旋转加速，内部确定性持续交易

Rotation Accelerating,OngoingTrading on Internal Certainties AnalystSAC No. S0570520080004SFC No.BRB318 Huatai Research 13 May 2025│China (Mainland) Weekly Our key viewsA-sharessaw continued post-holiday rally but turned volatile in the second half ofthe week after filling the7April gap, with accelerated sector rotation. On thefunding front, financing activity rebounded from the bottom, while counter-cyclicalinflows into ETFs slowed, with a tilt toward small/mid-cap growth styles. In ourview, the package of policies aimed at stabilizing the market and expectations issupporting risk appetite. April inflation and export data were resilient. While theshort-term win rate remains acceptable, the loss ratio is declining, suggesting astructurally driven market, in our view. Progress in China-US trade talks is a keyvariable. Amid overlapping external disturbances, we recommend maintaining abarbell strategy of high dividend + tech + domesticdemand in the short term, andfocus on internal certainties in the mid-term: 1) the new mutual fund regulation mayguide allocations closer to benchmarks, potentially benefiting large-cap indexconstituentsandunderweightsectorssuchasfinancialsandutilities;2)werecommend making allocation on dips insectors showing improvements in bothsupply and demand in 1Q25results—such as defense electronics, minor metals,wind power equipment, and dairy. April inflation/exportdataresilient,sustainabilitymerits observationLast week marked a data validation window: on inflation, April CPI and PPI were in line with Bloomberg consensusyoy, and core CPI—more correlated with domesticdemandafterexcludingfoodandenergy—remainedstable.Lookingahead,leading credit indicators such as the yoy spread between M1 and M2 suggestcontinueddownwardpressureoninflation,whiledecliningoilpricesandtariff-related disruptions are also weighing on price indicators. On exports, Aprilexportsexceeded our expectations. Exports to the US turned sharply negative yoy,but those to ASEAN and Latin America maintained strong growth, offsetting theweakness, likely reflecting a "rush to export" before tariff exemptions expire.Structurally, mechanical products and integrated circuits remained resilient, whilelabor-intensive light industry and textiles weakened. Lookingahead, there remainsuncertainty around tariffs after the 90-day exemption period for the US and otherregions, and coupled with cyclical softening of external demand, export growthmay face some pressure. China-US trade talks enter the“first round”post thereciprocal tariffsExternaldisruptionshave intensified recently. Rising volatility in global risk assets was driven by the India-Pakistan conflict, delayed Fed rate cuts following theFOMC meeting, among others. Over the weekend, senior China-US economic andtrade officials held talks in Switzerland. Given the market had already priced insome de-escalation of tariff tensions, if the talks deliver positivesignals, riskappetite may rise further, with potential recovery opportunities for the export chain.Conversely, if only a framework agreement is reached or outcomes fall short ofexpectations,short-termriskappetitecouldbepressured.However,inthemid-term, high tariffs couldgenerategreaterimpacton the US economy, whiledomestic pro-growth policies still have room for furtherramp-up. In our view, theTrump administration’s push for trade talks is partly driven by pressure from fallingUSDandUSTreasury prices. Judging from recent agreements between the UKand US, the policy goal of narrowing the US trade deficit remains unchanged, andthe tariff path ahead remains highly uncertain. New mutual fund regulation may reshape market ecosystemThe CSRC released an action plan to promote the high-quality development of mutual funds. We believe this may reshape the A-share marketecosystem: 1) Along-term and absolute return-oriented performance assessment system maypush down the median of volatility and turnover. Since 2020, CSI 300 volatility has gradually converged with that of developed market indices, but overall A-sharevolatility and turnover remain significantly higher than in developed markets.2)Optimized fee and incentive mechanisms may expand passive investing. As of4Q24, the share of index investing rose 0.6pp qoq to 30.4%, close to the US levelaround 2016, suggesting further upside.3) The policy may promote long-termcapital inflows and guide allocations toward benchmarks, benefiting large-capindex names and underweight sectors such as financials, utilities, and oil &petrochemicals. The effectiveness of factors like value, low volatility, and dividendmay also improve. 1Q25resultsshow a "mild stabilization" in the inventory cycle and continuedcapacity clearing. As tariff impacts gradually unfold, fundamentals may still facedisturbances, but domestic policies are cushioning risk appetite. Currently, theimplied M1 and USDindex expectations reflected in all-A-sharePETTM arerelatively neutral. The market appears to be in a "capped upsi