Core Viewpoint - The article discusses the performance of small-cap stocks in the context of the broader market, highlighting that despite recent concerns about potential pullbacks, there are indicators suggesting that small-cap stocks may still have upward potential, particularly when considering PMI and liquidity metrics [1][10]. Group 1: Market Performance - The Wind Micro-Cap Index has surged by 30.96% this year, while the traditional broad-based indices like the CSI 300 remain in negative territory [1]. - Historically, from 2009 to 2025, the annualized return of the Wind Micro-Cap Index is 28.85%, significantly outperforming the Wind All A Index at 3.71% [3]. - The strong performance of micro-cap stocks is not a recent phenomenon but has been consistent over time [4]. Group 2: Valuation Analysis - Micro-cap stocks have been driven primarily by valuation rather than earnings, with a negative EPS, and their current valuation is only slightly above the Wind All A Index, indicating no significant overvaluation at present [5][6]. - Since 2016, the valuation level of the Wind Micro-Cap Index has consistently been higher than that of the Wind All A Index, except for 2020 and 2021 [5]. Group 3: Market Sentiment and Liquidity - High market crowding in small-cap stocks is noted, but actual pullbacks require substantial negative events to trigger them [9]. - The article introduces PMI and liquidity as novel indicators for assessing the sustainability of the small-cap style, suggesting that micro-cap stocks tend to perform better when PMI is declining and liquidity is improving [10]. - Currently, the manufacturing PMI in China is fluctuating around the threshold, and the remaining liquidity has been on an upward trend since August of the previous year, which may favor micro-cap stocks [10][11].