In May the market began to fall, in June it even fell to despair, and in July the market improved.

In June, Taiwan's stock market continued to soar, surging 9.3%, as artificial intelligence and cloud computing concepts continued to gain traction among investors; The Hong Kong and A-share markets experienced A challenging month, falling 1.1% and 2.8% respectively, with the consumer sector generally under pressure due to the fall in the wholesale price of Flying Moutai, but technology stocks related to artificial intelligence/electronics performed strongly; The MSCI index of Shanghai, Shenzhen and Hong Kong investable markets is down 3.9 per cent this month.

This month, first-tier cities further eased housing restrictions. Beijing announced it would cut down payments for first homes to 20 percent and for second homes to 30-35 percent, and lowered the floor for mortgage interest rates accordingly. At this point, the four first-tier cities have all promulgated policies to stabilize the real estate market to support the demand of home buyers. At the same time, The State Council issued a document calling on local governments to "emancipate their minds and broaden their thinking" and come up with creative measures to support the property market. Suzhou, Foshan, Wuhan and other popular cities have issued clear documents to apply for household registration. Purchase can settle down has become a new round of stability of the property market policy important measures. It is expected that the implementation effects of various policies will gradually show in the second half of the year.

So far this year, China's economic development has been uneven. Manufacturing, especially high-end manufacturing, as well as exports, has been a bright spot for economic growth, while consumption has been weighed down by a weak housing market. In May, CPI rose 0.3% year-on-year, unchanged from the previous month. Affected by the rising prices of some international commodities and the improved supply-demand relationship in the domestic industrial products market, PPI fell by 1.4% year-on-year, 1.1 percentage points lower than that of the previous month. Exports (in dollar terms) rose 7.6 per cent year-on-year; Imports rose 1.8%; Trade surplus of US $82.62 billion; The value added of industrial enterprises above designated size increased by 5.6%. The official manufacturing purchasing Managers' index came in at 49.5 in June; The PMI measure of non-manufacturing construction and services activity fell to 50.5, indicating that factory activity is still contracting. Given that the United States and the European Union - China's two largest export markets - have imposed tariffs on China's electric vehicle exports and other leading industries, and that exchange rate pressures limit the room for monetary policy, we estimate that policymakers are likely to use more fiscal measures to boost the economy.

China is increasing investment in grid infrastructure projects, especially UHV transmission projects, to meet the increasing demand for new energy generation to be connected to the grid. In May alone, State Grid increased its investment by 14% to $47 billion. Considering the imminent reform of the power industry, the strong demand for electricity due to the development of AI, and the upcoming grid upgrade in North America, this will benefit power equipment manufacturers and power automation solutions.

The "national team" started buying Hong Kong shares as well as A-shares. The China Securities New Hong Kong Stock Connect central Enterprise Dividend ETF was officially launched, and China New Investment subscribed to the above ETF shares, which sent a positive signal that state-owned capital maintained the stability of the Hong Kong stock market. In the meantime, the dollar has strengthened again, putting pressure on Asian currencies, with the yuan falling 0.5 per cent this month to its lowest level since November after the central bank loosened its grip on the midpoint.

The yield on China's 10-year government bonds hit a two-decade low of 2.2%, and yields on 20 - and 50-year bonds have been at record lows for months, but investors are still buying aggressively. Sluggish economic growth, loose monetary policy and a banking system flush with liquidity but weak corporate demand for loans may all be to blame. For equities, we may already be seeing positive signs of a bottom: China's 10-year government bond yield is below the 2.7 per cent dividend yield on the CSI 300 index; The discount on Chinese 10-year government bonds has fallen from a peak of 240 basis points to 200 basis points over the US, reflecting changing views on future growth in both countries. We believe that with the Federal Reserve in the second half of the year or start to cut interest rates, the downward trend of domestic interest rates or normal. As the property market and home prices stabilize, we expect to see a lot of liquidity flowing from banks into the stock market.

Due to the application of artificial intelligence and strong demand for cloud computing, Taiwan's exports have remained strong. In May, export orders increased by 7.0% year on year, exceeding expectations, of which information and communication technology orders increased by 7.8% month on month and 11.4% year on year; The orders for electronic products increased by 9.2% year on year; Orders for optical instruments increased by 7.0% year-on-year. Overall, the performance of downstream electronic products is better than that of midstream and upstream raw materials. It is expected that export orders will increase by 12.5% year-on-year in June, and computer peripheral equipment, communication networks, plastics and rubber products will become the driving force for exports.

At the company level, Wuliangye has continued to increase shareholder returns, and cash dividends have exceeded 10 billion yuan per year for four consecutive years, of which 18.1 billion yuan is planned for 2023, and the dividend scale has ranked first among Shenzhen liquor listed companies for nine consecutive years. 2023 annual dividend rate of 60%, an increase of 5 percentage points, the annual increase is the highest high-end liquor.

Looking ahead, local real estate restrictions will be further relaxed to stimulate demand in the real estate market and economic growth. The Third Plenum to be held in July deserves our attention for deep reforms in real estate, employment, population, electricity and other areas.