Quantitative Models and Construction 1. Model Name: Portfolio Optimization with 10-Year Treasury Bonds - **Model Construction Idea**: Incorporating 10-year Treasury bonds into a portfolio to optimize the risk-return profile by leveraging their low correlation with other asset classes and high Sharpe ratio[10][13][14] - **Model Construction Process**: 1. Calculate the correlation matrix between 10-year Treasury bonds and other asset classes such as A-shares, U.S. equities, and gold[13] 2. Evaluate historical performance metrics, including annualized return, volatility, maximum drawdown, Sharpe ratio, and Calmar ratio for each asset[14] 3. Add 10-year Treasury bonds to a portfolio consisting of equities and short-term bonds (e.g., CSI 300, ChiNext, 1-3 year Treasury bonds) 4. Optimize the portfolio's efficient frontier by maximizing the Sharpe ratio[15] - **Model Evaluation**: The inclusion of 10-year Treasury bonds significantly improves the portfolio's efficient frontier, enhancing the risk-return tradeoff[10][15] --- Quantitative Factors and Construction 1. Factor Name: Macro Cycle-Based Bond Performance Factor - **Factor Construction Idea**: Assessing the performance of 10-year Treasury bonds under different macroeconomic cycles to identify favorable investment periods[16][18] - **Factor Construction Process**: 1. Divide the macroeconomic environment into six stages based on monetary, credit, and growth factors[16] 2. Calculate the annualized return of 10-year Treasury bonds in each macroeconomic stage[18] 3. Use a macroeconomic scoring card to evaluate the bond's performance probability in the current stage[18] - **Factor Evaluation**: The factor indicates that 10-year Treasury bonds perform best during the late stages of economic downturns, with a recent macroeconomic probability score of 40%[16][18] --- Backtesting Results of Models and Factors 1. Portfolio Optimization with 10-Year Treasury Bonds - **Annualized Return**: 4.51%[14] - **Annualized Volatility**: 2.31%[14] - **Maximum Drawdown**: 6.86%[14] - **Sharpe Ratio**: 1.95[14] - **Calmar Ratio**: 0.66[14] 2. Macro Cycle-Based Bond Performance Factor - **Recent Macro Probability Score**: 40%[18]

Core Insights - The current ten-year government bonds have high investment value, optimizing risk-return performance in portfolios and showing low correlation with other assets like stocks and gold [2][3] - The macroeconomic environment is favorable for ten-year bonds, with a loose monetary policy and weak credit demand, leading to better performance compared to other assets during this phase [2][3] Ten-Year Government Bond Historical Analysis - The long-term trend indicates a downward shift in interest rates, primarily driven by declining real returns, with expectations of lower financing costs due to weakening prices [3] - Financial institutions are experiencing a downward trend in earnings, with deposit and investment product yields decreasing further from the beginning of the year [3] - Supply-demand dynamics and central bank liquidity support are expected to drive interest rates lower, with a potential asset shortage emerging as bond supply slows [3] Ten-Year Government Bond Advantages - Interest rates are anticipated to reach new lows, with expectations of the ten-year bond yield dropping to 1.4%-1.5% within the year [4] - The ten-year bond serves as a crucial benchmark rate, balancing long and short-term funding needs and is a key reference for pricing other financial products [4] - The 国泰上证 10-year government bond ETF is the only ETF tracking the ten-year bond index, utilizing an optimized sampling method to enhance liquidity and reduce trading costs [4][5] ETF Characteristics - The 国债 ETF operates on a T+0 trading mechanism, allowing for same-day buying and selling, which facilitates multiple trading opportunities within a single day [5] - The ETF maintains transparency in holdings, with daily disclosures, making it suitable for conservative long-term investors [5] - The ETF has low fees, high liquidity, and a strong historical performance, managed by experienced fund managers [5] Industry Performance Overview - The steel industry saw a 6.9% year-on-year decline in crude steel production in May, indicating a need for further observation regarding production strength [14] - The coal industry experienced a continued decline in imports, with a slight increase in thermal power generation, suggesting a potential rebound in demand [15]

Quantitative Models and Construction Methods 1. Model Name: CCBA Pricing Model - **Model Construction Idea**: The CCBA pricing model is used to calculate the pricing deviation of convertible bonds, defined as the difference between the market price and the model price, adjusted for redemption probability[6][24] - **Model Construction Process**: - The pricing deviation is calculated as: $ Pricing\ Deviation = \frac{Convertible\ Bond\ Price}{CCBA\ Model\ Price} - 1 $ - Here, the "Convertible Bond Price" represents the market price of the bond, and the "CCBA Model Price" is derived from the CCBA pricing model[6][24] - The model incorporates historical volatility as a central parameter to determine the deviation level[7] - **Model Evaluation**: The model effectively identifies valuation ranges for convertible bonds, providing insights into their relative attractiveness[6] 2. Model Name: CCB_out Pricing Model - **Model Construction Idea**: This model builds upon the CCBA model by incorporating delisting risk to refine the pricing deviation calculation[24] - **Model Construction Process**: - The pricing deviation is calculated as: $ Pricing\ Deviation = \frac{Convertible\ Bond\ Price}{CCB\_out\ Model\ Price} - 1 $ - The "CCB_out Model Price" adjusts the CCBA model price by accounting for delisting probabilities[24] - Convertible bonds are categorized into three domains: debt-biased, balanced, and equity-biased, with the lowest deviation bonds selected for each domain[24] - **Model Evaluation**: The model demonstrates strong stability and adaptability, achieving consistent returns even in volatile market conditions[24] 3. Model Name: Return Decomposition Model - **Model Construction Idea**: This model decomposes the returns of convertible bonds into three components: bond floor returns, equity-driven returns, and valuation-driven returns[17] - **Model Construction Process**: - The model uses historical data to separate the total return of convertible bonds into: - Bond floor returns, representing the fixed-income component - Equity-driven returns, reflecting the impact of the underlying stock's performance - Valuation-driven returns, capturing changes in the bond's relative pricing[17][21] - **Model Evaluation**: The model provides a detailed understanding of the drivers of convertible bond performance, aiding in strategy optimization[17] --- Quantitative Factors and Construction Methods 1. Factor Name: Pricing Deviation Factor (CCB_out) - **Factor Construction Idea**: Measures the relative valuation of convertible bonds by comparing market prices to model-derived prices[24] - **Factor Construction Process**: - The factor is calculated as: $ Pricing\ Deviation = \frac{Convertible\ Bond\ Price}{CCB\_out\ Model\ Price} - 1 $ - Bonds with the lowest deviation are selected for further analysis[24] - **Factor Evaluation**: The factor effectively identifies undervalued bonds, contributing to the success of valuation-based strategies[24] 2. Factor Name: Momentum Factor - **Factor Construction Idea**: Captures the price momentum of the underlying stock over different time horizons[29] - **Factor Construction Process**: - Momentum scores are calculated based on the stock's returns over the past 1, 3, and 6 months, with equal weighting applied to each period[29] - **Factor Evaluation**: The factor enhances the responsiveness of valuation-based strategies, improving their adaptability to market trends[29] 3. Factor Name: Turnover Factor - **Factor Construction Idea**: Measures the trading activity of convertible bonds to identify liquidity and investor interest[33] - **Factor Construction Process**: - The factor is derived from: - Bond turnover rates over 5-day and 21-day periods - The ratio of bond turnover to stock turnover over the same periods[33] - **Factor Evaluation**: The factor effectively identifies actively traded bonds, improving the liquidity profile of selected portfolios[33] --- Backtesting Results of Models 1. CCBA Pricing Model - **Annualized Return**: 8.6% - **Annualized Volatility**: 11.6% - **Maximum Drawdown**: 19.9% - **Information Ratio (IR)**: Not explicitly provided[6] 2. CCB_out Pricing Model - **Annualized Return**: 21.8% - **Annualized Volatility**: 13.6% - **Maximum Drawdown**: 15.6% - **Information Ratio (IR)**: 2.10[27] 3. Return Decomposition Model - **Annualized Return**: Not explicitly provided - **Annualized Volatility**: Not explicitly provided - **Maximum Drawdown**: Not explicitly provided - **Information Ratio (IR)**: Not explicitly provided[17] --- Backtesting Results of Factors 1. Pricing Deviation Factor (CCB_out) - **Annualized Return**: 21.8% - **Annualized Volatility**: 13.6% - **Maximum Drawdown**: 15.6% - **Information Ratio (IR)**: 2.10[27] 2. Momentum Factor - **Annualized Return**: 24.5% - **Annualized Volatility**: 14.3% - **Maximum Drawdown**: 11.9% - **Information Ratio (IR)**: 2.39[31] 3. Turnover Factor - **Annualized Return**: 23.4% - **Annualized Volatility**: 15.4% - **Maximum Drawdown**: 15.9% - **Information Ratio (IR)**: 2.15[35]

Investment Rating - The report maintains an "Accumulate" rating for the steel industry [6] Core Viewpoints - The steel industry is experiencing a contraction in crude steel production, with May's output down 6.9% year-on-year, indicating a need for further observation regarding production adjustments [2] - The uncertainty surrounding tariffs has increased, impacting production and demand dynamics, although domestic economic conditions remain relatively stable [2][3] - Steel exports have shown significant growth, with net exports for January to May reaching 45.92 million tons, a year-on-year increase of 10.3% [3] - The report suggests that the recovery of steel profitability is closely tied to supply-side adjustments and the overall economic recovery driven by fiscal policies [4] Summary by Sections Production Data - In May, crude steel production was 86.55 million tons, down 6.9% year-on-year, with a daily average of 2.79 million tons, a month-on-month decrease of 2.6% [8] - Pig iron production in May was 74.11 million tons, down 3.3% year-on-year [8] - Steel production in May was 127.43 million tons, up 3.4% year-on-year [8] Export and Import Data - In May, steel exports were 10.58 million tons, a year-on-year increase of 9.8% [8] - Steel imports in May were 480,000 tons, down 24.5% year-on-year [8] - Iron ore imports in May were 98.13 million tons, down 3.8% year-on-year [8] Investment Recommendations - The report recommends several stocks for investment, including: - Hualing Steel (600782.SH) with a "Buy" rating - Nanjing Steel (600282.SH) with a "Buy" rating - Baosteel (600019.SH) with a "Buy" rating - New Steel (600019.SH) with a "Buy" rating - Jiu Li Special Materials (002318.SZ) with a "Buy" rating - Yongjin Co., Ltd. (603995.SH) with a "Buy" rating - New Casting (000778.SZ) with an "Accumulate" rating [9]

Investment Rating - The report maintains a "Buy" rating for key stocks in the gold sector, including Chifeng Jilong Gold Mining Co., Zijin Mining Group Co., and Shandong Gold International Mining Co. [7] Core Insights - The macro narrative surrounding gold is currently reminiscent of the 1970s and early 20th century, with increasing concerns about the sustainability of U.S. fiscal policies and high deficits [1][18] - Gold's valuation is considered reasonable relative to global M2, with potential for significant price increases, suggesting target prices of $3,435 and $6,088 per ounce based on different M2 comparisons [1][19] - Central banks are likely to continue increasing their gold reserves, particularly in emerging markets, as gold regains its status as a hard currency [2][22] - Tariff policies are expected to elevate U.S. inflation expectations, complicating the Federal Reserve's ability to lower interest rates and maintain fiscal deficits [3][40] - Geopolitical uncertainties and rising populism globally are contributing to gold's appeal as a safe-haven asset [4][52] Summary by Sections Historical Context of Gold - Gold has shifted from a financial asset to a monetary asset, with its primary attributes ranked as monetary, financial, safe-haven, and commodity [11][12] - The historical valuation of gold indicates that it has significant upside potential based on current economic conditions and monetary policies [18] Current Market Dynamics - Central banks' gold purchases have been robust, with a notable increase in demand from emerging markets, which currently hold only 8.2% of their reserves in gold compared to 33.2% in developed countries [2][22] - The implementation of Basel III regulations in 2025 will further enhance the demand for physical gold among banks [23] Economic Implications - The U.S. is facing a high deficit environment, with projections indicating an average deficit rate of 5.8% over the next decade, significantly higher than historical averages [3][40] - Tariff impacts on consumer confidence and economic growth could lead to stagflation, further complicating the economic landscape [3][46] Geopolitical Factors - Ongoing geopolitical conflicts and the rise of populism are increasing global uncertainties, which may bolster gold's safe-haven status [4][52]

Investment Rating - The industry investment rating is maintained as "Increase" [6] Core Viewpoints - The report indicates that coal production remains stable, with May's output at 400 million tons, a year-on-year increase of 4.2% [12][17] - Coal imports continue to decline, with May imports at 36.04 million tons, down 17.7% year-on-year [17][12] - Thermal power generation has turned from decline to increase, with a 1.2% year-on-year growth in May [19][20] - The report anticipates a slight increase in coal production in 2025, with a net increase of 55-60 million tons, representing a growth of approximately 1.2-1.3% [12][17] Summary by Sections Production - In May, the industrial raw coal output was 400 million tons, with a daily average of 13.01 million tons [12][15] - The total output from January to May was 1.99 billion tons, reflecting a 6.0% year-on-year increase [12] Imports - Coal imports in May were 36.04 million tons, a decrease of 17.7% compared to the same month last year [17][12] - From January to May, total coal imports reached 188.67 million tons, down 7.9% year-on-year [17] Demand - The total industrial power generation in May was 737.8 billion kWh, with a year-on-year growth of 0.5% [19][20] - Thermal power generation increased by 1.2% in May, reversing the previous month's decline [19][20] - Hydropower generation saw a significant decline of 14.3% year-on-year [19][20] Investment Recommendations - The report recommends key coal enterprises such as China Shenhua, China Coal Energy, and China Qinfa for investment [36][37] - It highlights the performance of new energy companies and those with potential for growth, such as Xinji Energy and Shaanxi Coal and Chemical Industry [36]

Group 1: Economic Overview - The report indicates that May's economic data shows a mixed performance, with consumption rising unexpectedly while other sectors face challenges due to tariff impacts and declining external demand [3][4]. - The GDP growth rate for the second quarter is projected to remain around 5%, but economic pressures may increase in the latter half of the year [4]. - The consumption sector's rebound is primarily supported by the "old-for-new" policy, while investment in real estate is declining, and industrial production continues to show signs of weakness [4]. Group 2: Company Insights - Asia Xiang Integrated (603929.SH) is highlighted as a leading semiconductor cleanroom company with a robust order backlog of approximately 3 billion yuan, including a recent 3.2 billion yuan project win [7]. - Yirui Technology (688301.SH) is recognized as a domestic leader in X-ray detectors, with a projected revenue growth from 2.196 billion yuan in 2025 to 3.168 billion yuan in 2027, reflecting a compound annual growth rate of approximately 20% [10][11]. - Dongshan Precision (002384.SZ) is set to acquire 100% of Sors Technology for up to 5.935 billion yuan, aiming to enhance its position in the optical communication market and expand its AI capabilities [13].

Group 1 - The report analyzes the impact of geopolitical conflicts on the A-share market, noting that such events typically cause short-term disturbances, with the most significant impact observed during the 2022 Russia-Ukraine conflict [1][14] - The report indicates that the A-share index usually recovers within three trading days after a geopolitical event, suggesting that these disturbances can be viewed as short-term "pulses" [1][14] - In terms of industry performance, oil and gas, as well as military industries, show strong short-term performance during geopolitical conflicts, while banking, electricity, and gold sectors exhibit resilience [2][15] Group 2 - The report highlights that the defense and military sectors tend to lead gains on the first day of a geopolitical conflict, with the oil and gas sector showing weaker sustainability in performance [2][15] - It is noted that even if international oil prices rise significantly, it does not guarantee sustained growth in the oil and gas sector, as evidenced by the 30% increase in ICE Brent crude prices following the Russia-Ukraine conflict, while the A-share oil and gas sector peaked on the first day of the conflict [2][18] - The report suggests that the military industry has shown consistent gains in the aftermath of recent conflicts, with specific sub-sectors like ground weaponry and aerospace equipment performing well [2][20] Group 3 - The report recommends maintaining a balanced portfolio and being patient while waiting for a clear market direction, with a focus on sectors such as ground weaponry, aerospace equipment, and new energy vehicles [29] - It emphasizes the importance of monitoring high-growth industries after the 2024 annual reports and 2025 quarterly reports are released, suggesting a focus on sectors like feed, motorcycles, and animal health [29] - Defensive assets such as banks, insurance, and utilities are recommended as core holdings, with attention to sectors like shipping ports and white goods that have shown increased dividend yields [29]

Investment Rating - The report maintains a "Buy" rating for the company [6]. Core Views - The company is expanding its business into the optical communication sector through the acquisition of Solstice Photonics for a total investment of up to RMB 5.935 billion, which is expected to enhance its competitive edge in the market [1][14]. - The optical communication market is experiencing sustained growth due to the rapid development of 5G communications and data centers, providing new business growth opportunities for the company [2][15]. - The company is leveraging its existing customer resources and manufacturing experience in consumer electronics and new energy vehicles to create synergies with Solstice Photonics [2][15]. - The precision manufacturing business is rapidly growing, particularly in the new energy vehicle sector, which is expected to benefit from increasing sales and market penetration [3][28]. - The company anticipates significant revenue growth, projecting revenues of RMB 436 billion, RMB 588 billion, and RMB 676 billion for 2025, 2026, and 2027, respectively, with corresponding net profits of RMB 38 billion, RMB 53 billion, and RMB 64 billion [4][5]. Summary by Sections Acquisition of Solstice Photonics - The company has agreed to acquire 100% of Solstice Photonics, which specializes in optical communication modules and components, enhancing its market position [1][14]. - Solstice Photonics has a strong customer base, including major internet data center operators and telecom equipment manufacturers, and is expected to generate a profit of approximately RMB 400 million in 2024 [1][14]. Consumer Electronics - The flexible printed circuit (FPC) market is expected to grow due to increasing demand for lightweight and compact electronic components, driven by innovations in smartphones and AI applications [2][18]. - The company is positioned as a leading player in the FPC market, ranking second globally, and is expected to benefit from the rising demand for high-density circuit boards [24][25]. New Energy Vehicles - The new energy vehicle market is projected to grow significantly, with sales expected to reach 18.24 million units globally in 2024, representing a year-on-year growth of 24.5% [28]. - The company is expanding its precision manufacturing capabilities to meet the increasing demand for components in the new energy vehicle sector [3][28]. AI Servers - The AI server market is anticipated to grow substantially, with an expected market value of nearly USD 298 billion by 2025, driven by advancements in AI technology and cloud computing [39].

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The report updates the high - frequency data of the national economic fundamentals from June 9th to June 13th, 2025, covering various aspects such as overall, production, demand, prices, inventory, transportation, and financing, and analyzes their trends and changes [9]. 3. Summary by Directory 3.1 Total Index: Stable Fundamental High - Frequency Index - The current Guosheng fundamental high - frequency index is 126.1 points (previous value: 126.0 points), with a week - on - week increase of 0.1 points and a year - on - year increase of 5.1 points, and the year - on - year increase has expanded. The long - short signal of interest - rate bonds is long, with a signal factor of 5.0% (previous value: 5.4%) [9][11]. 3.2 Production: Decline in Electric Furnace and Polyester Operating Rates - The industrial production high - frequency index is 125.6 (previous value: 125.5), with a week - on - week increase of 0.1 points and a year - on - year increase of 4.8 points, and the year - on - year increase remains unchanged. The electric furnace operating rate is 62.8% (previous value: 64.7%); the polyester operating rate is 88.6% (previous value: 88.9%) [9][11][13]. 3.3 Real Estate Sales: New Home Sales Turn Positive Year - on - Year - The commercial housing sales high - frequency index is 44.5 (previous value: 44.6), with a week - on - week decrease of 0.1 points and a year - on - year decrease of 6.5 points, and the year - on - year decrease remains unchanged. The transaction area of commercial housing in 30 large and medium - sized cities is 245,000 square meters (previous value: 213,000 square meters); the premium rate of land transactions in 100 large and medium - sized cities is 1.0% (previous value: 3.6%) [9][11][21]. 3.4 Infrastructure Investment: Recovery of Petroleum Asphalt Operating Rate - The infrastructure investment high - frequency index is 118.4 (previous value: 118.1), with a week - on - week increase of 0.2 points and a year - on - year increase of 1.9 points, and the year - on - year increase has expanded. The operating rate of petroleum asphalt plants is 31.5% (previous value: 31.3%) [9][11][33]. 3.5 Exports: Continuous Recovery of Export Container Freight Rate Index - The export high - frequency index is 144.3 (previous value: 144.3), with a week - on - week decrease of 0.1 points and a year - on - year increase of 5.8 points, and the year - on - year increase has narrowed. The CCFI index is 1243 points (previous value: 1155 points); the export price index of Yiwu small commodities is 106 points (previous value: 104 points); the RJ/CRB index is 303.3 points (previous value: 297.6 points) [9][11][37]. 3.6 Consumption: Decline in Passenger Car Retail and Wholesale - The consumption high - frequency index is 119.3 (previous value: 119.3), with a week - on - week increase of 0.0 points and a year - on - year increase of 1.5 points, and the year - on - year increase has expanded. The retail volume of passenger car manufacturers is 42,835 units (previous value: 95,364 units); the wholesale volume of passenger car manufacturers is 38,836 units (previous value: 156,618 units); the average daily box office is 39.01 million yuan (previous value: 82.57 million yuan) [9][11][50]. 3.7 CPI: Continued Decline in Pork Prices - The CPI monthly - on - monthly forecast is 0.0% (previous value: 0.0%). The latest average wholesale price of pork is 20.3 yuan/kg (previous value: 20.6 yuan/kg) [10][11][55]. 3.8 PPI: Recovery of Crude Oil Futures Prices - The PPI monthly - on - monthly forecast is - 0.1% (previous value: - 0.1%). The closing price of thermal coal at Qinhuangdao Port (from Shanxi) is 609 yuan/ton (previous value: 609 yuan/ton); the settlement price of Brent crude oil futures is 69 US dollars/barrel (previous value: 65 US dollars/barrel) [10][11][61]. 3.9 Transportation: Decline in Passenger Transport and Flights - The transportation high - frequency index is 128.0 (previous value: 127.8), with a week - on - week increase of 0.2 points and a year - on - year increase of 8.2 points, and the year - on - year increase has expanded. The subway passenger volume in first - tier cities is 36.98 million person - times (previous value: 37.17 million person - times); the highway logistics freight rate index is 1050 points (previous value: 1050 points); the number of domestic flights is 12,420 flights (previous value: 12,451 flights) [10][11][73]. 3.10 Inventory: Continuous Recovery of Aluminum Ingot Inventory - The inventory high - frequency index is 160.3 (previous value: 160.2), with a week - on - week increase of 0.1 points and a year - on - year increase of 9.8 points, and the year - on - year increase remains unchanged. The aluminum ingot inventory is 179,000 tons (previous value: 165,000 tons); the soda ash inventory is 1.682 million tons (previous value: 1.627 million tons) [10][11][79]. 3.11 Financing: Decline in Net Financing of Local Government Bonds and Credit Bonds - The financing high - frequency index is 229.1 (previous value: 228.5), with a week - on - week increase of 0.6 points and a year - on - year increase of 29.3 points, and the year - on - year increase has expanded. The net financing of local government bonds is - 4.3 billion yuan (previous value: 5.05 billion yuan); the net financing of credit bonds is 9.96 billion yuan (previous value: 12.37 billion yuan); the 6M national - share bank draft rediscount rate is 1.05% (previous value: 1.08%) [10][11][89].