A-sharessaw continued post-holiday rally but turned volatile in the second half of the week after filling the 7 April gap, with accelerated sector rotation. Financing activity rebounded from the bottom, while counter-cyclical inflows into ETFs slowed, with a tilt toward small/mid-cap growth styles. April inflation and export data were resilient. The short-term win rate remains acceptable, but the loss ratio is declining, suggesting a structurally driven market. Progress in China-US trade talks is a key variable.
April inflation/export data were resilient, sustainability merits observation. April CPI and PPI were in line with Bloomberg consensus yoy, and core CPI remained stable. Leading credit indicators suggest continued downward pressure on inflation. Exports exceeded expectations, with strong growth in ASEAN and Latin America offsetting US weakness. Mechanical products and integrated circuits remained resilient, while labor-intensive light industry and textiles weakened.
China-US trade talks enter the “first round” post reciprocal tariffs. External disruptions have intensified, with rising volatility in global risk assets driven by the India-Pakistan conflict and delayed Fed rate cuts. Senior China-US economic and trade officials held talks in Switzerland. Positive signals from talks could raise risk appetite, while a framework agreement or outcomes falling short could pressure short-term risk appetite. However, high tariffs could generate greater impact on the US economy in the long term.
New mutual fund regulation may reshape market ecosystem. The action plan may push down volatility and turnover, expand passive investing, and guide allocations toward benchmarks, benefiting large-cap index constituents and underweight sectors such as financials and utilities.
1Q25 results show a "mild stabilization" in the inventory cycle and continued capacity clearing. Tariff impacts gradually unfold, but domestic policies are cushioning risk appetite. The market appears in a "capped upside, supported downside" state, with ample micro liquidity favoring structural opportunities. Maintain a barbell allocation of dividend + domestic demand + tech, with marginal increases to sectors driven by industrial catalysts such as AI and cloud computing.
Risks: external risks exceeding expectations, domestic fundamentals missing expectations.
