Group 1 - The core viewpoint is that the "anti-involution" policy in 2025 is driving a new round of supply contraction in industries such as steel, cement, automotive, and photovoltaic [1] - The China Iron and Steel Association launched an initiative in June to resist "involution-style" competition, emphasizing the need to maintain the interests of the industrial chain [1] - The China Cement Association promoted a capacity replacement policy in July to optimize the industry structure [1] - The automotive industry standardized supplier payment terms in June, and BYD canceled its "one-price" promotion in July [1] - In July, leading companies in the photovoltaic sector collectively reduced production by 30%, while the Ministry of Industry and Information Technology stressed the need to address low-price and disorderly competition [1] - Historical cases of supply contraction indicate that the market may initially doubt the policy, and the market trend will depend on strong policy signals and catalysts such as price increases in industrial products and improved capacity utilization [1] - If the current policy continues, it may enhance industry capacity utilization and profitability, but demand-side verification (such as fiscal/GDP ratios) will influence the breadth of market trends [1] - There is a need to observe the strength of the policy and the emergence of signals similar to "cutting off the arm" [1] Group 2 - The Hong Kong Stock Exchange's national enterprise ETF tracks the mainland state-owned index, which reflects the overall performance of state-owned enterprises in the A-share market [1] - The index includes companies that are state-controlled or have a significant proportion of state ownership, covering important sectors such as finance, energy, and industry [1] - The index aims to provide investors with an effective tool to track the movements of the state-owned economy sector [1] - The mainland state-owned index is typically published by domestic securities exchanges or relevant index compilation institutions, serving as an important reference for observing the performance of the state-owned economic sector [1]

Group 1 - The main driver of the economy in Hong Kong is the financial services sector, with most bank loans linked to the HIBOR interest rate, and a reduction in financing costs is expected to stimulate the credit cycle and invigorate economic activity [1] - The correlation between the year-on-year growth of the Hang Seng Index and the year-on-year change in China's manufacturing PMI is as high as 56%, while the correlation with changes in HIBOR and US Treasury yields is relatively low [1] - Changes in interest rates have a more significant impact on local stocks, as lower interest rates can expand liquidity, reduce leverage costs, and stimulate market activity [1] Group 2 - Economic prosperity is highly correlated with the growth rate of M2, and lower financing costs are expected to boost the economy [1] - The current balance of forces on the RMB exchange rate suggests a low likelihood of significant tightening in HKD liquidity, and any fluctuations due to policy adjustments may create opportunities for increased allocation [1] - The Hong Kong Stock Connect ETF (code: 159519) tracks the state-owned index (code: H11153), which primarily includes state-owned enterprises listed on the Shanghai or Shenzhen Stock Exchanges, focusing on key sectors such as energy, finance, and industry [1]

Market Overview - The market experienced a rapid decline in the afternoon, with the ChiNext Index leading the drop. The total trading volume in the Shanghai and Shenzhen markets reached 1.42 trillion yuan, an increase of 129 billion yuan compared to the previous trading day. Over 4,000 stocks fell, with the Shanghai Composite Index down 0.44%, the Shenzhen Component Index down 0.86%, the ChiNext Index down 1.17%, and the CSI A500 Index down 0.59% [1]. US-China Trade Talks - The first meeting of the US-China economic and trade consultation mechanism began in London, aimed at implementing the consensus reached during the recent phone call between the two countries' leaders. Despite fluctuations in tariffs, China's exports maintained steady growth, with a year-on-year increase of 4.8% in May, following an 8.1% increase in April. The growth in exports to the EU and ASEAN offset the decline in exports to the US [3][5]. AI Sector Insights - The AI-related sector saw a pullback, with recent technology revaluation narratives cooling down. However, AI capital expenditures are expected to remain high, and applications such as AI agents and embodied intelligence are gradually commercializing, supported by government policies. This sector continues to be a focus for investors [3][7]. - Major cloud providers and tech companies showed high capital expenditure growth in Q1, unaffected by tariffs and macroeconomic factors, indicating the potential for AI to develop independently [5]. Entertainment Industry Developments - The film market is expected to recover due to a low base from last year and a variety of quality content, with 52 films scheduled for release this summer. The gaming sector is also seeing a surge in new game launches, with several titles quickly entering bestseller lists [8][9]. - Leading companies in the film and gaming sectors are expanding revenue streams by developing and selling IP-related products, enhancing their commercial value [9]. Investment Trends - The banking sector has attracted long-term capital due to its low volatility, high dividends, and low valuations. Ping An Asset Management has increased its stake in Agricultural Bank of China to 15.09%, reflecting a trend of frequent investments in bank stocks [10]. - The upcoming annual dividend distribution in June and July is expected to enhance the appeal of dividend-paying assets. New policies encouraging dividend distributions among listed companies are likely to stabilize investor returns and improve valuations [11].