The past week has revealed a contrasting performance among major stock indices, with the Shanghai Composite Index emerging as the leader while the ChiNext Index continues to struggle amidst a fragile market environment. Different sectors exhibited disparate reactions, with kitchen and bathroom appliances, banking, and airlines leading the gains. Conversely, large consumer sectors, including hospitality, dining, tourism, and trade, saw significant declines. From a technical perspective, the Shanghai index is nearing the end of a consolidation phase between 2943 and 3080. The recent upward momentum suggests the index may soon break through the annual resistance level and stabilize above the 3100 mark.

The introduction of new guidelines by the Chinese government has been pivotal in reshaping the market landscape, leading to noticeable shifts in capital flows over the short term. Initially driven by apprehensions surrounding specific regulations, a substantial amount of capital fled from smaller stocks; however, subsequent clarifications from regulatory authorities alleviated some concerns, resulting in a rapid rebound in smaller shares, though they did not recover to their pre-decline levels. Market trends indicate steady growth among larger indices such as the Shanghai 50 and the CSI 300, in contrast to a pronounced decline in smaller indices like the CSI 2000 and the Wind Micro Cap Index.

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Examining the fundamentals, China's economy exhibited resilience with a first-quarter GDP growth of 5.3%, reflecting a quarter-on-quarter increase of 1.6%. The data is indicative of a promising start to the year. An analysis of various economic indicators reveals a multifaceted picture: 1) The total retail sales in the first quarter rose by 4.7% year-on-year, with services consumption increasing rapidly and retail sales in the service sector climbing by 10.0%. 2) Fixed asset investment saw a year-on-year increase of 4.5%, with the March year-on-year growth rebounding from 4.2% to 4.7%, driven primarily by robust manufacturing investments. 3) The combined export and import figures reflected a 5.0% year-on-year growth, with exports and imports increasing by 4.9% and 5.0% respectively. 4) Consumer Price Index (CPI) remained stable, while the Producer Price Index (PPI) decreased by 2.7%. Overall, the robust GDP performance in the first quarter creates a solid foundation for meeting yearly growth targets.

Looking abroad, the U.S. retail sector outperformed expectations with a 0.7% month-on-month growth in March, surpassing an anticipated increase of 0.4% and a previous figure of 0.6%. Core retail sales, which exclude automobiles, gas, building materials, and food services, surged by 1.1%, again exceeding the forecasted growth of 0.4%. These indicators suggest that consumer demand remains resilient, potentially bolstering U.S. economic growth for the first quarter. Furthermore, the robust retail data has diminished investor confidence in the Federal Reserve's plans for interest rate cuts, leading market expectations to shift towards a later-than-anticipated decrease in rates.

On the financial front, market activity levels have seen an uptick, albeit with a diminishing risk appetite among leveraged funds. This past week, the daily average trading volume reached approximately 958.1 billion yuan, reflecting a notable increase in trading activity as evidenced by rising turnover rates. However, foreign investment trends indicated a continued outflow, with net foreign capital outflows totaling 6.691 billion yuan for the week, following a larger outflow of 11.47 billion yuan the previous week. In terms of margin trading, as of April 18, the total margin balance in the market stood at 1.53002 trillion yuan, a drop of 5.58 billion yuan week-on-week, indicating a decline in risk appetite among leveraged positions.

Looking ahead, the low-altitude economy has emerged as the standout sector in recent market trends. Characterized by activities involving both manned and unmanned aerial vehicles operating below 3000 meters, this sector is expected to evolve into a robust economic entity across various fields. The current fervor surrounding low-altitude tourism has propelled discussions about flying cars and solid-state batteries. Just recently, the Ministry of Industry and Information Technology highlighted that the low-altitude economy serves as a representative of new productive forces and is projected to develop into a trillion-yuan industry. Given this context, stocks with strong performer status plus emerging trends are likely to capture increased capital interest throughout the month.

Besides the low-altitude economy, investors should also keep an eye on other promising sectors as the trading month progresses. Currently, approximately 400 listed companies in the A shares market have disclosed their first quarter earnings for 2024, with 262 firms reporting a year-on-year profit increase, accounting for 65.5% of the sample. A strong performance typically garners positive market feedback.

From an industry perspective, sectors like consumer electronics, general retail, computer equipment, telecommunications, and semiconductors are showing encouraging signs of recovery. Furthermore, industries focused on exports, such as construction machinery, home appliances, shipping, and heavy-duty vehicles, warrant ongoing attention. These sectors have benefited from China's unexpectedly strong export performance in the first quarter, positioning leading companies within these industries for potential earnings growth.

During periods of market volatility, sector rotation often serves as the central theme within trading territories. Presently, the AI computing sector encounters short-term pressures. Concerns about Nvidia's next quarterly earnings, combined with the absence of optimistic earnings forecasts, have intensified investor caution, resulting in Nvidia's stock price plummeting by 10%. Additionally, the diminished expectations surrounding Fed interest rate cuts continue to negatively impact the tech sector, dampening enthusiasm for AI-leading companies. In the coming days, companies within the A-share market, especially those connected to Nvidia's industrial chain, may face price pressures, posing a risk of contagion affecting the broader AI sector.