Core Insights - The market is experiencing heightened volatility, leading to increased attention on the stable attributes of dividends, particularly through the cash flow ETF (159399), which attracted over 200 million yuan in investments on the 5th [1] - Nanjing Securities indicates that the growth sector carries significant trading risks, while sectors with strong policy expectations, such as "anti-involution" and "promoting domestic demand," remain relatively undervalued, presenting better long-term investment opportunities [1] - The cash flow ETF (159399) utilizes free cash flow as a stock selection factor, closely tracking the FTSE China A-Share Free Cash Flow Index, excluding financial and real estate sectors, and selecting the top 50 stocks with the highest free cash flow rates [1] Index Characteristics - The cash flow index focuses on large and mid-cap stocks, exhibiting strong defensive attributes and higher dividend yields, which may help mitigate market fluctuations [2] - The cash flow ETF (159399) has consistently distributed dividends for six consecutive months as of the end of August since its launch [2]

Core Viewpoint - Cash flow ETFs have become popular in overseas markets, and domestic products are seeing a surge in applications. The domestic free cash flow products are still in their infancy, while overseas cash flow products have achieved significant development results. The combination of "large and medium market capitalization + central state-owned enterprises + abundant cash flow" is expected to be one of the main investment themes for the year [1][7]. Group 1: Market Trends - The investment activity cash flow out of small-cap stocks has significantly decreased quarter-on-quarter in Q1 2025, while the cash flow out of large-cap stocks has been steadily increasing since June 2021. Future policies aimed at market capitalization management are expected to enhance the profitability of central state-owned enterprises [1]. - The domestic free cash flow index is still emerging, with various indices showing different characteristics. The FTSE China A-Share Free Cash Flow Focus Index has a more detailed selection space compared to similar indices like the National Securities Cash Flow Index and the CSI Cash Flow Index [1]. Group 2: Index Performance - The FTSE cash flow component stocks show a prominent large and medium market capitalization style, with 18% of stocks having a total market capitalization exceeding 100 billion. This higher market capitalization level and the inclusion of central state-owned enterprises make the FTSE cash flow index relatively resilient during market corrections [2]. - Since the base date (December 31, 2013), the FTSE cash flow index has shown smaller declines during market corrections compared to similar cash flow indices and the CSI Dividend Index [2]. Group 3: Risk-Return Analysis - Among the three cash flow indices, the FTSE cash flow index has a lower correlation with traditional styles, achieving the highest risk-return ratio of 0.85 as of July 18, 2025, compared to 0.63 for the CSI Dividend Index and 0.68 for the low-volatility dividend index [4][5]. - The FTSE cash flow index can effectively diversify risk and provide differentiated allocation in the context of increased institutional investment in actively managed equity funds due to their high elasticity [5]. Group 4: Investment Strategy - The FTSE cash flow index focuses on large and medium-cap stocks, utilizing free cash flow yield as a selection factor to enhance returns. It also incorporates quality and low volatility factors to further filter high-quality cash flow companies, thereby improving the index's risk resistance and long-term holding value [6][7]. - The cash flow ETF (159399) closely tracks the FTSE China A-Share Free Cash Flow Focus Index, selecting a group of "cash cow" companies in the A-share market, laying a solid foundation for long-term investment returns [7].

Group 1 - The cash flow ETF (159399) announced its sixth dividend distribution with a ratio of 0.25%, with the record date on August 13 and the payment date on August 18 [1] - The cash flow ETF utilizes free cash flow as a stock selection factor, closely tracking the FTSE China A-Share Free Cash Flow Focus Index, excluding financial and real estate sectors, and selecting the top 50 stocks with the highest free cash flow rates [1] - The FTSE cash flow index has shown outstanding long-term performance, with a cumulative increase of 624.37% since the base date of December 31, 2013, significantly outperforming the CSI 300's 133.67% and the CSI Dividend's 624.37%, consistently beating the CSI Dividend index for nine consecutive years [1] Group 2 - The dividend distribution plan indicates that the benchmark date for this month's dividend of 0.25% corresponds to a distribution of 0.0026 yuan per share based on a net asset value of 1.0562 [2]

Core Insights - The article emphasizes the importance of free cash flow (FCF) as a measure of a company's ability to generate actual cash available for distribution to shareholders or reinvestment, rather than just accounting profits [1][21] - The market has shifted towards a "value" style since 2022, with a focus on dividends and cash flow, supported by regulatory policies aimed at enhancing the quality and sustainability of corporate earnings and cash flows [21] Free Cash Flow Indices Overview - The CSI All Share Free Cash Flow Index focuses on large, medium, and small-cap stocks, selecting 100 constituents with positive free cash flow and enterprise value, primarily in coal, oil, petrochemicals, and transportation sectors, highlighting defensive attributes [3] - The CSI 300 Cash Flow Index is limited to constituents of the CSI 300, selecting 50 large-cap blue-chip stocks with positive operating cash flow for five consecutive years, concentrated in traditional high-dividend sectors like oil and petrochemicals, suitable for low-volatility investors [4] - The CSI 800 Free Cash Flow Index selects 50 large and medium-cap stocks from the CSI 300 and CSI 500, with over 40% in the energy sector, indicating significant exposure to commodity cycle fluctuations, suitable for tactical strategies [5] - The FTSE China A-Share Free Cash Flow Index includes Hong Kong Stock Connect eligible stocks (approximately 30% from Hong Kong), selecting 50 large and medium-cap stocks, with a high proportion of central and state-owned enterprises, offering cross-border allocation and hedging attributes, but with liquidity risks in Hong Kong stocks [6] - The National Index Free Cash Flow covers a broader range, selecting 100 non-financial and non-real estate stocks from the Shanghai, Shenzhen, and Beijing exchanges, with diversified industries including oil, petrochemicals, automotive, and home appliances, demonstrating both offensive and defensive characteristics [7] Sample Selection Criteria - The selection criteria for these indices include positive free cash flow and enterprise value, exclusion of financial and real estate sectors, and a focus on companies with consistent positive operating cash flow over multiple years [11][17] - The indices are weighted by free cash flow, with individual stock weight limits set at 10%, and are adjusted quarterly [14][17]

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].

1. Report Industry Investment Rating - Not provided in the content 2. Core Viewpoints of the Report - Free cash flow has become a high-potential investment direction in the domestic ETF market, and the "large and medium market capitalization + central state-owned enterprises + abundant cash flow" is expected to be one of the annual investment mainlines [3][9] - Domestic free cash flow indices are emerging, with differences among various indices. The FTSE China A-Share Free Cash Flow Focus Index (FTSE Cash Flow) stands out in terms of compilation, market capitalization distribution, valuation, and return-risk characteristics [3][30] - The FTSE Cash Flow Index has a lower correlation with traditional styles, a higher return-risk ratio, and can be used to construct investment strategies such as a dumbbell strategy with technology indices and a differentiated allocation with partial equity hybrid fund indices [3][92][93] 3. Summary According to the Table of Contents 3.1 Free cash flow has become a high-potential investment direction in the domestic ETF market - Overseas cash flow ETFs are mature, with diverse free cash flow indicator compilation schemes. For example, as of April 25, 2025, the scale of COWZ in the US exceeded $20 billion [9] - Domestic cash flow strategies are expected to be effective in the long term. Since 2014, A-share free cash flow has been positive and growing steadily, and companies with sufficient cash flow have shown significant excess returns [19] - The "large and medium market capitalization + central state-owned enterprises + abundant cash flow" is expected to be one of the annual investment mainlines. Since the introduction of the new "Nine National Policies" in 2024, the small-cap premium has declined, and large-cap stocks' investment cash outflows have been rising steadily [21][24] 3.2 Domestic free cash flow indices are emerging, with differences among various indices 3.2.1 Index Compilation Scheme Comparison - The mainstream domestic cash flow indices include the FTSE Cash Flow, Guozheng Cash Flow, and China Securities Cash Flow. The FTSE Cash Flow has a more refined sample space, with 50 constituent stocks, and uses unique quality, volatility, and growth indicators for multi-dimensional screening [3][30] - Compared with other cash flow indices, the FTSE Cash Flow's compilation scheme excludes securities with high volatility, and the combination of cash flow and volatility factors is expected to achieve higher excess returns [33] 3.2.2 Industry Market Capitalization Distribution Comparison - **Market Capitalization Distribution**: The FTSE Cash Flow has a larger market capitalization among similar indices, with 18% of constituent stocks having a total market capitalization exceeding 100 billion yuan, showing a large and medium market capitalization style. It is more resistant to market downturns [38][42] - **Industry Distribution**: The weights of the FTSE Cash Flow are concentrated in the energy and consumption industries. As of July 18, 2025, the top three industries in terms of weight are household appliances, non-ferrous metals, and food and beverages [44] - **Constituent Stock Overlap**: The FTSE Cash Flow has a higher overlap with major broad-based indices, with a cumulative overlap of 95.95% with the CSI 300, CSI 500, and CSI 1000, and is expected to benefit from subsequent policies [54] 3.2.3 Index Valuation - The FTSE Cash Flow has a lower valuation and a higher dividend yield among similar indices. As of July 18, 2025, its price-to-book ratio is 1.49, and its dividend yield is 4.76%, providing a relatively high margin of safety [59] 3.3 The return and risk of cash flow indices are generally similar, and the FTSE Cash Flow Index has a lower correlation with traditional styles 3.3.1 Return and Risk - The FTSE Cash Flow has outperformed the dividend index in the long term and has a high return-risk ratio. As of July 18, 2025, its return-risk ratio is 0.85, higher than that of the CSI Dividend Index (0.63) and the Dividend Low Volatility Index (0.68) [60][63] 3.3.2 Reasons for the Leading Returns of the FTSE Cash Flow Index - **Relationship between Market Capitalization and Cash Flow Yield**: The cash flow yield factor is more effective in large-cap stocks. The FTSE Cash Flow selects stocks from large and medium-cap stock pools, enhancing returns by selecting stocks with superior cash flow yields [67][68] - **Low Volatility and Quality Factors**: The FTSE Cash Flow further filters stocks using low volatility and quality factors from the FTSE Global Factor Index System, enhancing the index's risk resistance and long-term holding value [82] 3.3.3 Investment Strategy - The free cash flow strategy and the dividend strategy can complement each other. The FTSE Cash Flow, as a "dividend plus" strategy, can be combined with technology indices to construct a dumbbell strategy with lower volatility and form a differentiated allocation with partial equity hybrid fund indices [92][93]

Group 1 - The core viewpoint emphasizes the importance of stable free cash flow as a financial foundation for a long-term bull market in A-shares, particularly in a low-interest-rate environment [1] - The shift in economic operation models is leading to a change in stock market pricing logic, focusing on the accumulation of cash flow rather than front-end expansion [1] - Assets with abundant free cash flow, such as companies with controlled capital expenditures and efficient operations, can maintain value creation even in profit stagnation scenarios [1] Group 2 - The Cash Flow ETF (159399) tracks the FTSE China A-Share Free Cash Flow Focus Index (888888), which selects listed companies with high free cash flow yield from the Chinese A-share market [1] - The index covers multiple industries and focuses on financially sound companies with strong cash flow generation capabilities, reflecting the overall performance of such companies in the Chinese market [1] - The index adopts a value investment style, providing investors with a reference for companies with quality cash flow [1] Group 3 - Investors without stock accounts can consider the Guotai FTSE China A-Share Free Cash Flow Focus ETF Initiated Link A (023919) and Link C (023920) [2]

Group 1 - The article highlights the rebound of high dividend assets, with the Cash Flow ETF (159399) rising by 0.89% during trading, indicating active market participation [1] - The Cash Flow ETF (159399) utilizes free cash flow as a stock selection factor, closely tracking the FTSE China A-Share Free Cash Flow Focus Index, excluding financial and real estate sectors, and selecting the top 50 stocks with the highest free cash flow rates, thus identifying "cash cow" companies in the A-share market [1] - The long-term performance of the FTSE Cash Flow Index is notable, with an annualized return exceeding 18% since the base date (December 31, 2013), and a cumulative increase of 568.15%, significantly outperforming the CSI 300's 114.88% and the CSI Dividend's 285.62%, consistently beating the CSI Dividend Index for nine consecutive years [1] Group 2 - According to Shenwan Hongyuan Securities, free cash flow has a timing effect on cyclical stocks, suggesting that during an upcycle, the free cash flow rate of cyclical stocks is higher compared to recession periods, allowing for the identification of cyclical stocks in an uptrend through free cash flow rates, demonstrating strong applicability to economic cycles [1]

Core Viewpoint - The emergence of Free Cash Flow ETFs has disrupted traditional investment strategies, attracting significant capital and reshaping market dynamics since their launch in February 2025 [1][2]. Group 1: Core Advantages of Free Cash Flow ETFs - Free Cash Flow serves as a critical indicator of a company's operational quality, revealing its ability to generate cash after covering operating costs and capital expenditures [2]. - Unlike traditional dividend or low-valuation strategies, Free Cash Flow ETFs focus on companies that can produce substantial cash flow after necessary expenses, thus avoiding high-leverage financial risks [2][3]. - The dynamic mechanism of excluding unstable cash flow companies enhances the resilience of holdings during economic cycles, providing a safety margin based on real cash flow [3][4]. Group 2: Phenomenal Growth in Four Months - The initial trading day saw over 1 billion CNY in transaction volume for Free Cash Flow ETFs, with significant growth from 694 million CNY to 3.7 billion CNY in assets under management [6][7]. - As of now, there are 23 Free Cash Flow ETF products tracking five indices, with the CSI All Share Free Cash Flow Index being the most popular among fund companies [6]. - The 10-year government bond yield falling below 2% has created a significant yield advantage for Free Cash Flow indices, appealing to institutional investors seeking stable returns [7][8]. Group 3: Multi-Dimensional Drivers of Capital Influx - Competitive pricing strategies have emerged, with some fund management fees reduced to 0.15%, significantly enhancing investor returns over the long term [11][12]. - Policy support, such as the new "National Nine Articles," emphasizes dividend distribution and market capitalization management, favoring companies with strong cash flow [14]. - The shift in investor sentiment towards risk-adjusted returns positions Free Cash Flow ETFs as a balanced investment option amid economic uncertainty [9][10]. Group 4: Future Outlook and Challenges - The market for Free Cash Flow ETFs presents both opportunities and challenges, with individual investors likely to become a new source of capital as they shift from reliance on guaranteed returns to risk-adjusted strategies [15]. - The ability to maintain liquidity and manage large-scale inflows will be crucial for fund managers, requiring effective stock selection and dynamic cash flow management [15][16]. - The sustainability of cash flow generation, disciplined execution of fund strategies, and the market's appeal to long-term capital will determine the success of Free Cash Flow ETFs in navigating economic cycles [16].

Group 1 - The first batch of free cash flow strategy funds was announced in February, with 26 funds established so far, raising a total of over 15 billion yuan [1] - The established funds are passive index funds tracking various free cash flow indices, with 12 funds tracking the CSI All Share Free Cash Flow Index [1][3] - The market is seeing an expansion of free cash flow strategy funds, with new products being launched and applications submitted for additional funds [2] Group 2 - Analysts believe that free cash flow is well-suited to the current macroeconomic environment, as companies with ample free cash flow are expected to see stronger valuation increases [2] - Free cash flow indices have shown strong long-term performance, with lower volatility compared to dividend indices, and are concentrated in sectors like energy and consumer goods [3][4] - The National Free Cash Flow Index has outperformed other indices, while the CSI 300 Free Cash Flow Index is noted for its low volatility and stable performance [4]