to positive policy and earnings surprises [4] Group 3 - Despite the market's significant rise, caution is advised regarding potential short-term overheating risks [4] - It is suggested that investors maintain existing positions while managing risks, focusing on high-growth sectors like technology and consumer goods, and being cautious of stocks with excessive short-term gains and valuations deviating from fundamentals [4] - In the medium to long term, if economic recovery trends are confirmed and corporate earnings improve, the market may shift from sentiment-driven to profit-driven dynamics, highlighting the value of quality asset allocation [4]

Report Overview - Report Date: July 2, 2025 - Report Title: Index Futures Basis Series: Maintaining the Strategy of Basis Convergence - Analysts: Yu Kan, Li Honglei 1. Report Industry Investment Rating - Not provided in the report 2. Core Viewpoints - The futures market's characteristic of following the upward movement but not the downward movement may indicate investors' expectations for the index market. Coupled with the improvement of fundamentals and the continuation of the low - interest - rate environment, the report is optimistic about the further improvement of the index beta, which will drive the basis to rise. Regulatory policies may bring trillions of incremental funds to the market, increasing the certainty of the index's upward trend. Currently, the basis has returned to a historical low, and the previous strategy ideas can be continued, including enhancing the long - position substitution strategy, mainly using near - month hedging for short - position hedging, and adopting the term reverse arbitrage strategy for inter - period arbitrage [6][20][26] 3. Summary by Directory 3.1 Recent Basis Review - **Market Performance in June**: The A - share market in June showed a "low - first - then - high" structural trend. At the beginning and middle of the month, despite favorable policies, the market risk appetite was not significantly repaired. In the last week, with multiple positive factors, the market risk appetite rapidly increased, trading volume significantly expanded, and the index rose rapidly. Small and micro - cap stocks led the gains, with a monthly increase of over 5% [6][7][8] - **Basis Changes**: In June, the arbitrage trading of eating the basis increased. The basis of IC and IM has been continuously converging since mid - June, while IH and IF remained stable throughout the month. At the end of the month, due to market adjustments and institutional profit - taking pressure, the basis widened rapidly, and each variety's basis returned to a low level in the past three years. The intraday 1 - minute frequency basis of each variety remained highly consistent, indicating systematic expectations. The futures market's characteristic of following the upward movement but not the downward movement reflects investors' expectations for the index market [6][14][20] - **Strategy Performance in June**: The return of the long - position substitution strategy further increased. The excess returns of the IC and IM main contracts compared to the index increased to 2.8% and 12.6% respectively, nearly 2% higher than in May. For short - position hedging, near - month contracts had lower costs, especially in the IC variety. In inter - period arbitrage, the long - far - month and short - near - month strategy gained some profits but suffered a retracement at the end of the month [22] - **Product - End Strategy Adjustment**: In June, there were adjustments in the strategy positions of the product end, showing the characteristics of quick entry and exit. Index - related products were stable with a slight decline, but the scale of A500ETF stabilized and rebounded, and the new issuance of index - enhanced products increased compared to May. The neutral strategy suffered a certain retracement, but the long - short positions increased as the hedging cost decreased. The long - position substitution strategy of futures was evident, and the CTA strategy's futures positions increased rapidly during the index's rise but decreased rapidly at the end of the month, causing the basis to fall back to a historical low and creating an arbitrage space [24][25] 3.2 Long - Position Roll - Over Performance Review - **Performance Data**: In the past 250 trading days, the annualized excess returns of IF, IH, IC, and IM in the long - position roll - over strategy were - 3.6%, 0.9%, 2.1%, and - 4.1% respectively. The benchmark portfolio was set as a weighted combination based on the previous trading day's closing positions of each contract, without considering handling fees. The trading prices in the calculation were the TWAP prices in the first half - hour of the opening [38] 3.3 Short - Position Roll - Over Performance Review - **Performance Data**: In the past 250 trading days, the annualized excess returns of IF, IH, IC, and IM in the short - position roll - over strategy were - 0.2%, - 0.5%, 1.2%, and - 0.3% respectively [45]