Corporate profits are accelerating their recovery. The largest free cash flow ETF by scale, Huaxia (159201), attracted over 700 million yuan in net inflows over the past 5 days.

On the morning session of July 23, the CNG Free Cash Flow Index rose with volatility, gaining approximately 1%. Constituents such as Tianshan Aluminum, Shenhuo Shares, and Oriental Iron Tower led the gains. In terms of related ETFs, the largest free cash flow ETF by AUM, Huaxia (159201), followed the index upward, attracting over 700 million RMB in net inflows over the past five trading days as funds rushed to buy in.

Meng Lei, China Equity Strategy Analyst at UBS Securities, stated that although the A-share market has experienced recent volatility, deleveraging in the A-share market may be nearing its end due to the rapid decline in margin balances. The overall positive trend in earnings for both the broader A-share market and the technology sector remains unchanged. Under the baseline scenario, UBS Securities expects the earnings growth rate for all A-shares this year to rise from 3.9% last year to 11%, with corporate earnings accelerating their recovery.

Huachuang Securities believes that the compound interest effect of stable free cash flow in a low-interest-rate environment has become the cornerstone of long-term bull markets, while barbell strategies need to balance dividend expansion and price-to-book comparisons between large and small caps. Amid changes in economic operating models, the long-term logic of stock market pricing is shifting within the context of changing investment and financing structures: from focusing on front-end expansion to focusing on cash flow accumulation under prudent corporate management. The creation of free cash flow under prudent corporate management will support long-term valuations.

Against the backdrop of global geopolitical uncertainty and an "asset famine," the free cash flow index possesses stable cash flows and valuation advantages, making it a potential direction for core portfolio allocation. Furthermore, benefiting from continued policy support, sectors with improving prosperity expectations and price increases stand to gain continuously. Investors are advised to pay close attention to Dividend PLUS assets: Huaxia Free Cash Flow ETF (159201) and Huaxia CSI 500 Cash Flow ETF (560120).