Overseas, oil prices drove the US CPI for May to exceed 4%, nearing the year-on-year high. The normalization of the housing component and weak demand for core goods led to a core CPI reading slightly below expectations month-on-month. Overall, May's US inflation data did not further fuel expectations for interest rate hikes. Concurrently, with recent positive developments in US-Iran negotiations, signs of easing in US dollar liquidity tightening have emerged, providing a boost to global risk appetite.
Domestically, China's May CPI was flat year-on-year compared to the previous month, while the PPI rose to 3.9%. The cumulative PPI for January to May rebounded to a 1% year-on-year increase, which is expected to help drive the GDP deflator into positive territory in Q2 and support a continued recovery in corporate profit growth. May's export growth accelerated to 19.4% year-on-year from 14.1% in April. Exports for January to May this year recorded a 15.5% growth rate, driven by factors including the high prosperity of the AI industry chain, rising export prices, and a recovery in overseas growth.
Market Strategy Outlook
Regarding bonds, liquidity conditions tightened last week, overseas rate hike expectations intensified, and redemption pressure emerged on the liability side of non-bank financial institutions, leading to an overall adjustment in the bond market. Since June, the central bank has employed measures such as open market operations and policy window guidance. Given liquidity constraints, the downside for the bond market may be limited. However, against a backdrop of weak fundamentals and credit, the central bank is also unlikely to further tighten liquidity. Pressure from under-allocation by investment accounts persists, and the scope for a significant bond market correction is also limited. The market may return to a range-bound pattern in the short term. Attention should be paid to changes in liquidity conditions and the impact of this week's Federal Reserve meeting statement on domestic and international risk appetite.
For A-shares, under a three-factor framework, with corporate profits bottoming out, liquidity turning neutral, and risk appetite turning negative, a sustained rebound in A-shares may still require time. In terms of sector structure, June may see a phase of rebalancing between technology and cyclical sectors. On one hand, the trading volume of the top 5% of A-share stocks currently accounts for an extremely high proportion, potentially amplifying volatility in technology stocks at the trading level. On the other hand, considering waiting until the end of June, when A-shares formally enter the window for interim earnings reports, it may be opportune to observe whether better entry opportunities emerge for the technology sector.
For Hong Kong stocks, as US inflation data and central bank meetings are gradually concluded, the situation of one-sided liquidity tightening has eased somewhat. Coupled with rising future profit expectations driven by domestic inflation, the overall environment is expected to be favorable for Hong Kong stocks to stabilize and halt their decline.
Regarding crude oil, progress in US-Iran negotiations is conducive to curbing oil prices, but the medium-to-long-term price center may still be higher than before the outbreak of geopolitical conflicts.
For gold, geopolitical easing has led to a decline in oil prices, tempering expectations of rapid interest rate hikes driven by inflation. The decline in the US dollar and US Treasury yields has supported a recent recovery in gold prices.
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