China Securities Co.,Ltd.: A-shares weakened in March, predicting that gold priced in dollars will continue to strengthen.

China Securities Co., Ltd. released a research report stating that in March, A-shares were weakly volatile, Hong Kong stocks were differentiated, US stocks declined, gold strengthened, and the bond market experienced a pullback. The 10-year Chinese government bond yield has deviated from historical cyclical patterns. It is predicted that the peak year-on-year GDP for the US will be in 2025Q1, for Japan in 2025Q2, and for the Eurozone in 2025Q2. The weakness of the yen relative to the US dollar is expected to temporarily improve, and the Euro may strengthen relative to the US dollar. It is forecasted that gold priced in US dollars will continue to strengthen. China Securities Co., Ltd.'s main points are as follows: Global asset performance and cyclical positioning from the perspective of Kondratiev cycles: In March, A-shares were weakly volatile, Hong Kong stocks were differentiated, US stocks declined, gold strengthened, and the bond market experienced a pullback. Currently in a Kondratiev depression period, Trump's additional tariffs on April 2nd strengthened the logic for allocating to safe-haven assets such as gold. The negative impact of population factors on the stock market has become significant since 2015, and is gradually increasing. China's capacity utilization has been declining since 2021, and the inventory cycle bottomed out and rose from 2023Q2, but constrained by the Kondratiev, population, and capacity cycles, the Producer Price Index (PPI) recovery is weak and is now nearing the end of the upward cycle. Fundamentals and asset price outlook: Analysts' forecasts for 2025Q1 for the CSI All Share and CSI All Share non-financial ROE are 7.38% and 6.42% respectively (forecast for 2025Q2 are 7.23% and 6.28%), higher than the previous month. The ROETTM for 2024Q3 is 7.77% and 6.94%. Based on the three cycles (inventory cycle + capacity cycle + population cycle), the intrinsic value estimate for the CSI All Share index in 2025Q2 is 5,343 points. The 10-year Chinese government bond yield has deviated from historical cyclical patterns. It is predicted that the peak year-on-year GDP for the US will be in 2025Q1, for Japan in 2025Q2, and for the Eurozone in 2025Q2. The weakness of the yen relative to the US dollar is expected to temporarily improve, and the Euro may strengthen relative to the US dollar. It is forecasted that gold priced in US dollars will continue to strengthen. Global multi-asset allocation strategy portfolio tracking: The global multi-asset allocation absolute return @ low-risk portfolio had a return of 0.14% last week, -0.05% in March, and an excess return of 0.87% relative to the ChinaBond (Total Wealth) index year-to-date; The global multi-asset allocation absolute return @ medium-high-risk portfolio had a return of 0.20% last week, -0.46% in March, and an excess return of 1.18% relative to the Wind FOF index year-to-date. A-share industry and style rotation @ relative returns: Based on financial statements, analyst expectations, and intermediate industry data, industries with relatively high prosperity levels include agriculture, forestry, animal husbandry, fisheries, non-ferrous metals, communications, transportation, and non-bank financial institutions. The current institutional focus is on non-bank financial institutions and transportation industries, while the focus on light industry manufacturing, automotive, consumer services, and comprehensive industries has decreased from high levels. In the past week, institutions' focus on the "petroleum and petrochemicals," "non-ferrous metals," "steel," "consumer services," and "real estate" industries has increased. The machinery industry is at the threshold of triggering the crowded index (liquidity), while the machinery, automotive, and food and beverage industries are in a sustained crowded state (liquidity); recently, overall crowded signals and the number of crowded industries have decreased from highs. Taking multiple dimensions into account, for April 2025, it is bullish on the relative returns of the CSI Dividend, Dividend Index, and SZ Dividend. Risk Warning: Although asset allocation can effectively diversify risks, there are potential dangers and limitations in certain market environments or in the design of strategies. The following are some major risks and limitations: 1. High correlation leads to reduced risk diversification: The core idea of the model is to evenly distribute the risk of the investment portfolio among various assets, aiming for equal risk contributions from each asset. However, when there is high correlation between certain assets, the covariance terms in the covariance matrix will be larger, causing these highly correlated assets to make a greater overall risk contribution to the portfolio. As a result, the total risk of the investment portfolio will become more dependent on these highly correlated assets, reducing the risk diversification effect of the risk parity model. 2. Changes in market environments may cause the model to fail: The effectiveness of quantitative models is based on backtesting historical data, but changes in future market environments may differ significantly from historical data, leading to model failure. For example, changes in market macro environment, investor trading behaviors, or local game theory may affect the actual performance of factors, thus rendering risk parity or maximum diversification strategies unable to achieve the expected results. 3. Limitations in asset selection: The effectiveness of the strategy largely depends on asset selection. Asset selection and market volatility will have a significant impact on the performance of the strategy. Investors need to adjust their strategies flexibly according to market conditions and their risk preferences, and be wary of the risk of model failure.