Overview - The core viewpoint of the article is that China's economy in 2025 is characterized by a deepening supply-demand imbalance, with strong supply and weak demand, as well as a resilient external demand compared to internal demand. The GDP is projected to exceed 140 trillion yuan, with nominal growth of 4% and real growth of 5% [1][4]. Economic Structure - The economic operation in 2025 shows three main features: a deepening supply-demand imbalance, stronger external demand than internal demand, and initial success in price governance. The industrial added value increased by 5.9%, which is higher than GDP, investment, and consumption growth rates [4][5]. - The contribution rates to GDP growth from final consumption expenditure, capital formation, and net exports are 52%, 15.3%, and 32.7%, respectively [1]. Consumption - The total retail sales of consumer goods grew by 3.7% in 2025, with a "front high and back low" rhythm. The growth rates for goods and catering were 3.8% and 3.2%, respectively, indicating stronger performance in goods [12][15]. - In December, the retail sales growth rate dropped to 0.9%, reflecting a further weakening of growth momentum. Durable goods consumption faced significant pressure, with home appliances down by 14.3% [15][18]. Fixed Asset Investment - Fixed asset investment decreased by 3.8% in 2025, primarily due to declines in infrastructure (-1.5%) and real estate investment (-17.2%). Private investment continued to shrink for the third consecutive year, with a significant drop of 6.4% [18][20]. - Real estate sales showed a smaller decline compared to investment, with sales area and amount down by 8.7% and 12.6%, respectively, indicating a slight recovery in sales [20][21]. Foreign Trade - In 2025, exports maintained resilience with a cumulative growth of 5.5%, while imports showed no growth. Exports to the US fell by 19.9%, while exports to non-US regions grew by 9.9%, becoming the main support for overall export growth [29][30]. - In December, exports increased by 6.6%, driven by strong performance in automobiles and integrated circuits, which grew by 71.7% and 47.7%, respectively [29][30]. Supply Side - Industrial production growth accelerated in 2025, with the industrial added value increasing by 5.9%. The contribution rate of industry to economic growth reached 35%, up by 1.8% from 2024 [31][35]. - In December, industrial production showed a year-on-year growth of 5.2%, with a notable increase in high-tech industries [31][35]. Inflation - Inflation showed moderate recovery in 2025, with the CPI remaining flat year-on-year and core CPI rising to 1.2%. The PPI contracted by 2.6%, influenced by supply-demand balance and rising international metal prices [36][37]. - In December, CPI rose by 0.8%, marking the fourth consecutive month of increase, while PPI contracted by 1.9% [36][37]. Outlook - Looking ahead to 2026, it is expected to be a pivotal year for the "14th Five-Year Plan," with a GDP growth target of around 5%. Industrial production is anticipated to grow steadily, supported by resilient external demand and a recovery in consumption [40].

Market Overview - In 2025, global stock markets experienced a broad rally, with emerging markets significantly outperforming developed markets. The MSCI Emerging Markets Index rose by 31%, while the MSCI Developed Markets Index increased by 19%. US stocks lagged behind globally [4][10] - The technology sector led the market, driven by the AI wave, followed by cyclical stocks, while energy and consumer sectors underperformed due to weak global demand [4][10] Core Themes - The three key investment themes for 2026 that will impact global and A-share markets are: 1. Continued liquidity easing globally, providing funding support for market investments 2. Sustained AI investment as a core driver for the technology sector 3. A potential recovery in global manufacturing, boosting high-end manufacturing sectors [15][16] A-share Market Analysis - The bull market is expected to continue, with the Shanghai Composite Index surpassing 4000 points. Valuations are not in bubble territory, and as long as earnings materialize and liquidity narratives remain unchanged, the market trend is likely to persist [28] - Focus on three main directions for industry selection: "AI + manufacturing overseas + related raw materials." Traditional industry allocations are shifting from high dividend yields to high free cash flow assets [28][39] Industry Insights - The AI investment trend is expected to continue, supported by industry, funding, and policy factors. Despite a shift from infrastructure competition to application value realization, demand for computational power will persist [21][22] - Global manufacturing is anticipated to maintain a recovery trend, aided by liquidity support from interest rate cuts and a restructuring of supply chains in response to security concerns [23][24] Investment Strategy - The focus is shifting from high dividend assets to high free cash flow assets, as the market environment changes. High free cash flow companies can provide both safety through dividends and growth through capital expenditures in key sectors like AI and manufacturing [48][49] - Growth-oriented stocks, particularly in the ChiNext board, are expected to outperform value stocks like the CSI 300, driven by strong earnings growth and favorable liquidity conditions [56][66] International Market Outlook - The Hong Kong stock market is projected to experience a slow bull run, with the Hang Seng Index potentially rising to 29,000 points, driven by earnings recovery and liquidity easing [71] - The US stock market is expected to see slower growth, with high valuations and strong earnings providing key support, but entering a phase of fragile balance with increased volatility [76]

Core Viewpoint - The report from China Merchants Bank Research Institute provides a comprehensive overview of their published research for 2025, highlighting key insights and analyses relevant to the banking and financial sectors [1]. Summary by Sections - The report is a public version of the original research published by China Merchants Bank Research Institute, emphasizing the originality of the content [4]. - It includes a directive for proper citation and authorization for any reproduction of the report, ensuring that the integrity of the original work is maintained [4].

Core Viewpoint - Retail properties are essential for providing a one-stop shopping experience and are favored by financial institutions due to their ability to generate stable cash flows, especially in a period of real estate inventory [4][6] Group 1: Market Characteristics - The retail property market has entered a phase of deepening inventory, with over 50% of properties now in a mature stage, characterized by a significant reduction in new supply since 2020 [4][36] - Rental levels for retail properties are on a downward trend, while vacancy rates remain relatively controllable as operators adjust rents to maintain occupancy [4][39] Group 2: Key Determinants of Performance - Location, management capabilities, and product types are critical to the operational performance of retail properties [5][57] - High-quality retail properties are concentrated in first- and second-tier cities, with 60% located in these areas, indicating a trend towards high-capacity urban centers [59][61] Group 3: Financial Aspects - Retail properties exhibit high financial intervention potential due to their heavy asset characteristics and the ability to generate stable cash flows during the operational phase [8][13] - The development of a multi-tiered REITs market is enhancing the financial attributes and investment value of retail properties, with a notable increase in interest from institutional investors [12][14] Group 4: Operational Trends - The operational model of retail properties is shifting towards a focus on experience and social interaction, with shopping centers increasingly integrating dining and entertainment options [27][30] - The rental income structure is evolving, with a growing preference for leasing models that include fixed rents and performance-based components [52][54] Group 5: Competitive Landscape - The competitive landscape is intensifying in high-capacity cities, leading to potential oversupply risks in certain markets, particularly where retail space is concentrated [61][62] - The operational management landscape is characterized by a concentration of a few large operators, while many smaller firms struggle to compete effectively [66]

Group 1: Macro Research Position - The position involves in-depth research on domestic real economy or macro policies, providing forward-looking assessments and writing macro research reports [4] - Responsibilities include updating analysis frameworks, undertaking internal and external macro research projects, and providing research services to clients [4] - Candidates are required to have a master's degree in economics or finance, with a preference for a PhD, and at least 3 years of macro research experience [6] Group 2: Capital Markets Research Position (Commodity Market) - The role focuses on researching investment opportunities and risks in major commodity markets, developing research frameworks, and writing reports from short to medium-term [11] - It includes conducting in-depth studies on significant issues in the field and providing buy-side research services to internal departments [11] - Candidates should have a master's degree in economics or finance, with at least 3 years of experience in research roles within large financial institutions [12] Group 3: Regional Research Position - The position entails conducting regional comparisons and industry research, building frameworks for regional economic studies, and writing in-depth reports on key areas such as the Yangtze River Delta and Guangdong-Hong Kong-Macau Greater Bay Area [16] - Responsibilities also include researching major regional policies and providing decision-making support to leadership and clients [16] - Candidates are expected to have a master's degree, with a preference for those with a dual background in economics and engineering, and at least 3 years of relevant research experience [18]

Group 1: US Macro Strategy - The US economy remains robust, with weekly initial jobless claims falling to 199,000, indicating strong performance beyond seasonal trends, reflecting a positive cycle between businesses and the labor market [2] - The S&P 500 index fell by 1% and the Nasdaq index by 1.5%, with concerns over high valuations and AI monetization pressures persisting in the mid-term outlook [2] - The recommendation is to maintain a standard allocation to US stocks, with expected returns aligning with profit growth, and to consider increasing allocations if a market correction of 10%-20% occurs [2] Group 2: US Debt and Currency - In the context of a rate-cutting cycle, US Treasury yields are expected to trend downward, with a focus on 2-5 year bonds due to liquidity easing [3] - The dollar is anticipated to remain in a downtrend, but the US economy's relative strength suggests no basis for a sustained decline, with a potential rebound expected in 2026 [3] - The Chinese yuan is projected to appreciate moderately, driven by narrowing interest rate differentials and strong export performance, although short-term appreciation may slow [3] Group 3: China Macro Strategy - Economic sentiment is showing signs of improvement, with the manufacturing PMI rising to 50.1% and the non-manufacturing PMI to 50.2%, indicating a return to expansion [5] - Domestic demand is mixed, with a significant drop in new home transactions by 26.7% in major cities, while tourism and consumption during the New Year holiday showed growth [5] - The government is implementing policies to boost consumption and investment, including optimizing subsidy programs and accelerating infrastructure investments totaling approximately 295 billion yuan [6] Group 4: Bond Market Insights - The bond market is experiencing narrow fluctuations, with the recent manufacturing PMI data indicating recovery, while regulatory changes have eased redemption fees for bond funds [7] - The outlook for government bond yields suggests a steep curve, with expectations of moderate inflation and potential for further monetary easing [7] - The strategy recommends focusing on short to medium-term bonds while being cautious with long-term investments until yields reach the upper range [7] Group 5: A-Share Market Performance - The A-share market showed slight gains, with the Shanghai Composite Index rising 0.13%, driven by year-end currency appreciation and significant capital inflows [8] - Short-term risks include diminishing support from year-end capital influx and potential earnings disappointments during the upcoming reporting season [9] - The market structure indicates strong performance in cyclical and growth sectors, with recommendations to focus on technology stocks driven by AI trends and high-end manufacturing [9] Group 6: Hong Kong Market Outlook - The Hong Kong market saw significant gains post-New Year, with the Hang Seng Index rising 2.76%, attributed to rapid yuan appreciation [9] - The mid-term outlook remains positive for Hong Kong stocks, particularly in technology and high-end manufacturing sectors, with dividend yields being notably higher than comparable A-share stocks [9]

Group 1: US Economic Overview - The actual GDP growth rate for Q3 was 4.3%, with consumption growth at 3.5%, investment at -0.3%, and exports at 8.8% [2] - The K-shaped recovery continues, with services and non-durable goods consumption accelerating, while durable goods consumption remains sluggish [2] - The investment in equipment and intellectual property benefited from optimistic AI expectations, while construction and real estate investments were hindered by high interest rates [2] Group 2: Q4 Economic Predictions - The GDPNow model predicts a Q4 GDP growth rate of 3.0%, with consumption growth at 2.7%, investment at 7.0%, and exports at 6.6% [3] - Caution is advised regarding the sustainability of consumption growth due to declining savings rates and a weak job market [3] - Investment growth is primarily driven by inventory replenishment post-tariff impacts and a weak recovery in real estate investment [3] Group 3: Stock Market Insights - The S&P 500 and Nasdaq indices saw slight increases of 1.4% and 1.3% respectively, with December typically being a strong month for US stocks [4] - Concerns about high valuations and AI bubble risks persist, with future market dynamics expected to oscillate between high valuations, interest rate cuts, and AI monetization [4] - Recommendations include maintaining a diversified portfolio, focusing on materials and industrial sectors alongside technology [4] Group 4: Bond Market and Currency Trends - In a rate-cutting cycle, US bond yields are expected to trend downward, with short-term bonds benefiting directly from Fed actions [4] - The dollar is anticipated to remain in a downtrend due to high Fed rate cut expectations, although a long-term recovery is expected by 2026 [4] - The RMB is experiencing strong appreciation driven by year-end settlement demand, with further appreciation likely as the interest rate differential narrows [5] Group 5: Chinese Economic Conditions - The real estate market continues to weaken, with new home and second-hand home transactions dropping by 27.4% and 25.8% respectively in December [6] - Industrial profits fell by 13.1% year-on-year in November, indicating increasing economic pressure and weak recovery momentum [7] - Export dynamics show a short-term contraction in volume but a price recovery, with container shipping rates rebounding [8] Group 6: Fiscal and Monetary Policy - The 2026 fiscal policy will focus on expanding expenditure, optimizing government bond tools, and enhancing local financial autonomy [9] - The monetary policy is shifting towards a more flexible approach, emphasizing support for domestic demand and innovation [10] - The bond market is expected to remain slightly weak in the short term, with a focus on mid-term bond investments [11] Group 7: Market Outlook - Short-term risks include the potential decline in year-end capital inflows and increased earnings volatility in January [12] - The technology sector remains a key focus, with recommendations to balance investments across technology, dividends, and consumer sectors [13] - The Hong Kong market is expected to benefit from continued inflows and a favorable interest rate environment, despite current pressures [13]

Core Viewpoint - The coexistence of a weak dollar and strong US stocks this year is attributed to the resonance of macro cycles and industrial transformation, with the AI wave providing substantial support and outlook for the industry [2][11]. Group 1: Macro Drivers - The depreciation of the dollar has a mid-term positive impact on US stocks, as they are negatively correlated; a 10% decline in the dollar index can lead to a 2-3% increase in S&P 500 revenues [24][29]. - The international revenue exposure of S&P 500 companies is rising, with approximately 41% of revenues expected to come from outside the US by 2024, indicating a high degree of internationalization among larger firms [13][19]. - The technology sector has the highest international revenue exposure at 59%, benefiting significantly from a weaker dollar, while other sectors like utilities and finance remain more domestically focused [16][22]. Group 2: AI as a Driving Force - The AI sector has not yet reached a bubble, but concerns are emerging; the current high valuations are supported by strong fundamentals, with significant demand for computing power [39][44]. - The financing model for tech giants is shifting from cash flow-driven to debt-driven, with capital expenditures expected to rise significantly, raising concerns about sustainability and return on investment [57][59]. - The demand for AI capabilities is projected to grow, with McKinsey estimating a need for $6.7 trillion in capital expenditures for global data centers by 2030, indicating a robust growth trajectory for AI-related investments [50]. Group 3: Investment Outlook - The US stock market is expected to transition from a dual driver of earnings and valuation to a single driver focused on earnings, with a predicted earnings growth of 11.8% in 2025 and 14.2% in 2026 [67][75]. - Despite high valuations, the market is not in a bubble; the focus should be on earning growth rather than betting on further valuation expansion [79]. - The technology and materials sectors are recommended for investment, as they offer a favorable balance of growth and valuation, with technology being the primary beneficiary of the AI wave [82].

Core Viewpoint - The article presents a macroeconomic and capital market outlook for 2026, highlighting a stable growth trajectory for the U.S. economy, a cautious recovery in Europe, and potential challenges in Japan, while emphasizing the importance of monetary and fiscal policies in shaping market dynamics [1][2][3]. Economic Outlook - China's GDP growth is projected to reach 4.8% in 2026, driven by stable external demand, improved internal consumption, and price recovery [2]. - Exports are expected to grow by 5% in dollar terms, supported by easing international trade tensions and the resilience of China's industrial chain [2]. - Retail sales are forecasted to rise by 4.5%, bolstered by strong consumer policies, while fixed asset investment growth is anticipated to recover to 1.8% [2]. - Infrastructure and manufacturing investments are expected to grow by 6.5% and 4.6%, respectively, while real estate investment is projected to decline by 13.6% [2]. Fiscal Policy - Fiscal policy is expected to become more proactive, with a target deficit rate maintained at 4.0%, corresponding to a deficit scale of 5.85 trillion yuan [3]. - The total fiscal expenditure is projected to be 43 trillion yuan, an increase of 1.6 trillion yuan from the previous year, with potential for additional tools to be introduced based on economic conditions [3]. Monetary Policy - Monetary policy is anticipated to remain moderately accommodative, with a potential reduction in the OMO rate by 10 basis points to 1.3% and a reserve requirement ratio cut of 50 basis points [3]. - The 10-year government bond yield is expected to rise slightly to 1.8% in 2026, reflecting a balance between long-term growth and risk prevention [3][4]. Capital Market Outlook - The A-share market is expected to continue its upward trajectory, driven by improved corporate performance and favorable liquidity conditions, while the bond market may experience fluctuations with a slight upward trend in yields [4]. - The 10-year U.S. Treasury yield is projected to decline to 4.0%, while the Hong Kong stock market is expected to benefit from a stable liquidity environment and a projected rise in the Hang Seng Index to around 29,000 points [4][5]. Asset Allocation Strategy - The strategy suggests a focus on equities, particularly in technology and growth sectors, while maintaining a defensive position in dividend stocks [6][7]. - The allocation to A-shares is recommended to be increased, while exposure to U.S. dollar bonds is suggested to be reduced [6]. A-share Market Dynamics - The A-share market is expected to experience a "slow bull" phase, with corporate earnings projected to improve, particularly in technology and high-end manufacturing sectors [4][42]. - The anticipated easing of U.S.-China trade tensions may lead to a recovery in export-oriented companies, while the technology sector is expected to remain a key driver of performance [42][48]. Hong Kong Market Insights - The Hong Kong market is projected to continue its slow bull trend, supported by earnings recovery and liquidity expansion, with a focus on dividend stocks as a defensive strategy [76][78]. - The Hang Seng Index is expected to see a valuation uplift, driven by inflows from domestic investors seeking yield in a low-interest-rate environment [76][78].

Economic Outlook - The Chinese economy is expected to grow at a rate of 4.8%, characterized by stable external demand, improved internal demand, and price recovery [2] - Export growth is projected to reach 5%, driven by a marginal easing of international trade tensions and the resilience of China's industrial chain [2] - Retail sales are anticipated to rise to 4.5%, supported by strong consumer policies [2] - Fixed asset investment growth is expected to recover to 1.8%, bolstered by increased fiscal spending and the initiation of major projects [2] - Infrastructure and manufacturing investment growth rates are projected at 6.5% and 4.6%, respectively, while real estate investment is expected to decline by 13.6% [2] Fiscal Policy - Fiscal policy is set to be more proactive, with a target deficit rate maintained at 4.0%, corresponding to a deficit scale of 5.85 trillion [3] - The broad deficit rate is expected to rise to 9.7%, with total fiscal arrangements increasing by 1.6 trillion to 43 trillion [3] - The structure of fiscal spending will focus on "investing in people," optimizing tax structures, and enhancing fiscal sustainability [3] Monetary Policy - Monetary policy is expected to be moderately accommodative, balancing long-term and short-term growth with risk prevention [3] - The OMO rate may be reduced by 10 basis points to 1.3%, and a reserve requirement ratio cut of 50 basis points is anticipated [3] Capital Markets - The domestic stock market is expected to grow, driven by improved liquidity and corporate performance, while the bond market may experience fluctuations [4] - The 10-year government bond yield is projected to rise slightly to 1.8%, while the 10-year U.S. Treasury yield may decrease to 4.0% [4] Foreign Trade - China's exports are expected to maintain resilient growth, with a projected annual growth rate of 5.0% for 2026 [22] - The trade surplus is anticipated to remain high, although its contribution to GDP growth may weaken compared to 2025 [28] Consumption - Retail sales growth is expected to shift from being policy-driven to being led by service consumption and structural recovery, with an anticipated growth rate of 4.5% for 2026 [49] - Service consumption is projected to become a major support force, while durable goods may show signs of demand exhaustion [50] Investment - Real estate investment is expected to decline by 13.6%, with sales volume and value significantly reduced compared to previous years [66] - Infrastructure investment growth is projected to rise to 6.5% in 2026, with a focus on enhancing the quality and efficiency of investments [81] - Manufacturing investment is expected to recover, with a projected growth rate of 4.6% for 2026, supported by improved external demand and policy incentives [95]