Core Viewpoint - The article discusses the transformation of industries and the necessity for policy innovation in response to economic changes since 2022, highlighting the divergence in economic indicators and the impact of external factors on domestic industries [1][6]. Group 1: Industry Transformation and New Challenges - Since 2022, the economic transformation has entered a "new stage," characterized by a downward trend in the contribution of traditional sectors like real estate, with growth rates for real estate-related industries dropping below 2% [7][24]. - The pressure in this new stage is increasingly focused on terminal demand, leading to a decline in PPI while CPI remains weak, indicating a shift of excess capacity to downstream sectors [13][24]. - The transformation has resulted in a significant decline in the growth rate of traditional industries, similar to trends observed from 2011 to 2015, which ultimately stabilized the economy [7][13]. Group 2: Policy Innovation - The effectiveness of traditional policy frameworks has diminished, necessitating comprehensive policy innovation to address the new economic landscape [1][35]. - By the end of 2024, a comprehensive optimization of the policy framework was initiated, focusing on supply-side structural reforms and enhancing the targeting of structural policies [35][42]. - The new policy framework emphasizes high-quality development, high-level openness, and sustainable growth, with a shift from investment-driven to people-centered approaches [3][121]. Group 3: External Shocks as Accelerators - External shocks, particularly during the tariff phases, have accelerated domestic industrial upgrades, with significant shifts in trade structures observed [64][65]. - The first phase of tariffs led to a notable increase in high-value-added industries, while the second phase primarily impacted low-value-added consumer goods, which were already experiencing significant internal competition [64][101]. - The export structure has improved, with a decrease in the proportion of exports to the U.S. and an increase in exports to non-U.S. economies, particularly in the context of the Belt and Road Initiative [83][90]. Group 4: Focus on "Anti-Internal Competition" and Service Sector - The new policy framework is expected to focus on "anti-internal competition" and the service sector, which can absorb structural employment pressures during the transformation process [4][121]. - The service sector has become the largest employment absorption area, yet it faces significant supply shortages, indicating a need for increased support and demand stimulation [4][121]. - By the second half of 2025, the main macroeconomic indicators may experience a "strong-weak conversion," with potential downward pressure on manufacturing and positive improvements in service sector investments and consumption [4][121].

Core Viewpoint - The article highlights a significant shift in global asset allocation, with a notable inflow into European equities and bonds, while Chinese equities are experiencing outflows, indicating a "seesaw" effect in the market dynamics [1][3][41]. Market Review - The successful outcome of the China-US-Switzerland talks on May 12 has significantly boosted global risk appetite, leading to an increase in global stock indices [10][41]. - The 20-year US Treasury auction on May 22 was poorly received, with the final yield surpassing 5%, raising concerns about US fiscal pressure [1][10]. Global Asset Performance - In May, equity assets generally rose, while US Treasury yields increased and the dollar weakened. The 10-year US Treasury yield rose by 24 basis points [2][13]. - Gold prices increased by 2.1%, and Brent crude oil rose by 1.7% during the same period [2][13]. Global Fund Flows - In May, there was a significant inflow of $215 billion into global money market funds, with developed market equities receiving $305 billion, while emerging market equities saw an outflow of $83 billion [3][20]. - Developed European fixed income and equity funds attracted inflows of $190 billion and $247 billion, respectively, indicating stronger performance compared to the US [3][20]. China Market Dynamics - By the end of May, global equity funds experienced an outflow of $88.5 billion from China, a reversal from the inflow of $198.3 billion in April [4][41]. - The outflow was primarily driven by passive ETFs, which saw a withdrawal of $82.5 billion in May compared to an inflow of $203.9 billion in April [4][41]. - In terms of sector performance, there was a significant inflow into technology, real estate, and materials, while telecommunications, consumer staples, and healthcare saw outflows [4][41]. Country Allocation - Global market funds reduced their allocation to US equities by 1.0 percentage points in April, while increasing allocations to European equities [5][41]. - The allocation to China remains stable at 26.4%, indicating potential for further growth [5][41]. Emerging Markets - Emerging market funds saw a decrease in allocation to Chinese equities, with a drop of 1.6 percentage points compared to March, while the allocation to Indian equities also decreased [5][41]. - In May, emerging market equity funds experienced a net outflow of $45 billion, with China being the primary contributor to this outflow [43][46].

Core Insights - The article discusses the potential opportunities in the market due to expected lower supply chains, particularly in the context of the U.S. economic slowdown and its implications for various industries [2]. Group 1: Market Trends - The article highlights that the current market conditions may allow for adjustments and opportunities, especially with the anticipated lower supply chains [2]. - It notes that the consumer spending has shown a significant impact, often being a key indicator for market adjustments [2]. Group 2: Industry Analysis - The article mentions that the technology sector is expected to experience significant growth, driven by trends in the industry [2]. - It also discusses the performance metrics, indicating a notable increase in certain sectors, with a focus on the implications of these trends for future investments [4].

Core Viewpoint - The article emphasizes that the A-share market is likely to remain in a consolidation phase until Q2-Q3 of 2025, with a need to wait for favorable conditions to initiate a larger market rally [1][2]. Market Review and Conditions for Breakthrough - Historically, after a bear market ends, the market often enters a consolidation phase before confirming a bull market. Significant upward breakthroughs from this phase typically signal the start of a major bull market [2]. - The article outlines previous consolidation periods in the A-share market, noting that the end of bear markets in 2005 and 2009 led directly to bull markets, while subsequent bear market endings resulted in prolonged consolidation phases [2]. - The conditions for a breakthrough include sustained inflow of incremental capital into A-shares, cyclical and structural improvements in the fundamentals, and optimistic expectations for a bull market [2]. Current Market Dynamics - The current environment shows that the asset management industry is returning to incremental competition, but further accumulation of profit effects is needed [2]. - The cyclical improvement in fundamentals is expected to be confirmed by 2026, while the structural bull market in technology requires breakthroughs at the foundational level to drive application layers [2]. - The optimistic expectations for China's strategic opportunity period are developing but need to resonate with other factors to reflect in asset prices [2]. Short-term Market Trends - The short-term rebound in the A-share market is supported by a "隔离墙" (isolation wall) against macroeconomic disturbances, which reduces major downside risks [5][6]. - The market is currently experiencing a positive attempt at structural breakthroughs, driven by the expansion of profit effects in new consumption and a rebound in technology growth [5][6]. - However, the overall profit effect is nearing a high point, suggesting potential for increased volatility in the short term [5][6]. New Consumption Trends - Core targets within new consumption sectors (such as jewelry, trendy toys, new snacks, and beauty products) are maintaining their respective growth trends, with high valuation frameworks still sustainable [7]. - The article expresses caution regarding the expansion of profit effects in new consumption, indicating that significant profit effect expansions often signal short-term adjustments [7]. - The A-share market's mid-term return to a structural bull market relies on breakthroughs in technology industry trends, with short-term rebounds in technology not yet escaping adjustment phases [8]. Quantitative Indicators - The article includes various quantitative indicators tracking market sentiment and profit effect diffusion across sectors, indicating ongoing expansions in several industries, including healthcare, environmental protection, and transportation [10].

Core Viewpoint - The article emphasizes the resilience and growth potential of the Chinese capital market amidst global uncertainties, highlighting the importance of strategic preparation and the rise of new economic forces in technology [3][4][6]. Group 1: Market Resilience and Growth - The Chinese capital market is expected to experience a long-term bull market, driven by improved corporate governance, increased shareholder returns, and a focus on both investment and financing functions [4][6]. - The rise of Chinese technology companies, such as Huawei and ByteDance, is creating opportunities for growth in the new economy, with indices like the Hang Seng Tech Index and domestic innovation boards entering a new valuation era [4][6]. - External uncertainties may enhance China's international influence, with Chinese goods becoming symbols of quality and strength, which is significant for boosting domestic demand [5][6]. Group 2: Research and Development Focus - The company aims to strengthen the concept of "research products," emphasizing a customer-centric approach and the integration of policy and commercial logic in research recommendations [7][8]. - There is a focus on enhancing data capabilities and intelligent research methodologies, leveraging big data, algorithms, and computational power to improve research efficiency and accuracy [9][10]. - The company recognizes the need for foresight in research, especially in the context of artificial intelligence's growing role in quantitative investment, advocating for strategic and long-term thinking [8][10]. Group 3: Leadership and Management Philosophy - The role of leadership in the research sector is multifaceted, requiring a balance of innovation, strategic oversight, and effective management to drive the research agenda [11]. - The company emphasizes a collaborative approach to management, focusing on building a strong research ecosystem and fostering a culture of continuous improvement [11].

Core Viewpoint - The leadership transition at Shenwan Hongyuan aims to enhance research quality and align with national development strategies, emphasizing the importance of sustainable growth and innovation in the research sector [1][2] Group 1: Leadership Changes - Zhou Haichen is no longer the General Manager of Shenwan Hongyuan Research, with Wang Sheng taking over the role, responsible for overall management [1] - Liu Jian, the Chairman, highlighted Wang Sheng's professional capabilities and commitment to customer service, indicating a focus on high-quality research and the importance of party leadership in guiding research efforts [1] Group 2: Research Focus and Strategy - The research department is expected to deepen its role in supporting national strategies, enhance data capabilities, and develop intelligent research methodologies [2] - The goal is to optimize the "investment research + production research + policy research" system to contribute to the establishment of a first-class investment bank and investment institution [2] Group 3: Commitment to Quality and Innovation - The new leadership is tasked with continuing the legacy of the "century-old team" spirit, focusing on macro trends and industrial changes while optimizing research models [1] - There is a strong emphasis on deep, forward-looking research to expand the brand influence of the research department [1]

Core Viewpoints - The article discusses the current concerns of investors regarding macro interest rates, credit, and convertible bonds, and provides insights on these topics [2][12]. Group 1: Bond Market Dynamics - Bond interest rates are positively correlated with domestic demand and negatively correlated with external demand, indicating that despite unexpected tariff changes, the core contradiction in the bond market remains focused on domestic demand [3][14]. - The liquidity environment is improving gradually, with funding rates decreasing from around 1.8% to a range of 1.4%-1.6%, suggesting that negative carry is becoming a thing of the past [4][19]. - The long-end interest rates, particularly the 10-year government bond, require a decline in deposit rates to facilitate further downward movement [20][21]. Group 2: Macro-Prudential Support - The People's Bank of China is focusing on macro-prudential measures to support the healthy development of the bond market, which includes monitoring risks and enhancing regulatory coordination [5][24]. - The current credit environment shows weak growth in broad credit, with local government bonds expanding, indicating that investors may face more interest rate risks [25]. Group 3: Credit Bond Market - The credit bond market is expected to see a shift towards stronger credit performance and weaker interest rates, driven by a decrease in deposit rates and increased allocation towards credit bonds by wealth management products [7][28]. - The performance of credit strategies is likely to favor short to medium-term bonds, particularly those with a maturity of 2-3 years, with a ranking of value from city investment bonds to industry bonds [8][30]. Group 4: Investment Opportunities - The recent surge in sci-tech bonds presents unique investment opportunities, especially with new issuers and private sector participation, although investors should remain cautious of potential credit risks [10][32]. - The recommendation for a near-term convertible bond strategy is based on the increasing market focus on bonds with shorter maturities, particularly those with a strong repayment capability [11][34].

Core Viewpoint - The article discusses the significant rise in long-term Japanese government bond yields, attributing it to factors such as improving employment, rising wages, and inflationary pressures, alongside supply-demand imbalances in the bond market [2][8][15]. Group 1: Long-term Japanese Government Bond Yields - The auction of 1 trillion yen 20-year bonds on May 20, 2025, saw a bid-to-cover ratio drop to 2.5, the lowest since 2012, and a tail difference of 1.14, the highest since 1987, leading to a sharp increase in 30-year bond yields to 2.74% [1][6]. - The yield spread between 30-year and 10-year Japanese bonds increased significantly to 126 basis points, placing it in the 99.3 percentile since 2000, indicating a steepening of the yield curve [1][6]. Group 2: Economic Factors Influencing Yields - The Japanese labor market has shown consistent improvement since 2021, with a declining unemployment rate and rising labor participation, contributing to wage increases and inflation that have exceeded the Bank of Japan's target of 2% for two consecutive years [2][8][12]. - The Bank of Japan is expected to initiate a rate hike cycle in March 2024 to address rising inflation and normalize monetary policy, which has been extremely accommodative for 25 years [12][15]. Group 3: Supply-Demand Imbalances - The supply-demand imbalance in the long-term bond market is a primary driver of the recent yield increases, with the Bank of Japan reducing its bond purchases, leading to liquidity risks in the market [15][22]. - Major Japanese life insurance companies are facing significant unrealized losses on their bond holdings, prompting them to reconsider their long-term bond positions, further exacerbating liquidity issues [22][24]. Group 4: Future Outlook - Upcoming bond auctions from May 28 to June 5, 2025, for 40-year, 10-year, and 30-year bonds are expected to impact the overall bond market, with potential for continued upward pressure on yield spreads [3][24]. - The actions of the Bank of Japan and the Ministry of Finance in mid-June will be crucial in determining the trajectory of Japanese bond yields, as they seek to balance currency appreciation, economic recovery, and market normalization [3][24]. Group 5: Impact on Global Markets - The ongoing rise in Japanese bond yields may influence global bond markets, as the interconnectedness of developed economies means that changes in Japanese yields could lead to similar movements in other countries' long-term bond rates [5][41]. - A reversal in the carry trade, where investors borrow in yen to invest in higher-yielding dollar assets, could lead to capital outflows from U.S. equities, increasing volatility in those markets [5][41].

Core Viewpoint - April's profit growth is primarily driven by short-term improvements in costs and expenses, but attention is needed on potential profit decline pressures in the third quarter due to tariff disturbances [3][76]. Group 1: Profit and Revenue Analysis - In April, industrial profits increased by 0.4 percentage points year-on-year to 2.9%, mainly due to improved cost and expense pressures [3][9]. - The contribution of costs and expenses to overall profit improved, with costs contributing +2.7 percentage points and expenses +0.5 percentage points, while other losses contributed negatively [3][9]. - Actual operating revenue showed resilience, with a year-on-year decline of 1.6 percentage points to 5.5%, contributing 4.9% to overall profit growth [3][9]. Group 2: Cost Structure and Industry Performance - The overall cost rate for industrial enterprises was 86%, with a year-on-year marginal decline of 12.6 basis points [3][17]. - Downstream consumer manufacturing industries saw a cost rate increase of 59.7 basis points to 84.3%, which was significantly lower than seasonal trends [3][17]. - In contrast, the petrochemical and metallurgy chains experienced weaker cost performance, with respective cost rates rising to 86.5% and declining to 87% [3][17]. Group 3: Revenue Support from Infrastructure and Exports - Benefiting from infrastructure investment and export boosts, the coal and metallurgy chains, along with downstream consumer industries, provided significant revenue support [4][27]. - The actual revenue growth rate fell by 1.6 percentage points to 5.5%, with the petrochemical industry experiencing a notable decline of 3 percentage points to 2.1% [4][27]. - The consumer manufacturing chain maintained a relatively high revenue growth rate of 7.8%, supported by short-term export boosts [4][27]. Group 4: Future Outlook and Uncertainties - Future profit recovery remains uncertain due to potential lagging effects of tariffs and low capacity utilization in mid and downstream sectors [4][33]. - Historical data indicates that profit margins have a greater impact on profits than revenue, with current low capacity utilization keeping consumer manufacturing cost rates high [4][33]. - Previous experiences suggest that post-tariff implementation may lead to declines in asset turnover and rising fixed costs, resulting in profit growth rates declining more than revenue [4][33]. Group 5: Regular Tracking of Industrial Performance - Industrial enterprise profits showed a year-on-year increase of 0.4 percentage points, primarily due to improved profit margins [5][36]. - Revenue growth for industrial enterprises remained stable, with significant increases in the food and beverage sectors [5][50]. - Inventory growth slightly declined, indicating that terminal demand still requires further recovery [5][61].

Group 1 - The core driver of the recent volatility in the US Treasury market is the US tax reduction bill and the weak demand for Japanese bonds, leading to significant increases in Treasury yields in May [2][3][7] - The 10-year Treasury yield rose by 37 basis points since April 30, with the term premium contributing 28 basis points to this increase, indicating heightened concerns over fiscal sustainability and inflation [10][69] - The term premium for US Treasuries reached a new high of 0.9% by May 22, reflecting disturbances in fiscal, inflation, monetary, and trading factors [10][69] Group 2 - The "Beautiful America Act" aims to extend tax cuts from the Tax Cuts and Jobs Act (TCJA), with an expected increase in the deficit rate by approximately 1.8 percentage points by 2026, despite limited marginal economic contributions [3][29][40] - The Act's passage faces uncertainty in the Senate, where the Republican majority is slim, and potential amendments could require further voting in the House [3][29] - The Act includes significant tax cuts, with 80% of the measures extending existing cuts and 20% introducing new cuts, but the overall economic impact is expected to be limited, similar to the effects of tax extensions in 2010 and 2012 [33][40][41] Group 3 - The relationship between the US fiscal deficit and Treasury yields remains stable, with a 1 percentage point increase in the deficit correlating to a rise of approximately 78 basis points in the 10-year Treasury yield [4][47] - Short-term pressures on the Treasury market have eased, with positive net inflows into bond funds in May, indicating a temporary reduction in systemic pressure [49][50] - Long-term, Treasury yields are expected to remain elevated due to potential unanticipated deficit expansions and ongoing trade policy uncertainties [60][70]