Summary of Key Points from the Conference Call Industry Overview - The report focuses on the mutual fund (MF) sector in China, particularly analyzing the southbound flow of investments and movements of the "national team" in Q225 [2][4]. Core Insights and Arguments 1. **Sector Position Changes**: In Q225, mutual funds increased their positions in banks, telecom, and non-bank financials by 1.6 percentage points each, and 0.8 percentage points in non-bank financials. Conversely, positions in food & beverage and auto sectors were cut by 2.1 percentage points and 0.9 percentage points respectively [2][3]. 2. **Southbound Net Inflows**: Southbound net inflows reached RMB 273.9 billion, marking a 25% year-over-year increase. The financial sector saw the largest inflows, followed by consumer discretionary and healthcare sectors [4][52]. 3. **National Team's ETF Purchases**: The "national team" is estimated to have added over RMB 200 billion in A-share ETFs in Q225, with 65% allocated to CSI 300 Index ETFs. This action is seen as a measure to stabilize the capital market [5][15]. 4. **New MF Issuance Trends**: New issuance of actively managed mutual funds totaled 59.9 billion units in Q225, a 128% increase year-over-year, but a 73% decline from the peak in 2020-21. The performance of these funds is expected to improve with better market conditions [3][4]. 5. **Consumer Sector Dynamics**: The report highlights a shift in investor preference towards "new consumption" and innovative drugs, indicating a potential growth area for mutual funds [4][5]. Additional Important Insights 1. **Geopolitical Uncertainty**: Elevated geopolitical risks have led to a preference for defensive sectors, including national defense, which ranked fourth in MF position increases [2][4]. 2. **A/H Premium Trends**: The A/H premium has decreased significantly due to liquidity differences between A-shares and H-shares, suggesting a potential medium-term low for this premium [4][5]. 3. **Performance Evaluation Mechanism**: The new performance evaluation mechanism for mutual funds may reshape market dynamics, potentially leading to increased inflows as market performance improves [3][4]. 4. **Risks to Market Stability**: Risks facing China's equities include a hard landing in the property market and slow structural reforms, which could lead to market shocks if not adequately addressed [62]. This summary encapsulates the key points discussed in the conference call, providing insights into the mutual fund sector's performance, investor behavior, and market dynamics in China.

Investment Rating - The report raises the Southbound flow forecast from US$75 billion to US$110 billion for 2025, indicating a positive outlook for Southbound investments [7][35][41]. Core Insights - Emerging markets in Asia, excluding China, experienced strong foreign institutional investor (FII) inflows of US$2.8 billion week-over-week, primarily driven by Taiwan [6][44]. - In April, Korea led the regional foreign selling, while domestic institutional flows in India remained robust [7][8]. - Global equity mutual funds saw inflows of US$8 billion week-over-week, with significant outflows from US funds [6][10]. Summary by Sections Foreign Institutional Investor (FII) Flows - EM Asia ex-China markets saw FII buying of US$2.8 billion week-over-week, led by Taiwan (+US$1.7 billion) [6][44]. - Southbound flows recorded US$0.2 billion this week, totaling US$78 billion year-to-date [6][35]. - In April, Korea experienced significant FII selling, while India saw strong domestic institutional inflows [7][8]. Mutual Fund Performance - The largest 350 EM and Asian mutual funds rebounded, posting average returns of 1-4% year-to-date, with EM funds outperforming Asia funds by 3 percentage points [7][8]. - Only 20-40% of the largest Asian/EM funds outperformed their benchmarks in April, below the 10-year average of 55-65% [11][12]. Southbound Flows - Southbound flows have made the strongest start of a year in history, with US$78 billion year-to-date [7][35]. - The report highlights a significant increase in Southbound ownership in the Hong Kong market, indicating growing interest from mainland investors [37][41]. - The top buying stocks in Southbound flows included Meituan Dianping and Akeso, while Tencent and Alibaba saw significant selling [67][71].