CSC: Concerns over tariffs may temporarily suppress market sentiment, focusing on service consumption and new consumption

According to the Zhitong Finance APP, CSC has released a research report stating that concerns over tariffs have resurfaced, which may suppress market sentiment in the short term. However, marginally, the market is gradually becoming desensitized to tariffs. In April, industrial enterprise profits improved, and the implementation of "two new" and consumption incentive policies was satisfactory, driving growth in downstream consumption and supporting the midstream equipment manufacturing industry. In May, the overall manufacturing PMI showed signs of recovery, export orders rebounded, and new momentum and consumer goods performed prominently. The resilience of China's fundamentals will provide bottom support for the market. In terms of allocation, we continue to favor the "new quality domestic demand growth" direction characterized by geopolitical isolation, domestic demand-driven growth, and growth elasticity. Currently, the domestic demand cycle remains optimal, focusing on service consumption, new consumption, and anti-tariff measures. The U.S. has issued tariff threats again, raising market concerns, which may temporarily suppress market sentiment. Recently, there have been continuous reports from the U.S. side claiming that China has violated the consensus reached during the China-U.S. Geneva trade talks and has implemented multiple discriminatory restrictions against China, increasing pressure once again. Meanwhile, on May 30, based on Section 232, Trump announced an increase in steel and aluminum tariffs from 25% to 50%, suggesting that the Trump administration is preparing a "Plan B" for tariffs. The "roller coaster" of tariffs may temporarily suppress A-share market sentiment, but compared to the effective tariff levels against China in early April, it may not be more extreme, and the market is gradually becoming desensitized to tariffs. Industrial enterprise profits are improving, maintaining resilience under the impact of the tariff war. Consumption incentive policies are driving profit growth in downstream consumption. Policies related to large-scale equipment updates and re-export trade support the midstream equipment manufacturing industry. U.S. tariffs have put pressure on the profits of some light industries. The profit growth rate in new momentum industries continues to accelerate, showing significant driving effects. Price drag continues, and the exchange of price for volume remains significant. May PMI data shows that the economy is gradually warming up. The manufacturing PMI is mainly driven by production and new orders, with export orders rebounding, reflecting some results from the easing of the China-U.S. tariff war. New momentum and consumer goods industries continue to perform prominently. Prices continued to decline in May but are stabilizing. June is a key node for the concentrated release of A-share dividends, and it is necessary to track capital flows and marginal changes in industry prosperity to grasp high-dividend target allocation opportunities. Historically, due to the constraints of annual report disclosures and dividend distribution systems, A-shares enter a peak dividend period from May to July, with June being particularly prominent in terms of dividend scale. High-dividend sectors become the focus of capital allocation. Industries such as finance, public utilities, and energy, with stable cash flows and high dividend yields, easily attract medium- to long-term funds such as insurance capital and pension funds that seek stable returns, driving a phase of valuation recovery in these sectors. Caution is needed regarding the capital realization pressure after dividends. Historical data shows that some investors engage in arbitrage behavior of "layout before dividends, profit-taking after receipt," especially when market risk appetite is low, which may trigger short-term capital outflows from related stocks or sectors, exacerbating stock price adjustment pressure. It is recommended to be vigilant about risk prevention while seizing high-dividend target allocation opportunities. Stick to the domestic demand cycle, focusing on service consumption and new consumption. In the short term, external uncertainties are forcing an acceleration of the internal cycle, with policies aimed at expanding and improving the quality and efficiency of consumption. The overall tone focuses on boosting domestic demand, policy catalysis, and consumption recovery. In the medium to long term, service consumption and new consumption are important new drivers of economic growth