Huachuang Securities: Top Ten Global Investment Themes in March

Huachuang Securities released a research report stating that by the end of March 2025, the margin trading balance of A-shares accounted for 2.55% of the market capitalization of A-shares, reaching a high point since 2017. At the same time, the implied volatility of the Shanghai and Shenzhen 300 Index ETF has continued to decline, from 100% in October 2024 to 20%. It is worth noting that although the proportion of margin trading balance to the market capitalization of A-shares continues to rise, there is still a significant gap compared to the high of 4.47% in 2015. Huachuang Securities' main points are as follows: 1. Since 2024, China's top ten technology companies have outperformed the seven giants of the US stock market. From 2024 to March 2025, the Terrific 10 index of Chinese technology companies, which is a simple weighted average of ten tech companies, rose by 58%, surpassing the 41% increase in the Magnificent 7 index of US tech giants. How to understand this situation? On the one hand, DeepSeek triggered a revaluation of Chinese assets in the market and the fading of the narrative of the "American exceptionalism"; on the other hand, the stimulus policies since September 2024 have boosted confidence and led to a rise in risk appetite. 2. Small-cap stocks in the US and the confidence index of small businesses in the US show differentiation. The relative performance of US small-cap stocks is usually closely related to the increase in confidence of small businesses, i.e., the ratio of the Russell 2000 index to the S&P 500 index and the trend of the NFIB Small Business Confidence Index are basically consistent. The bank calculated the correlation coefficient of the two from 2016 to the end of September 2024 and found that the correlation coefficient between the Russell 2000 index/S&P 500 index and the NFIB Small Business Confidence Index reached 0.77. However, since October 2024, the two indices have diverged, with the NFIB Small Business Confidence Index rising while the Russell 2000 index continued to underperform the S&P 500 index. 3. Valuation of the US seven giants is negatively correlated with the actual yield of the 10-year Japanese government bonds. The high valuation of the US seven giants has raised concerns about the market's vulnerability. The bank found that since October 2024, the price-earnings ratio of the US seven giants was in reverse relationship with the actual yield of the 10-year Japanese government bonds. That is, when the actual yield of the Japanese 10-year government bonds goes up, the price-earnings ratio of the Bloomberg US Seven Giants Index declines. How to understand this reverse relationship? The US seven giants may still face concerns about overvaluation and fragile liquidity. 4. Global fund managers expect gold to be the best-performing asset in a full trade conflict. According to the March 2025 survey of global fund managers by Bank of America, in a scenario of a full trade conflict, 58% of fund managers expect gold to be the best-performing asset, followed by long-term US Treasuries (16%), short-term US Treasuries (9%), commodities (6%), and the US dollar in fifth place (5%). At the same time, allocations of US stocks have experienced the largest month-on-month decline on record, while allocations to European stocks have significantly improved on a month-on-month basis. 5. The Hang Seng Index and the Philadelphia Semiconductor Index show differentiation year-on-year. The Hang Seng Composite Index is highly correlated with the Philadelphia Semiconductor Index. From 2001 to the end of March 2025, the year-on-year changes in the Hang Seng Composite Index and the Philadelphia Semiconductor Index have been highly synchronized, with a lag-related coefficient of 0.70. How to understand this synchronization? The semiconductor industry has significant globalization characteristics. The Hang Seng Comprehensive Index includes leading companies such as Semiconductor Manufacturing International Corporation and HUA HONG SEMI, whose businesses are linked to the components of the Philadelphia Semiconductor Index upstream and downstream. However, it is worth noting that since October 2024, there has been a clear differentiation in the year-on-year changes of the two indices. 6. The proportion of margin trading balance to the market capitalization of A-shares has reached a high since 2017. By the end of March 2025, the proportion of margin trading balance to the market capitalization of A-shares was 2.55%, reaching a high since 2017. At the same time, the implied volatility of the Shanghai and Shenzhen 300 Index ETF has continued to decline, from 100% in October 2024 to 20%. It is worth noting that although the proportion of margin trading balance to the market capitalization of A-shares continues to rise, there is still a significant gap compared to the high of 4.47% in 2015. 7. The price trends of rebar and copper continue to diverge. Since 2023, there has been a clear deviation in the spot prices of rebar and copper. How to understand this phenomenon? Generally, both copper and rebar are exposed to risks in the economy, so historically their trends have been basically consistent, and the differences between the two may reflect the strength of demand in different industries. The price of rebar reflects the demand for infrastructure and real estate, while the price of copper reflects more the demand from industries like automobiles. The bank attempted to use the operating rate of oil asphalt plants and the operating rate of steel radial tire for automobiles as proxy variables for infrastructure and automobile production activities, and found that the correlation coefficient between the price of copper and the price of rebar and the operating rate of steel radial tires - the operating rate of oil asphalt plants since 2021 is 0.86. 8. The rise in the AH premium center may be partially due to the strength of the US dollar index. Since 2014, the AH premium index has shown a rising trend in the center. The People's Bank of China (2020) constructed an A-share H-share premium index after excluding the trend of the US dollar, and found that since the implementation of the Shanghai-Hong Kong Stock Connect in November 2014, the Hang Seng AH premium index adjusted for the US dollar index shows a stronger mean-reversion characteristic. Therefore, the rise in the AH premium index center may be partially due to the rise in the US dollar index center. 9. The rotation speed of A-share industries has reached a historical high in the past 10 years. The industry rotation speed reflects the market's consensus or divergence on current investment themes. The bank uses the daily return ranking of the Citic first-level industry, then calculates the changes in the ranking for each day, and takes the absolute value sum of the month-on-month changes to obtain the absolute level of industry ranking changes. Finally, a 60-day moving average is taken on the daily ranking changes. As of March 2025, the rotation speed of A-share industries has reached the 94th percentile level of historical distribution in the past 10 years. 10. With the background of record high gold prices, the holdings of gold ETFs have increased rapidly. From 2014 to 20Over the 22 years, the holding amount of gold ETFs is highly correlated with the price of gold, with a correlation coefficient of 0.81. However, in the period from 2022 to 2023, there was a divergence in the trend of the two, with a decrease in the holding amount of gold ETFs while the price of gold continued to rise. The reason behind this divergence was that central banks in countries such as China and India were purchasing gold to offset the outflow of funds from gold ETFs. Since 2024, the correlation between the two has once again returned, accompanied by a new record high in gold prices, leading to a rapid increase in the holding amount of gold ETFs.Risk Warning: The Federal Reserve's monetary policy exceeds expectations, global geopolitical risks intensify, and global trade conflicts escalate.