China Merchants Fund: The importance of profit quality has become evident in the recent market volatility.

Recently, the A-share market has been volatile, with a slight pullback in small and micro cap stocks. Industry insiders believe that the CSI Free Cash Flow Index selects A-share listed companies with excellent free cash flow, and the index components lean towards the quality factor. After the market volatility increases, the importance of this factor becomes apparent. Industrial Fund believes that in the current market led by technology stocks, the performance of quality and dividend styles indices is relatively weak. However, over the long term, quality and dividend style indices, based on the profitability and dividends of listed companies, are few in the A-share market that can provide long-term sustainable returns. Currently, domestic risk-free interest rates are low, and high-dividend equity assets are still actively allocated by fixed income funds. The performance of quality and dividend style indices is still worth looking forward to.