Core Viewpoint - The article discusses the performance of active equity funds compared to index products, highlighting the significant excess returns achieved by active funds in 2025, while also addressing concerns about their ability to maintain this performance amid market fluctuations and new regulatory guidelines [2][5][9]. Temporal Dimension: Predicting Active Equity Excess Returns - Three main logical lines are identified to predict active equity excess returns, leading to the development of six predictive indicators: 1. **Investment Theme and Institutional Pricing Power**: Indicators such as tracking error differentiation (TE-S) and active equity holding concentration (HHI) show long-term predictive capabilities [3][16]. 2. **Active Risk Amplification Reflects Stronger Confidence**: The month-on-month change in tracking error (TE-MDQ) serves as a short-term predictor, indicating that increased tracking error often correlates with fund managers' confidence in market conditions [3][17]. 3. **Market Trading Sentiment**: Indicators like market movement (MMT) and trading volume (AMT) have long-term predictive effects, while implied volatility (VIX) is effective in the short term [3][18]. - A short-term timing model using TE-MDQ, MMT, and VIX predicts that active equity will outperform the index by 2.33% in Q4 2025, with a historical accuracy of 69% [3][26]. - A long-term timing model using AMT and TE-S predicts that active equity will underperform the index by 6.49% from Q4 2025 to Q3 2026, also with a 69% historical accuracy [3][29]. Cross-Sectional Dimension: Selecting Active Equity Funds - Two effective selection factors for predicting future performance of active equity funds are identified: long-term information ratio (INFO_LONG) and tracking error change level (TRACK_D) [4][34]. - An optimal active equity fund portfolio, adjusted quarterly, shows an annualized return of 11.1% from Q1 2016 to Q3 2025, outperforming the benchmark by 3.6% [4][43]. - The portfolio has a maximum drawdown of -35.4%, better than the benchmark's -45.4%, with an annual turnover rate of approximately 2.2 times and an 80% annual win rate [4][44].

Core Viewpoint - The recent significant capital expenditure plan disclosed by Oracle has led to a sharp decline in its stock price, indicating a market shift in the investment logic surrounding artificial intelligence (AI) [2] - Investors are becoming more cautious, reassessing potential risks rather than relying solely on optimistic narratives driven by capital expenditure [2] Group 1: Investment Returns - The current AI wave is characterized by a substantial increase in capital expenditures by technology companies, transitioning from a "light asset" model to a more capital-intensive "heavy asset" structure [3] - Major hyperscalers have collectively spent $357.2 billion on AI-related capital expenditures over the past four quarters, with expectations to reach approximately $500 billion by 2026 [3] - Oracle's capital expenditure represents 582% of its operating cash flow, indicating that its free cash flow cannot cover its investment needs [3][4] Group 2: Financing Conditions - The significant capital expenditures raise concerns about return on investment (ROI), as the commercialization path for AI remains unclear and profitability is uncertain [4] - Oracle's cash consumption has increased, with free cash flow dropping to -$10 billion, while its net debt stands at $97.7 billion, raising concerns about its credit risk [6][7] - The rising credit default swap (CDS) spreads for Oracle indicate heightened concerns about its credit risk, suggesting that future financing may become more difficult and costly [7] Group 3: Interconnectivity Among Companies - The current AI landscape features technology giants taking on roles traditionally held by venture capital firms, creating complex interdependencies that could lead to systemic risks [8][9] - Companies like NVIDIA, OpenAI, and Oracle have established deep business collaborations, which could amplify risks if one company faces financial difficulties [8][9] - The market is beginning to reassess the risks associated with the interconnectedness of AI companies, as evidenced by stock price declines across related firms following Oracle's downturn [9] Group 4: Implications for the U.S. Economy - AI-related fixed asset investments are expected to contribute approximately 0.7 percentage points to U.S. GDP growth in the first half of 2025, accounting for about one-third of the growth [10] - If concerns about the returns on AI capital expenditures persist, investment growth in AI may slow down, which could negatively impact the overall economy [10] - The wealth effect driven by AI investments is significant, as the top 10% of income earners contribute nearly half of U.S. consumer spending, and any market adjustments could reduce this spending [11]

Core Viewpoint - The petrochemical industry has been in a downturn for approximately 3.5 years, but with a decline in capital expenditure and the accelerated exit of outdated overseas capacity, the industry is expected to enter a low-growth phase. The self-discipline within the industry is accelerating the recovery of product profitability, and the anticipated growth in demand from sectors like new energy suggests a potential turning point for the chemical industry cycle [2][3][11]. Industry Performance - The chemical price index and profit margins are currently at low levels, with a 10.3% decline in the chemical product price index from early 2025, placing it at the 10.4% percentile since 2012. The profit margin for chemical raw materials and products from January to October 2025 is at 4.14%, the lowest since 2017. The gross and net profit margins for petrochemical companies in Q3 2025 are 15.9% and 4.6%, respectively, also among the lowest in recent years [6][12]. Supply Dynamics - Capital expenditure for petrochemical companies decreased by 18.3% and 10.1% in 2024 and Q1-Q3 2025, respectively. The construction of new projects has also seen a decline, with a 13.2% year-on-year drop in Q3 2025. The growth rate of fixed assets and ongoing projects is at its lowest since Q1 2018, at 6.8% [3][7]. The exit of 11 million tons of outdated capacity in Europe from 2023 to 2024 is expected to alleviate global supply-demand imbalances [7]. Demand Outlook - The demand for chemical products is expected to remain resilient, with a focus on the recovery of the U.S. real estate market. The domestic demand for chemical products is projected to grow, supported by policies aimed at achieving around 5% economic growth in 2026. Early-cycle products like chemical fibers are anticipated to see rapid growth in consumption from 2020 to 2024 [12][14]. Investment Opportunities - The industry is expected to see a turning point, with favorable supply-side factors and rapid growth in demand for materials in the new energy sector. The valuation of chemical companies is currently low, with significant profit growth expected in 2026 for leading companies. The chemical fiber industry, particularly PTA and polyester filament, is expected to experience a cyclical upturn in 2026 [15][25].

Group 1 - The A-share market has shown weak performance recently, with the Shanghai Composite Index closing down 1.1% on December 16, marking a cumulative decline of 2.5% over the past six trading days [2] - The market is experiencing a broad decline, with over 4,000 listed companies falling, while the trading volume on December 16 was 1.75 trillion yuan, slightly down from the previous day [2] - The sectors performing well include retail, beauty care, and social services, while telecommunications, non-ferrous metals, and power equipment saw the largest declines [2] Group 2 - Both internal and external factors have contributed to a temporary decline in market risk appetite, with external factors playing a dominant role. The recent FOMC meeting indicated a neutral to hawkish stance, with expectations of only one rate cut by 2026, raising concerns about liquidity [3] - Domestic economic data for November showed a continued slowdown compared to October, with significant declines in fixed asset investment and retail consumption growth, leading to increased market focus on fundamental data [3] Group 3 - The underlying logic for market growth remains intact, with a positive mid-term trend expected through 2026. The macro policy shift since last year has changed investor sentiment, providing a stable foundation for market recovery [4] - The fundamental drivers of the current market rally include the restructuring of the international monetary order and advancements in industrial innovation, both of which have not been disrupted [4] Group 4 - The current market pullback may offer good positioning opportunities for the first half of 2026, as overall valuations in the A-share market remain attractive compared to global peers and major asset classes [5] - Suggested investment strategies include focusing on growth styles during market corrections, with three main lines of focus: 1) sectors experiencing growth such as AI technology and innovative pharmaceuticals, 2) companies benefiting from overseas expansion, and 3) cyclical sectors nearing improvement points [5][6]

Core Viewpoint - The banking sector has entered a stage of high-quality development, with a focus on high dividend investments and stable growth in profits and revenues expected through 2026 [2][3][4]. Group 1: Banking Sector Performance - The expected revenue growth for listed banks in 2026 and 2027 is +2.5% and +3.6% respectively, while net profit growth is projected at +1.9% and +2.6% [2]. - Factors contributing to improved revenue and profit growth include narrowing net interest margin pressure, quality-focused credit issuance, and stabilization of fee income growth after several years of reductions [2][4]. - The net non-performing loan generation rate is expected to stabilize or slightly decline, with retail and corporate sectors showing different trends in risk exposure [4][25]. Group 2: Credit and Financing Trends - The demand for credit is expected to slow slightly by 2026, with a shift in the structure of new social financing reflecting changes in customer needs and regulatory impacts [3][4]. - The government and state-owned enterprises are becoming significant contributors to leverage, influencing the structure of new social financing and the banks' balance sheets [3]. Group 3: Market Dynamics and Regulatory Environment - The banking industry is experiencing a reduction in the number of licenses, indicating accelerated supply-side reforms and improved competitive dynamics [4][22]. - Regulatory policies are evolving, with a focus on enhancing the quality of service rather than merely increasing customer numbers, particularly in inclusive finance [3][4]. Group 4: Financial Metrics and Projections - The net interest margin is projected to narrow by 6 basis points in 2026, with a balanced structure of volume and price being crucial for achieving high-quality financial metrics [4][16]. - The total assets of banks are expected to grow at a rate of 7.8% YoY, with net profit growth rates showing a gradual increase from 12.6% to 2.6% over the forecast period [12][16].

Core Viewpoint - The article discusses the divergence between the traditional neoclassical exchange rate models and the realities of modern financial systems, emphasizing the need to consider financial factors alongside real economic indicators when assessing exchange rates [2][3][6]. Exchange Rate Framework - The neoclassical framework emphasizes real economic factors while downplaying the impact of financial factors on exchange rates, which may lead to significant misjudgments in exchange rate assessments [3][6]. - In contrast, post-Keynesian economics posits that capital flows and expectations are the core mechanisms driving exchange rate fluctuations, especially in a highly financialized economy [3][6][15]. Types of Exchange Rates - There are three main forms of exchange rates: bilateral exchange rates (especially against the US dollar), nominal effective exchange rates, and real effective exchange rates, with the latter being crucial for analyzing the impact on trade [5][6]. Factors Influencing Exchange Rates - Estimating the so-called "equilibrium value" of exchange rates is complex due to the multitude of bilateral and multilateral factors involved, with traditional models often failing to account for the significant role of capital flows [6][12]. - The post-Keynesian perspective argues that capital flows dominate exchange rate determination, as evidenced by the vast scale of foreign exchange market transactions compared to international trade [14][15]. Historical Context and Examples - Historical instances, such as the volatility of the US dollar post-Bretton Woods and the Asian financial crisis, illustrate the inadequacies of neoclassical models in explaining exchange rate movements [16]. - The article highlights the phenomenon of the Chinese yuan's "internal depreciation and external appreciation" post-2005, which aligns more closely with post-Keynesian theories than with neoclassical assumptions [17][18]. Recent Developments - Recent data indicates that despite improvements in China's manufacturing competitiveness, the real effective exchange rate of the yuan has depreciated by 16% from January 2022 to October 2025, contradicting neoclassical predictions [18].

Core Viewpoint - The power grid and industrial control sectors are expected to show steady growth through 2025, with a focus on structural investment opportunities, particularly in high-elasticity areas such as AIDC and overseas expansion [2][4]. Power Grid - The investment in the national power grid during the 14th Five-Year Plan is projected to grow at an average annual rate of over 5%, driven by high-intensity construction of ultra-high voltage projects and sustained high levels of main network investment [4][6]. - The total investment in the power grid during the 14th Five-Year Plan is estimated to be around 2.8 trillion yuan, with an average annual investment of approximately 550 billion yuan [6]. - The ultra-high voltage construction is expected to maintain high intensity, with a total investment of over 800 billion yuan anticipated during the 14th Five-Year Plan [8][10]. - The main network investment has shown strong growth, with a year-on-year increase of nearly 20% in the first five batches of equipment tenders [10][12]. - The digitalization of the power grid is expected to continue growing, with significant increases in tender amounts for digital equipment and services [14][15]. Industrial Control - The industrial control sector is currently in a phase of internal recovery, with moderate market improvement observed in demand and inventory levels [16][17]. - The OEM market has shown a year-on-year increase, driven by demand from the energy storage and new energy sectors [20][21]. - Structural growth opportunities are anticipated in the industrial control sector, particularly in the context of the ongoing expansion of the new energy industry [21][22]. AIDC - The AIDC sector is expected to focus on high-slope directions in both strong and weak power supply, with significant advancements anticipated in power density and efficiency [22][24]. - The strong power side is evolving towards more efficient systems, while the weak power side is seeing upgrades that could significantly increase product average selling prices (ASP) [26][28]. Overseas Expansion - The global power investment cycle is expected to create opportunities for the export of power equipment, particularly in regions facing electricity shortages [30][31]. - The demand for gas turbines and SOFCs is anticipated to rise, with China positioned to benefit from these trends through increased exports [47][48]. - China's transformer exports have seen significant growth, with a year-on-year increase of 40% in the first ten months of 2025, reflecting a strong international demand [39][40].

Macro: Supply and Demand Gap Widening - In November, supply growth slightly decreased year-on-year, with industrial added value and service production indices at 4.8% and 4.2% respectively, compared to 4.9% and 4.2% in October [5] - The demand structure showed marginal improvement in export delivery value, while domestic demand growth declined, primarily driven by the decrease in industrial added value growth [5] - Fixed asset investment saw a cumulative year-on-year decline of 2.6% from January to November, with construction installation projects being the main factor for the overall investment decline [7] Consumer Sector: Consumption Growth Slows - In November, total retail sales increased by 1.3% year-on-year, marking a decline of 1.6 percentage points from October, the lowest monthly growth rate in 2023 [6] - The decline in consumption was attributed to weakened support from trade-in programs and high base effects from the previous year, particularly in categories like home appliances (-19.4%) and automotive (-8.3%) [6] - The "Double Eleven" shopping festival caused a shift in consumption patterns, pulling forward sales from November, which contributed to the slowdown in retail sales growth [6] Investment: Fixed Asset Investment Decline - The cumulative year-on-year decline in fixed asset investment expanded to 2.6% from January to November, with construction installation projects being the primary contributor [7] - The November fixed asset investment saw a seasonally adjusted month-on-month decline of 1.03%, a slight narrowing from October's 1.51% [7] - The government is expected to push for investment stabilization, with additional funding support anticipated to improve investment data by 2026 [7] Real Estate: Continued Weakness - The real estate market remains weak, with new housing sales area declining by 17.3% year-on-year in November, a slight improvement from October's 18.8% decline [10] - Real estate investment saw a year-on-year decline of 30.3% in November, indicating a cautious approach from developers amid weak market demand [10] - The overall investment environment remains pressured, with the government emphasizing the need for stabilization measures [10] Financial Sector: Credit Demand Weakness - In November, new social financing increased by 2.5 trillion yuan, but new RMB loans decreased by 390 billion yuan year-on-year, reflecting weak credit demand [25][26] - The decline in credit demand is attributed to slow recovery in the real economy and weakened demand in the real estate sector [26] - The government bonds and corporate bonds have been the main contributors to social financing, indicating a reliance on these instruments for economic support [26] Commodity Sector: Demand Needs Boost - In November, domestic crude oil production was 4.3 million barrels per day, a year-on-year increase of 1.9%, while net imports were 12.43 million barrels per day, up 4.8% [15] - The steel sector faced a decline in production, with crude steel output down 10.9% year-on-year in November, reflecting weak demand and high inventory levels [17] - The copper market showed a year-on-year increase in production by 9.7% in November, but demand remained subdued due to seasonal factors [19]

Core Viewpoint - The A-share market is expected to outperform the Hong Kong stock market in the second half of 2025 due to factors such as increased incremental capital, restructuring of international monetary order, and favorable policies that benefit A-share sectors [2][3]. Group 1: Market Performance - From August 18 to December 12, the A-share market showed a significant performance advantage, with the Shanghai Composite Index rising by 5.2%, the CSI 300 by 9.0%, and the ChiNext Index and STAR 50 by 26.0% and 22.5% respectively, while the Hang Seng Index and Hang Seng Tech Index only increased by 2.8% and 1.7% [2]. - The leading sectors in both A-shares and Hong Kong stocks were similar, with notable gains in non-ferrous metals, semiconductors, and electrical equipment [2]. Group 2: Fundamental Factors - A-share advantages stem from high growth in sectors like hard technology and new energy, with A-shares benefiting more from the domestic economic recovery compared to Hong Kong stocks [3]. - The A-share market has a stronger focus on hardware sectors such as semiconductors and electronics, while Hong Kong stocks are more represented by large internet companies [3]. Group 3: Liquidity Factors - The A-share market has seen increased liquidity due to active participation from individual investors, with margin trading balances rising from 2.1 trillion yuan in mid-August to 2.5 trillion yuan by mid-December [4]. - The trend of "deposit migration" continues, with non-bank deposits maintaining high growth rates, contributing to the liquidity in the A-share market [4]. Group 4: Overseas Factors - The Hong Kong market is more sensitive to overseas factors, including international liquidity and trade policies, which have led to greater volatility compared to A-shares [5]. - Recent fluctuations in U.S. monetary policy and trade tensions have had a more pronounced negative impact on the Hong Kong market, while A-shares demonstrated resilience during these periods [5]. Group 5: Future Outlook - The A-share market is expected to maintain its advantages in the medium term, particularly in hardware sectors related to AI and cloud computing, as these areas are projected to see increased industrial application [6]. - Continued liquidity support from long-term capital inflows and favorable policies is anticipated to sustain A-share market activity [6]. - The restructuring of international monetary order and the potential for improved U.S.-China trade relations may further enhance the attractiveness of A-shares compared to Hong Kong stocks [6].

Core Viewpoint - The article discusses the recent performance of the Hong Kong stock market compared to the US and A-share markets, highlighting the sensitivity of the Hong Kong market to liquidity changes and its structural differences, which have led to its underperformance since late November 2025 [2][6][29]. Group 1: Market Performance Analysis - Since early 2025, the markets in the US, Hong Kong, and A-shares have shown a quarterly switching pattern, with the Hong Kong market lagging behind in recent months [2][4]. - As of late November, the Hang Seng Index has declined by 2.2%, while the A-share and US markets have shown positive returns, with the Shanghai Composite Index up by 0.5%, and the S&P 500 and Nasdaq up by 5.5% and 6.9%, respectively [2][4]. - The article notes that the Hong Kong market's recent weakness is attributed to its heightened sensitivity to liquidity changes and structural differences compared to the other markets [6][29]. Group 2: Liquidity Factors - A slowdown in southbound capital inflows has been observed, with net inflows dropping from an average of 7 billion HKD to below 1 billion HKD per day since late November [7]. - External liquidity has also been a concern, with recent data indicating a net outflow of 4.6 billion USD from Hong Kong stocks and ADRs, while A-shares saw a slight inflow of 0.2 billion USD [9]. - The article emphasizes that the Hong Kong market's reliance on external liquidity makes it more vulnerable to changes in investor sentiment and market conditions [6][9]. Group 3: Structural Characteristics - The Hong Kong market's structure is heavily weighted towards technology and consumer sectors, with a significant focus on new consumption and internet applications, which are more sensitive to market sentiment [16][21]. - The article highlights that the technology sector in Hong Kong is primarily application-focused, lacking the hardware component that provides more stability in the A-share market [19][21]. - Consumer spending in Hong Kong is currently under pressure due to a weak credit cycle and stagnant income expectations, making it difficult for the consumption sector to drive market performance [20][21]. Group 4: Future Outlook - The article suggests that the Hong Kong market's performance will depend on the recovery of the credit cycle and the ability to attract foreign investment, particularly in light of the expected liquidity conditions in the US and A-share markets [29][30]. - It is noted that the Hong Kong market may benefit from structural opportunities in sectors like AI and dividends, but these require positive catalysts to materialize [40][42]. - The overall outlook for 2026 indicates that while the US credit cycle may recover, the Chinese credit cycle faces challenges, which could further impact the Hong Kong market's performance [30][37].