Market Performance - On July 1, the major stock indices in Shanghai and Shenzhen opened mixed, with the Shanghai Composite Index slightly higher and the Shenzhen Component and ChiNext Index also opening with minor gains. The Shanghai Composite Index showed a fluctuating upward trend throughout the day, closing at 3457.75 points, up 0.39%, marking a new year-to-date closing high [1] - The Shenzhen Component Index closed at 10476.29 points, up 0.11%, while the ChiNext Index closed at 2147.92 points, down 0.24%. The total trading volume for the Shanghai market was approximately 553.6 billion yuan, and for the Shenzhen market, it was about 912.5 billion yuan [1] Sector Performance - The pharmaceutical sector led the gains, with significant increases in various sub-sectors such as immunotherapy, innovative drugs, recombinant proteins, generic drugs, weight loss drugs, hepatitis concepts, and hair medical treatments. Other sectors that saw notable increases included shipbuilding, industrial gases, photolithography machines, banking, and superconducting concepts [1] - Conversely, digital currency stocks experienced significant declines, along with substantial adjustments in sectors like electronic identification, cross-border payments, and Web3 concepts [1] Institutional Insights - According to institutional views, the market is expected to experience fluctuations, with a historical 60% probability of the Shanghai Composite Index rising in July. Investors are advised to focus on defensive sectors in the early part of the month and shift attention to mid-year performance reports and policy movements later on. Key sectors to watch include technology (semiconductors, AI), military industry, and high-growth areas in mid-year reports [2] - Another institution emphasized the importance of focusing on performance-driven sectors and stable assets as the earnings season approaches, with expected growth in industries such as steel, computers, and defense [2] Policy Developments - The National Healthcare Security Administration announced that a draft for the commercial insurance innovative drug directory and the medical insurance directory will be released soon. This initiative aims to streamline the application process for companies and ensure that both directories are aligned in their adjustments [4] - The State-owned Assets Supervision and Administration Commission is accelerating the development of the new energy vehicle industry, focusing on enhancing the capabilities of young talents in intelligent development and digital marketing [5]

Group 1 - The macro background for the A-share adjustment in Q2 includes a natural decline in Chinese exports and increased tariff threats from the US, leading to amplified macroeconomic expectations and a decrease in risk appetite [1][2] - The direct reason for the short-term market adjustment is the approaching "April Decision" period, which includes the verification of annual and quarterly reports, as well as economic data from China and the implementation of US tariffs [1][2] - The adjustment pressure from the April verification period is considered limited, with expectations for domestic AI computing power to potentially show strong differentiation and growth [1][3] Group 2 - The macroeconomic issues persisting into Q2 include the natural decline in Chinese exports and the potential for further US tariff threats, which may lead to a weak and volatile A-share market [2][4] - The narrative of the current technology adjustment is similar to the Nasdaq adjustment from July to October 2023, characterized by slow application realization and concerns over excessive investment in computing power [2][3] - The adjustment in domestic AI computing power is seen as a shorter phase compared to the US, as the industry is still in a stage of basic breakthroughs with insufficient application layer development [3][4] Group 3 - Defensive thinking is favored in Q2 2025, with a focus on high dividend relative returns and the strengthening of pricing power for short-term allocation funds [4][5] - The technology structural bull market is expected to continue into 2025, with investment opportunities identified in domestic AI computing power and applications, embodied intelligence, and low-altitude economy [4][5] - The valuation advantage of Hong Kong stocks over A-shares is highlighted, particularly in the context of insurance capital's increasing influence on high dividend assets [5]

Core Viewpoint - The article emphasizes the upcoming "April Decision" as a critical period for economic and A-share performance verification, highlighting concerns over potential new tariffs from the U.S. and a cautious narrative surrounding AI advancements [1][2]. Short-term Adjustment Triggers - The "April Decision" window is approaching, with the first quarter reports for the economy and A-shares set to validate market fundamentals. China's export growth is expected to naturally decline, and the impact of tariffs has yet to be fully realized. The effectiveness of fiscal policies remains to be seen [2][3]. - Concerns are rising regarding the U.S. potentially imposing additional tariffs on China, which could exacerbate economic volatility and suppress risk appetite in the market [2][3]. - A temporary lull in AI advancements is noted, with cautious narratives emerging about the slow progress of large models and the lack of blockbuster applications. This has led to a phase of adjustment in the tech sector [2][3]. Key Influencing Factors of the "April Decision" - The performance verification period is crucial, with expectations for revenue and net profit improvements in the domestic AI computing power industry due to high capital expenditures from internet giants and operators. However, the market's pessimistic expectations for performance reports are unlikely to lead to significant adjustments [3][4]. - The anticipated economic verification in April is expected to have limited marginal impact on the market, as the current expectations for cyclical improvement are low [4]. - The release of a U.S. tariff report on April 1 and subsequent actions may limit the significance of the "bad news" effect, with ongoing concerns about potential tariff increases affecting market sentiment [4][5]. AI Industry Trends - The AI industry is seen as a process where large models and computing power mutually promote breakthroughs in applications. The current phase is characterized by waiting for blockbuster applications, with market adjustments expected to be limited in scope and duration [5][6]. - The market is currently focused on the potential for application innovations, with the possibility of new highs in technology following the realization of these applications [6][7]. Defensive Investment Strategy - In the second quarter of 2025, a defensive investment mindset is favored, with a focus on high-dividend assets that offer both absolute and relative returns. The technology sector is expected to maintain its upward trend, with continued interest in domestic AI computing power and applications, embodied intelligence, and low-altitude economy investment opportunities [6][7]. - The shift of Hong Kong stocks towards A-share characteristics is noted, with high-dividend stocks and internet companies in Hong Kong expected to perform well in their respective styles [7].