Core Viewpoint - The overall A-share market is expected to experience a decline in net profit for 2024, with a projected decrease of 3.0% for the entire market, 9.0% for the financial sector, and 14.2% for the non-financial sector, primarily due to significant impairment losses in the fourth quarter of 2024, particularly in the real estate and photovoltaic industries [1][2][3] Profit Growth - In 2024, the A-share market's net profit is forecasted to decline by 3.0%, with the financial sector showing a growth of 9.0% and the non-financial sector declining by 14.2%. The non-financial sector's revenue is expected to decrease slightly by 1%, with a significant drop in profit margins compared to 2023 [2][3] - The first quarter of 2025 shows a rebound in net profit for the A-share market, with a year-on-year growth of 3.5% for the entire market, 2.9% for the financial sector, and 4.2% for the non-financial sector, indicating a recovery in downstream industries [3][4] Profitability Analysis - The return on equity (ROE) for non-financial A-shares has remained stable, marking 15 consecutive quarters of decline since Q2 2021. The marginal improvement in net profit margins is offset by a significant decline in asset turnover rates [1][15] - Industries such as electronics, home appliances, non-bank financials, and agriculture have shown consecutive improvements in ROE over the past two quarters [15][23] Capital Expenditure and Cash Flow - Non-financial capital expenditure has been in negative growth for four consecutive quarters, but new economy sectors are seeing a rebound in capital expenditure growth. The total assets of non-financial enterprises have stabilized, with a notable increase in prepayments [2][16] - The free cash flow to equity ratio for non-financial companies has reached a historical high, supporting an increase in dividend payout ratios to 45% in 2024, with the dividend yield for the CSI 300 rising to 3.2% [2][18] Industry Performance - The first quarter of 2025 has highlighted strong performance in sectors such as non-ferrous metals, certain export chains, and TMT (Technology, Media, and Telecommunications), with significant year-on-year profit growth in these areas [3][4] - The agricultural sector has shown remarkable recovery, with a profit growth of 2541.6% due to low base effects, while non-bank financials have benefited from improved capital market conditions, achieving a profit growth of 48.7% [2][4] Market Outlook - The current economic environment suggests that the low point of the profit downturn cycle has been surpassed, but attention must be paid to the impact of tariff policies on corporate fundamentals in the second quarter of 2025 [2][38] - The market is advised to seek opportunities in sectors with recovering demand and low tariff impacts, particularly in AI-related industries and companies with strong cash flows that are less exposed to external demand [39][40]

核 心 观 点 行业比较：电子和机械设备对美敞口更大。 我国对美国电子商品出口最多，而 交运设备关税税率最高 ，加 征后高达 168% 。从中观行业来看，具体到我国对美出口一级行业，电子、轻工、机械与纺织出口依赖度及 份额均较高。从美国进口来看，电子与轻工对我国进口依赖度与进口份额均较高。综合来看， 电子和机械设 备对美敞口更大 。 上游原材料、制造业受冲击严重，后续去产能对冲。 ① 电 子行业的营收对美敞口较大， 若对美出口全部 消失，对行业总营收的影响约为 3.2% 左右，成本传导为主要机制，后续国内产业政策或将推动国产替代，政 策补贴提振消费电子。 ②机械设备行业的营收对美敞口也较大， 如果对美出口全部消失，对行业总营收的影 响为 4.2% 左右，或将加速行业重组。当前国内设备更新政策已经前置推出，同时城市更新等稳增长政策也有 利于扩大机械设备总需求。往后看，产业升级或将加速。 ③交运设备行业的营收对美敞口较小， 即便对美出 口全部消失，对行业总营收的影响也仅为 1.9% 左右，不过行业利润空间或将被挤压。当前国内促进汽车消费 的相关政策也已经前置落地，后续促内需仍有空间，扩外需方面，"一带一路"共建国 ...

Core Insights - The Hong Kong stock market is leading globally, with the Hang Seng Index and Hang Seng Tech Index rising by 16.8% and 23.2% respectively as of March 28, 2025, indicating a significant revaluation of core technology assets [1][2] - The cumulative increase of Hong Kong tech leaders has surpassed that of US tech leaders since the beginning of 2024, reflecting strong performance in the sector [1][2] - The internet sector continues to maintain robust absolute growth, while the real estate sector shows signs of recovery from previous downturns, although confirmation is pending until all reports are released [3] Market Performance - The overall market performance indicates that the Hong Kong core indices are outperforming global counterparts, with significant contributions from valuation increases [2] - The market's earnings yield (ERP) is approaching historical high-pressure levels, suggesting increased volatility and market speculation [2] - The price-to-earnings (P/E) ratio has been a major contributor to this year's market gains, while the price-to-book (P/B) ratio remains relatively low compared to global earnings levels [2] Fundamental Analysis - Preliminary statistics for the 2024 annual reports show that approximately 84% of Hong Kong stocks have disclosed their results, confirming a stabilization in the fundamentals [2] - The net profit growth for all Hong Kong stocks, Hong Kong Stock Connect, and H-shares is reported at 12.0%, 4.9%, and 33.5% respectively, indicating a positive trend in profitability [2] Sector Focus - Future attention is directed towards two key marginal sectors: the Hang Seng Internet sector, which requires monitoring for base effect issues, and the cyclical/real estate chain, which is expected to show signs of recovery as downward pressures ease [3] - The internet sector continues to exhibit strong growth, while the real estate sector is beginning to show signs of a turnaround from previous challenges [3] Capital Flow and Pricing Issues - The overall capital flow in the Hong Kong market is at its highest level in the past decade, as indicated by absolute trading volumes and turnover rates [4] - Southbound capital is gaining pricing power, with a notable overweight in dividend-paying sectors and significant inflows into growth sectors [4] - Recent trends show that overseas capital has experienced a pattern of active selling followed by slight recovery, with a current trend of active outflows and passive inflows [4]