In the context of insufficient effective demand, many economic entities tend to be more cautious. However, extrapolating the overall economic outlook solely based on micro-level sentiments may not always be accurate.

The market was generally weak in June, with broad-based indices all falling, some with significant declines. Only the electronics industry index rose due to the capital influx of Apple’s supply chains. And some industries dropped by more than 10%.

In May, the overall market fluctuated slightly, with the small broad-based index falling around 2 percentage points. We believe that the overall stability of the market has been some recovery. Plus, investors’ expectations for both the economy and the stock market continue to improve.

Our interpretation is that the overall market has shown a positive sign of recovery.

We believe that there are some very positive changes taking place in the securities market, which are favorable for investors.

Overall, the bubble in large-cap blue-chip stocks, which had a significant market capitalization, has been relatively well released. The risk associated with small and mid-cap stocks is starting to be released. If there is further clarity in economic recovery and combined with reforms in the securities market, the future market outlook may improve compared to the current cautious expectations in the market.

The reality of the market reminds us of the difference between desires and actuality. We should strive to find the counteracting forces to market declines while remaining cautious of market inertia until the market's pricing ability is restored.

We emphasis that one point where our views differ from the market is the interconnectedness between the market's weakness over the past three years and the excessively high valuations of blue-chip stocks at the beginning of 2021. While the subsequent geopolitical factors and turning points in the real estate sector also played a role, the impact of the high valuations was underestimated. However, this issue has now been largely resolved now.