According to a research report from CICC, active foreign capital continued to flow out of A-shares, with outflows expanding to $70 million (vs. $30 million outflow last week). Outflows from overseas Chinese stocks also expanded, reaching $240 million (vs. $75 million outflow last week). Passive foreign capital continued to flow in, with $2.07 billion flowing into overseas Chinese stocks (vs. $3.07 billion inflow last week) and $1.05 billion into A-shares (vs. $1.0 billion inflow last week). As of August, active foreign capital's allocation ratio to China rose from 6.4% in July to 6.7%, while passive funds' allocation ratio increased to 8%. The underweighting degree decreased from 1.45ppt in July to 1.35ppt, though still above June's 1.31ppt, indicating that active funds are adding positions relatively slowly.

CICC's main observations include:

Active foreign capital continued flowing out of A-shares, with outflows expanding to $70 million (vs. $30 million outflow last week), while outflows from overseas Chinese stocks also expanded to $240 million (vs. $75 million outflow last week). Passive foreign capital maintained inflows, with $2.07 billion flowing into overseas Chinese stocks (vs. $3.07 billion inflow last week) and $1.05 billion into A-shares (vs. $1.0 billion inflow last week). As of August, active foreign capital's China allocation ratio rose from 6.4% in July to 6.7%, passive funds' allocation ratio increased to 8%, with underweighting decreasing from 1.45ppt in July to 1.35ppt, though still above June's 1.31ppt, suggesting active funds are adding positions slowly.

Southbound flows accelerated, with HK$43.96 billion flowing in this week (vs. HK$36.85 billion last week), averaging HK$8.79 billion daily (vs. HK$7.37 billion daily last week). The largest net purchases were BABA-W (09988) and MEITUAN-W (03690), while there were net sales of Hua Hong Semiconductor, CSPC Pharmaceutical Group, and China Telecom.

Previously anticipated that the overall market might experience high-level consolidation, still focusing on sectors with stronger expectations, though volatility from rotational switching is inevitable due to: 1) accelerating weakness in domestic fundamentals, 2) potential inflection point in macro liquidity, 3) improving overseas liquidity but expectations already ahead, 4) extreme sentiment and technical indicators, with the optimistic scenario of Hang Seng Index at 26,000 points already exceeded, 5) but micro liquidity remains active.

Last week's market experienced significant volatility under internal and external catalysts with obvious structural divergence, largely consistent with previous guidance. On Wednesday, Hang Seng Tech Index surged led by Alibaba, but declined significantly at Friday's close, giving back some gains.

Last week, upward revisions to US GDP and strong durable goods orders pushed the US dollar and long-term Treasury yields higher, consistent with previous expectations that rate cuts shouldn't be equated with declining Treasury yields and USD weakness. After preventive rate cuts, markets may gradually shift from "easing trades" to "recovery trades," driving the US dollar and long-term yields to bottom out or even rebound.

Operationally, the firm continues recommending directions that "may lose some time in the short term but won't lose space in the long term," such as internet stocks in June and current banking/dividend plays. Conversely, for long-term correct directions with excessive short-term crowding, moderate profit-taking might be appropriate.

Currently, the intersection of sentiment (expectations), event catalysts, and crowding levels shows:

Sentiment: 1) AI-related hardware and application expectations remain strong, 2) continued focus on China-US mapping directions;

Events: 1) Copper mine supply disruptions and AI developments; 2) Trade friction continues to pressure sentiment in some sectors (innovative pharmaceuticals, home furnishing, etc.);

Crowding: 1) E-commerce relatively high, internet still somewhat low, 2) Innovative pharmaceuticals have declined but not very low yet, 3) New consumption hovering at relatively low levels, 4) Banking and insurance at year-low levels.

Recent slight increases in internet and banking trading suggest some funds may be seeking "high-to-low" switching opportunities based on crowding metrics, but low-positioned cyclical and consumption sectors still need total policy and fundamental support.