Group 1 - The core viewpoint of the article emphasizes that free cash flow has become a high-potential investment direction in the domestic ETF market, with significant growth observed in overseas markets [1] - The development of cash flow ETFs in overseas markets is mature, with the largest US free cash flow ETF, COWZ, exceeding $20 billion in size as of April 25, 2025 [1][5] - Various index compilation schemes for overseas free cash flow products exist, with a focus on selecting stocks with the highest free cash flow yield [3][4] Group 2 - Domestic cash flow strategies are expected to be effective in the long term, as companies shift from growth-oriented to cash flow-focused management strategies [7] - The performance of large-cap stocks has outperformed small-cap stocks in the US cash flow products, with COWZ showing a widening lead over CALF since 2024 [6] - The domestic cash flow index has seen steady growth since 2014, with a focus on companies with high cash flow returns, leading to significant excess returns compared to broad market indices [7] Group 3 - The FTSE China A-Share Free Cash Flow Focus Index has a larger average market capitalization compared to other domestic cash flow indices, indicating a focus on large and mid-cap stocks [19][21] - The FTSE cash flow index has a higher dividend yield and lower valuation compared to its peers, making it an attractive investment option [33] - The FTSE cash flow index has shown a strong risk-return profile, outperforming traditional dividend indices since 2014 [36][37] Group 4 - The FTSE cash flow index benefits from a dual filtering approach that includes quality and low volatility factors, enhancing its risk management and long-term value [50][55] - The index's composition is heavily weighted towards consumer and cyclical sectors, with significant allocations in household appliances, non-ferrous metals, and food and beverage industries [26][27] - The index has a high overlap with major broad-based indices, which positions it well to benefit from future market management policies [31][32]

1. Report Industry Investment Rating The provided content does not mention the industry investment rating. 2. Core Viewpoints of the Report - Cash - flow ETFs have become popular products in overseas markets, and domestic products are being actively申报. "Large - medium market capitalization + central state - owned enterprises + abundant cash flow" is expected to be one of the annual investment themes. With policies like the new "Nine - Point Plan", the small - cap premium has declined, and policies are expected to drive central state - owned enterprises to improve profitability [2]. - Domestic free cash - flow indices are in the ascendant, and there are differences among them. The FTSE China A - Share Free Cash - Flow Focus Index (FTSE Cash - Flow) has a more detailed sample - selection space compared to similar indices, with 50 constituent stocks and a multi - angle screening mechanism that includes unique quality factors, volatility, and growth indicators [2]. - In terms of market - capitalization and industry distribution, the FTSE Cash - Flow shows a prominent large - medium market - capitalization style, with low valuation. It is relatively "resilient" during market corrections. The FTSE Cash - Flow has a lower correlation with traditional styles among cash - flow indices, has a high risk - return ratio, and can be used in investment strategies such as the dumbbell strategy with technology indices [2]. 3. Summary by Directory 3.1 Free Cash Flow Has Become a High - Potential Investment Direction in the Domestic ETF Market - **Maturity of Overseas Cash - Flow ETFs**: Overseas cash - flow products have achieved fruitful results. As of April 25, 2025, the largest US free cash - flow ETF, COWZ, had a scale of over $20 billion [8]. - **Diversity of Overseas Free Cash - Flow Index Compilation Schemes**: Different overseas free cash - flow indices have various compilation methods. For example, CALF and COWZ are based on different sample spaces and use free cash - flow yield for screening and weighting [10]. - **Long - Term Effectiveness of Domestic Cash - Flow Strategies**: Since 2012, A - share enterprises (excluding finance) have shifted from an incremental to a stock - thinking business model, and free cash - flow has been increasing steadily since 2014. Companies with sufficient cash flow have shown significant excess returns compared to broad - based indices [20]. - **"Large - Medium Market Capitalization + Central State - Owned Enterprises + Abundant Cash Flow" as an Investment Theme**: From 2021 - 2023, the small - cap style was dominant, but after the introduction of policies in 2024, the small - cap premium declined. The investment cash outflow of large - cap stocks has been rising steadily since June 2021, while that of small - cap stocks decreased significantly in Q1 2025 [22]. 3.2 Domestic Free Cash - Flow Indices Are in the Ascendant, with Differences Among Them - **Index Compilation Scheme Comparison**: The mainstream domestic cash - flow indices include the FTSE Cash - Flow, China Securities Cash - Flow, and Shenzhen Securities Information Cash - Flow. The FTSE Cash - Flow has 50 constituent stocks, excludes financial and real - estate industries, and uses a multi - factor screening mechanism. It combines cash - flow and volatility factors, which is expected to achieve excess returns [32][35]. - **Industry and Market - Capitalization Distribution Comparison** - **Market - Capitalization Distribution**: The FTSE Cash - Flow has a large - medium market - capitalization style, with 18% of its constituent stocks having a total market capitalization of over 100 billion. It is more "resilient" during market corrections [40]. - **Industry Distribution**: The FTSE Cash - Flow has high weights in industries such as household appliances, non - ferrous metals, and food and beverages. Overseas cash - flow ETFs have a higher proportion of technology stocks, and domestic cash - flow indices may include more technology - oriented enterprises in the future [46]. - **Constituent - Stock Overlap**: The constituent stocks of the FTSE Cash - Flow have a high overlap (95.95%) with major broad - based indices, especially 71.17% with the CSI 300, and are expected to benefit from subsequent policies [56]. - **Index Valuation**: As of July 18, 2025, the FTSE Cash - Flow has a relatively low price - to - earnings ratio (TTM of 11.25) and price - to - book ratio (1.49) among similar indices, and a relatively high dividend yield (4.76%), indicating investment value [61]. 3.3 The Risk - Return Profiles of Cash - Flow Indices Are Generally Similar, and the FTSE Cash - Flow Index Has a Lower Correlation with Traditional Styles - **Risk - Return Analysis**: The FTSE Cash - Flow has outperformed the dividend index in the long - term and has a high risk - return ratio. As of July 18, 2025, its risk - return ratio reached 0.85, higher than the CSI Dividend's 0.63 and the Dividend Low - Volatility's 0.68 [65]. - **Reasons for the FTSE Cash - Flow's Leading Returns** - **Relationship between Market Capitalization and Cash - Flow Yield**: The cash - flow yield factor is more effective in large - cap stocks. However, it also shows a certain enhancement effect in large - medium market - capitalization stock pools. The FTSE Cash - Flow selects stocks from large - medium market - capitalization indices such as the CSI 300 and CSI 500 based on free cash - flow yield [69][70]. - **Low - Volatility and Quality Factors**: The FTSE Cash - Flow uses quality and low - volatility factors from the FTSE Global Factor Index System, which enhances the index's risk - resistance and long - term holding value [85]. - **Investment Strategies**: The free cash - flow strategy and the dividend strategy can complement each other. The FTSE Cash - Flow, as a "dividend plus" strategy, has a lower correlation with technology indices and the partial - stock hybrid fund index than traditional dividend indices, and can be used to construct investment portfolios to improve risk diversification [96][97].