Cinda: The A-share market may continue to fluctuate for a longer period of time, and it is highly unlikely to directly end the bull market.

Cinda's research report states that the United States' policy of equivalent tariffs has a significant impact on the global economic and political landscape, but it may only be a one-time shock to the A-share index. The bull market in A-shares is the result of the combined effects of stock market policies and valuation cycles, the deleveraging cycle in the real estate market, and the capacity reduction cycles in various industries. The impact of exports may not be as significant as imagined. The tariff shock may prolong the volatility that has been occurring since October last year, but it is unlikely to directly end the bull market. For example, the liquidity crunch in 2013 and the COVID-19 pandemic in early 2020, despite the significant impact, did not cause the stock market to fall back to a bear market. Instead, it adjusted to the lower end of the volatility range and continued to rise. Recommendations for the next month: Banking, steel, and construction (low overseas economic sensitivity, high domestic policy sensitivity, and low PB restoration) > Real estate and consumption (domestic stable growth forces estimated to continue to strengthen) > Hong Kong stocks and internet companies (increased overseas volatility, rising Chinese asset allocation willingness). Key evidence: During the initial impact of the COVID-19 pandemic in early 2020, most industries were in a good capacity position. Although it had a significant impact on people's lives and the global political and economic landscape, from the perspective of overall profits of listed companies and the A-share index, the impact was relatively short-lived. During the China-US trade conflict from 2018-2019, the bear market occurred in 2018, and by the time export data began to decline in 2019, its impact on the stock market was minimal. This indicates that the domestic economic cycle is more important than exports. In the short term, tariffs have a significant impact on the global economic and political landscape, but their impact on the A-share index may be temporary. The US policy of equivalent tariffs is likely to have a significant impact on the global economy, but its impact on the A-share index may not be as significant as anticipated. The last major macro event to impact the global economy was the COVID-19 pandemic, which had a significant impact on all countries and industries globally, but the drop in the US stock market was much greater than that of the A-share market. From the perspective of the stock market, Cinda believes that from 2015-2018, events such as the bursting of the mobile internet bubble and financial deleveraging caused most industries in the domestic stock market to go through cycles of de-bubbling, capacity reduction, and deleveraging, leading to low overall valuations in the stock market. During the initial impact of the COVID-19 pandemic in early 2020, most industries were in a good capacity position despite its significant impact on people's lives and the global political and economic landscape. This indicates that when industries are in a good position in their capacity cycle and the A-share market is in a favorable bull/bear cycle, the impact of adverse events is usually short-lived. In the long term, Cinda believes that the optimal combination of technology, labor, and capital is the core of economic growth, and free trade or trade protection is just a means to achieve this. Since the reform and opening up in 1978, China's economy has successfully entered the fast lane of economic development by integrating into globalization, which has been a basic policy for economic growth for most latecomer countries since World War II. However, looking back at the economic development of European and American countries since the Industrial Revolution, some countries did not rise through traditional free trade but through methods such as emigration and overseas colonization. Changes in US policy are also a reflection of this historical background. Ultimately, as long as a better combination of technology, labor, and capital can be achieved, economic development can be facilitated. With China's clear advantages in the manufacturing sector, the phase of relying entirely on exports to drive the economy is over, and in the current environment, a balanced approach is likely feasible. Regarding short-term A-share strategies: the impact of tariffs will prolong the period of volatility but is unlikely to change the trend of the bull market. The bull market in A-shares is the result of the combined effects of stock market policies and valuation cycles, the deleveraging cycle in the real estate market, and the capacity reduction cycles in various industries. The impact of exports may not be as significant as imagined. The tariff shock may prolong the period of volatility that has been occurring since October last year, but it is unlikely to directly end the bull market. For example, during the volatility caused by the liquidity crunch in 2013 and the COVID-19 pandemic in early 2020, although the impact was significant, the stock market did not fall back into a bear market but adjusted within a volatile range before continuing to rise. Since the period of volatility since October 2024, the market has favored small-cap and low-priced strategies. This phenomenon can be explained by abundant liquidity but weak profits, leading investors to prefer speculative styles. In observing previous bull markets (2005-2007, 2014-2015, 2019-2021), regardless of whether they were profit-driven, low-priced strategies tended to have strong excess returns in the late stage of a significant index rise to the beginning of volatility. However, once the market enters the late stage of volatility, low-priced strategies often fail, and the index begins a new round of central rebound, usually not driven by low-priced strategies. In terms of large and small-cap styles, each period of volatility during a bull market is likely a turning point in the rotation of styles. After the volatility ends, the new uptrend is likely to have a different style from the previous one. For example, before the volatility period in July-September 2020, the market favored small caps, but from August 2020 to early 2021, the trend shifted towards large caps.During the market volatility period from September to December 2014, the market style leaned towards large caps. In the following months from January to June 2015, the style shifted towards small caps. Looking at the current situation, Cinda believes that towards the end of the market turbulence, before a new round of increase occurs, there is a high probability of observing a shift towards large caps. It is recommended to reallocate to Hong Kong-listed internet companies in the growth sector, and to pay attention to index weightings (banks) and undervalued stocks (steel) in the value sector.Je vais la plage cet aprs-midi.