1、 Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.15 August 2025 Issuer of report:HSBC Qianhai Securities Limited View HSBC Qianhai Securities at:https:/ Equity Research Repor

2、t Chinese stocks are rallying on abundant domestic liquidity,despite continued foreign fund outflows However,the fundamentals have yet to see a solid recovery Rising US unemployment suggests more Fed rate cuts this year,which are a potential catalyst for EM(including China)Liquidity feast Since June

3、,Chinese stocks listed both onshore and offshore have been on the rise.We believe abundant liquidity is the driver,offsetting foreign fund outflows(see China Equity Strategy-US marketing feedback:More interest but still cautious,5 August 2025).We find continued liquidity support is coming from:1)mut

4、ual funds,as y-t-d new issuance saw 132%y-o-y growth;2)individual investors,as margin financing accounts have exceeded RMB2trn in August;3)insurance funds,whose equity allocations have been increasing;and 4)the National Team,which protects the markets downside by buying ETFs and notably undertook th

5、is in early April this year.Moreover,Southbound net inflows have surpassed HKD900bn y-t-d,a new high since the Stock Connect was introduced in 2014.yet fundamentals have yet to recover.While we see bullish market sentiment,theres no solid economic recovery.In July,major activity indicators missed co

6、nsensus across the board,including retail sales(+3.7%y-o-y),industrial production(+5.7%y-o-y),and fixed asset investment(y-t-d+1.6%y-o-y and-5.3%y-o-y in a single month).Moreover,fixed asset investment is contracting,with all three major components(manufacturing investment,infrastructure investment,