1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - This week (May 12 - May 16), the bond market was mainly volatile, with a differentiated yield curve and a steeper long - end. Yields generally rose due to factors such as better - than - expected China - US trade and tightened liquidity after the RRR cut and central bank's net capital withdrawal. As of May 16, the yields of 30Y, 10Y, and 1Y treasury bonds changed by 4BP, 3BP, and closed at 1.88%, 1.68%, and 1.45% respectively. The term spreads of 30Y - 10Y and 10Y - 1Y changed by - 1BP and 1BP to 20BP and 23BP respectively [1][7]. - Next week, the liquidity may be disturbed by factors such as concentrated treasury bond supply and tax periods, but the probability of a significant tightening is low. Fundamentally, most production indicators declined, real - estate transactions decreased year - on - year, and most price sectors continued to fall [1][25]. - In the short term, the bond market may be disturbed by tax periods and supply, but overall it is not bearish. Attention should be paid to the progress of fiscal bond issuance in May and the changes in liquidity maintained by the central bank [3][85]. 3. Summary According to the Catalog 3.1 This Week's Bond Market Review: Bond Market Weakened, Yield Curve Differentiated, Long - end Steepened - This week, the bond market was affected by better - than - expected China - US trade, RRR cut but central bank's net capital withdrawal and tightened liquidity. Yields generally rose. The 10Y yield increase was due to better - than - expected China - US trade negotiations, stronger equity market, and tightened liquidity [1][7]. - Specifically, on May 12, the bond market weakened significantly due to better - than - expected China - US trade negotiations; on May 13, the bond market recovered as liquidity was loose; on May 14, the bond market weakened slightly as the equity market strengthened; on May 15, the bond market weakened as liquidity tightened; on May 16, the long - and short - ends of the bond market showed differentiated performance as the funding rate increased [20][21]. 3.2 Next Week's Outlook and Strategy 3.2.1 Bond Market Outlook: Liquidity May Be Disturbed by Concentrated Treasury Bond Supply and Tax Periods, but the Probability of a Significant Tightening Is Low - Fundamentals: Most production indicators declined by 0.5 - 1 percentage point, but the operating rate of automobile semi - steel tires recovered to the pre - holiday level, rising to 78.33% month - on - month. Real - estate indicators such as commercial housing sales and land transactions decreased by 9 - 31% year - on - year. Most price indices continued to fall, with a decline of 0.4 - 0.7% except for pork prices which were flat compared to last week [25][37][44]. - Supply: From May 12 - May 16, the issuance scale of interest - rate bonds decreased slightly. The issuance of treasury bonds was 5904.9 billion yuan (including 280 billion yuan of special treasury bonds), local bonds was 1972.5 billion yuan, and inter - bank certificates of deposit was 5139.9 billion yuan, a decrease of 326.49 billion yuan compared to last week. The overall issuance progress of local bonds reached 32.5% [2][58]. - Liquidity: From May 12 - May 16, the central bank's reverse repurchase had a net withdrawal of 475.1 billion yuan. Liquidity tightened this week. DR001/DR007 rose by 14BP and 10BP respectively compared to May 9. For next week, attention should be paid to the disturbance caused by the large - scale and long - term treasury bond supply [2][67]. 3.2.2 Bond Market Strategy: In the Short Term, It May Be Disturbed by Tax Periods and Supply, but the Bond Market Is Not Bearish Overall - Next week, attention should be paid to: 1) The peak issuance of special treasury bonds and the accelerated implementation of new special bonds will drive the high - level supply of government bonds. The net supply in May is estimated to be about 1.9 trillion yuan. 2) The central bank will maintain liquidity, but it may be disturbed by tax periods and bond issuance. The probability of a significant tightening of liquidity is low. 3) The policy space is compressed, and the expectation of "loose money" is lowered [3][85]. - In terms of interest rates, the bond market will be volatile in the short term. The 10 - year treasury bond yield may reach a maximum of 1.8% (the level before the US announced tariffs in April), and considering a 10BP policy rate cut, 1.7% is a good point for increasing positions. For the short - end, if liquidity tightens next week, short - end interest rates may rise, and trading opportunities can be focused on [4][86]. 3.3 Next Week's Open - Market Operations and Financial Calendar - The table shows the central bank's open - market operations in the past four weeks and the forecast for the next four weeks, including reverse repurchase, MLF, and net investment (withdrawal) [87]. - The table of next week's (May 19 - May 25) capital calendar shows the expected issuance scale of local government bonds, the maturity scale of certificates of deposit, the maturity scale of reverse repurchases, and whether it is a tax - payment week or a reserve - payment week [90]. - The table of next week's financial calendar shows the release date, time, event/indicator name, and market expectation of some economic data [91].

Group 1: Monetary Policy Framework Adjustments - Federal Reserve Chairman Powell discussed potential adjustments to the long-term monetary policy framework, particularly the "Flexible Average Inflation Targeting" (FAIT) and "Mitigating Shortfalls from Maximum Employment" frameworks[2] - The Fed's current monetary policy framework needs to adapt to the post-pandemic economic environment, moving away from the previous "three lows" (low rates, low growth, low inflation) context[4] - The introduction of asymmetric mechanisms in 2019 aimed to stimulate inflation and employment in a low-growth environment, allowing inflation to exceed 2% temporarily if it had been below that level for an extended period[4] Group 2: Inflation and Employment Targets - The Fed continues to maintain a 2% inflation target despite the recent adjustments to its policy framework, emphasizing the need to return to this target after inflation surged due to supply-demand imbalances[5] - Powell indicated that the Fed is not currently considering raising the 2% inflation target, as doing so could be misinterpreted as a signal of monetary easing[5] - The Fed's recent reliance on hard data suggests limited probability for a rate cut in July, with adjustments to the long-term framework not signaling a dovish stance[6] Group 3: Economic Risks - Risks include potential economic downturns due to reduced fiscal spending, worsening trade tensions, and liquidity issues in the U.S. Treasury market[7]

Investment Rating - The report maintains a "Recommended" rating for the banking sector, indicating a positive outlook for the industry [5]. Core Insights - The report highlights that the growth of social financing (社融) has been driven by accelerated government bond issuance, while credit demand remains weak. In April 2025, new social financing amounted to 1.16 trillion yuan, with a year-on-year increase of 1.22 trillion yuan [5]. - The report notes that the total social financing stock grew by 8.74% year-on-year, with a quarter-on-quarter increase of 0.37 percentage points. However, credit demand from both households and enterprises has shown signs of fatigue due to multiple factors, including insufficient demand, debt restructuring, and tariff impacts [5]. - The report indicates that in April, new RMB loans increased by 884 billion yuan, which is a year-on-year decrease of 2,465 billion yuan, reflecting a negative contribution from credit to social financing [5]. Summary by Sections Social Financing and Credit Demand - In April, the government issued 2.16 trillion yuan in bonds, a year-on-year increase of 732.7 billion yuan, contributing significantly to the growth of social financing [5]. - The report details that household loans decreased by 5,216 billion yuan year-on-year, with short-term loans down by 4,019 billion yuan and medium to long-term loans down by 1,231 billion yuan [5]. - For enterprises, new loans amounted to 6,100 billion yuan, which is a year-on-year decrease of 2,500 billion yuan, influenced by ongoing debt restructuring and weakened financing demand due to tariffs [5]. Deposit and Money Supply Trends - The report states that M1 and M2 money supply grew by 1.5% and 8% year-on-year, respectively, indicating a decline in the liquidity of funds [5]. - By the end of April, RMB deposits in financial institutions increased by 8% year-on-year, with a month-on-month decrease of 4,400 billion yuan [5]. - Non-bank deposits rose by 1.57 trillion yuan year-on-year, driven by a significant increase in wealth management products [5]. Investment Recommendations - The report suggests that the continued strength of government bonds will support social financing growth, while credit demand is expected to recover gradually. Recent financial policies, including interest rate cuts and structural tools, are anticipated to improve the banking sector's fundamentals [5]. - Specific stock recommendations include Industrial and Commercial Bank of China (601398), China Construction Bank (601939), Postal Savings Bank of China (601658), Jiangsu Bank (600919), and Changshu Bank (601128) [5].

Macro Overview - The financial data for April 2025 indicates a clear trend of loose monetary policy, with M2 growth rebounding to 8% and new social financing increasing by 1.16 trillion yuan, reflecting a year-on-year increase of 1.22 trillion yuan [2][4] - The central bank's intention to maintain ample financial liquidity is evident, although the evidence for the establishment of a wide credit chain is still lacking [3][4] Technology Sector - The technology growth sector is expected to remain active, driven by policy support and industrial upgrades, particularly in AI computing power, robotics, and semiconductors, which are seen as long-term growth areas [8] - The market is anticipated to experience a volatile upward trend from mid-May to mid-June, with structural opportunities emerging despite potential external uncertainties [8] Steel Industry - The steel sector is undergoing a transformation with a focus on high-quality development, as demand shifts from real estate to high-end manufacturing, supported by government policies [10][13] - The domestic steel production is showing signs of recovery, with crude steel output increasing by 0.60% year-on-year, and the demand for high-end steel products is expected to improve marginally [11][12][13] Chemical Industry - The chemical sector is currently at a low point, with revenue and profit pressures, but there are structural opportunities to be seized, particularly in expanding domestic demand and new material production [16][18] - The basic chemical industry is viewed as having long-term investment value due to its low valuation compared to historical averages, with specific focus areas including civil explosives, refrigerants, and modified plastics [18] Media and AI - The domestic AI industry is rapidly advancing, with local open-source models expected to overcome computational and chip limitations, enhancing the competitive edge of leading internet companies [21][24] - The film industry is experiencing a downturn, with April box office revenues down 46.49% year-on-year, indicating a need for high-quality content to drive market recovery [21] Company-Specific Insights - Benxi Steel is recognized for its leading position in the automotive steel sector, with significant production capabilities and a focus on innovation and quality [26][29] - The company is leveraging 5G and industrial internet technologies to enhance operational efficiency and automation, indicating a strong commitment to digital transformation [28]

Investment Strategy - The urban renewal action plan outlines eight main tasks aimed at improving urban infrastructure and housing quality, with a focus on high-quality supply rather than extensive investment[2] - Key investment areas include the renovation of existing buildings, upgrading old residential communities, and enhancing urban infrastructure, particularly underground pipeline systems[6][7] Financial Projections - Historical spending on dangerous housing renovations peaked at 53.6 billion CNY annually during the 2015-2019 period, decreasing to 9.3 billion CNY by 2022[8][10] - Current estimates suggest that annual investment in dangerous housing renovations may be below 50 billion CNY[8] Funding Sources - The action plan specifies diverse funding sources, including budgetary investments, long-term special bonds, local government bonds, and various financial institution loans[11] - The primary funding source is expected to be government bonds, with some funds already allocated to urban renewal projects this year[11] Economic Risks - Potential risks include slower-than-expected domestic economic recovery, misinterpretation of policy implications, and unexpected declines in the real estate market[19]

- The report highlights the performance of index-enhanced funds, with the CSI 500 index-enhanced funds showing the highest weekly excess return median of 0.16%, followed by CSI 1000 index-enhanced funds at 0.12%, and CSI 300 index-enhanced funds at -0.04%[2][3][4] - Other index-enhanced funds had a weekly return median of 0.24%, with the best weekly performance reaching 4.24% and the worst at -3.33%[3][6] - Absolute return (hedge) funds had a weekly return median of 0.09%, with the best weekly performance at 0.63% and the worst at -0.34%[6][7] - Active quantitative funds showed a weekly return median of 1.90%, with the best weekly performance at 7.27% and the worst at -3.19%[6][7] - Multi-factor funds demonstrated a weekly return median of 2.20%, with the best weekly performance at 2.95% and the worst at 0.57%[19][22] - Big data-driven active investment funds had a weekly return median of 1.91%, with the best weekly performance at 4.18% and the worst at -1.61%[20][22] - Sector rotation funds had a weekly return median of 1.30%, with the best weekly performance at 4.37% and the worst at -1.55%[18] - Funds extracting performance fees had a weekly return median of 0.79%, with the best weekly performance at 3.66% and the worst at -4.41%[15][17] - Thematic funds focused on private placements had a weekly return median of 0.70%, with the best weekly performance at 3.65% and the worst at -2.98%[14]

Investment Rating - The report suggests a focus on leading internet companies in the AI sector, indicating a positive investment outlook for companies like Tencent and Alibaba [4][5][6]. Core Insights - The report highlights a significant decline in the film industry, with April box office revenues at 1.198 billion yuan, a year-on-year decrease of 46.49% and a month-on-month decrease of 37.77% [4][16]. - The gaming market continues to grow, with March 2025 sales revenue at 26.692 billion yuan, showing a year-on-year increase of 13.99% despite a month-on-month decline of 4.45% [4][49]. - The advertising market saw a slight increase of 1.5% year-on-year in March 2025, with notable growth in categories like entertainment and personal care [4][5]. - The launch of GPT-4.1 has significantly enhanced programming capabilities, indicating a rapid advancement in AI technology [4][5]. Market Overview - The media industry index fell by 2.23% in April 2025, underperforming compared to the Shanghai Composite Index, which decreased by 1.70% [6][8]. - The overall media sector is experiencing a downturn, with various sub-sectors like film and television broadcasting showing significant declines [7][8]. Sub-industry Data Tracking Film Industry - The film market is cooling down, with a notable lack of blockbuster films leading to a decline in overall box office performance [4][16]. - "Nezha 2" continues to show a long-tail effect, contributing 210 million yuan to the box office, accounting for approximately 19.8% of total revenues [4][16]. Gaming Industry - The gaming market remains robust, with mobile games generating 19.814 billion yuan in March 2025, a year-on-year increase of 16.88% [4][49]. - Client games also showed growth, with a market size of 5.589 billion yuan, reflecting a year-on-year increase of 1.09% [4][49]. Advertising Industry - The advertising market is undergoing adjustments, with a 1.5% year-on-year increase in March 2025, particularly in entertainment and personal care sectors [4][5]. AI Industry - The rapid development of AI technology is highlighted, with the introduction of new models like GPT-4.1, which enhances programming capabilities significantly [4][5]. Investment Recommendations - The report recommends focusing on leading internet companies that are embracing AI, such as Tencent and Alibaba, which are expected to see a revaluation of their value due to advancements in AI technology [4][5]. - In the film sector, companies like Wanda Film and Huayi Brothers are suggested for their potential in leveraging high-value IPs [4][5].

Key Insights - The report highlights the effective outcomes of the recent China-US trade talks, with a focus on the potential benefits for the optical communication and IoT sectors due to reduced tariffs [12][13] - The easing of tariff pressures is expected to restore confidence in the consumer electronics sector, particularly benefiting companies in the Apple supply chain and leading passive component manufacturers [15][17] - The construction machinery sector shows a mixed performance, with domestic excavator sales growth slowing in April, but overall positive trends in exports and improving operational quality among leading manufacturers [19][22] Macro Insights - The US CPI data for April indicates a year-on-year increase of 2.3%, with core CPI at 2.8%, suggesting that inflationary pressures are stabilizing [2][3] - The report anticipates that inflation will rise in the latter half of the year, potentially reaching 3.0%-3.5% due to tariff impacts, although immediate effects remain muted [4][5] - The US Federal Reserve is expected to delay interest rate cuts, with market expectations for two cuts later in the year [6][5] Communication Sector - The deployment of 5G-A networks across 31 provinces in China is progressing, enhancing capacity, speed, latency, and reliability compared to 5G [8] - The report emphasizes the importance of self-reliance and independence in the communication industry, with a well-established domestic optical communication supply chain poised to benefit from reduced tariff impacts [13] Electronics Sector - The recent trade agreement has led to a significant reduction in tariffs on electronic components, providing a temporary reprieve for companies exporting to the US [15][16] - The report notes a recovery in market confidence within the electronics sector, although competition is expected to intensify as international players increase their presence in the Chinese market [16] Machinery Sector - April data shows a year-on-year increase of 17.6% in domestic excavator sales, although growth rates have slowed compared to previous months [19] - Leading manufacturers are experiencing improved profitability and operational quality, with significant cash flow increases reported [22][23] Light Industry - The home furnishing sector is showing signs of recovery, with government subsidies contributing to improved performance in Q1 2025 [26] - The packaging industry is witnessing steady performance from leading companies despite competitive pressures, with expectations for improved market dynamics [27]

Key Insights - The report highlights the effective outcomes of the recent China-US trade talks, with a focus on the potential benefits for the optical communication and IoT sectors due to reduced tariffs [12][13] - The easing of tariff pressures is expected to restore confidence in the consumer electronics sector, particularly benefiting companies in the Apple supply chain and leading passive component manufacturers [15][17] - The construction machinery sector shows a mixed performance, with domestic excavator sales growth slowing in April, but overall positive trends in export growth and improved operational quality among leading manufacturers [19][22][23] Macro Insights - The US CPI data indicates a slight decline in inflation, with a year-on-year increase of 2.3% in April, suggesting that tariff impacts have not yet significantly affected consumer prices [2][3] - High-frequency data shows some retail prices have begun to rise, indicating potential inflationary pressures in the latter half of 2025 [4][5] - The Federal Reserve's interest rate decisions may be influenced by the delayed impacts of tariffs and inflation data, with expectations for rate cuts potentially occurring in September [6][5] Communication Sector - The deployment of 5G-A networks across 31 provinces in China is expected to enhance capacity, speed, latency, and reliability, paving the way for new applications and improved automation in traditional industries [8] - The focus on self-reliance and independence in technology development remains a priority, with the optical communication industry poised for growth despite tariff challenges [13] Electronics Sector - The recent trade agreement has led to a significant reduction in tariffs, providing a temporary reprieve for consumer electronics companies and potentially lowering production costs [15][16] - The market is witnessing a recovery in confidence, although competition is intensifying, necessitating innovation and quality improvements among domestic firms [16][17] Machinery Sector - April data shows a year-on-year increase in excavator sales, with domestic sales growing by 16.4% and exports by 19.3%, although the growth rate has slowed compared to previous months [19][22] - Leading manufacturers are experiencing improved profitability and operational quality, driven by cost control and reduced capital expenditure [22][23]

Key Insights - The report highlights the positive impact of the recent US-China trade agreement, which includes the cancellation of 91% of additional tariffs and a 90-day suspension of 24% tariffs, creating a more stable environment for negotiations and potential cooperation [2][3] - The agreement is expected to reduce uncertainty in trade, improve investor sentiment, and enhance corporate profit expectations, particularly for industries heavily reliant on exports [3][4] - The report suggests that sectors previously affected by tariffs, such as electronics, consumer goods, and machinery, may see a recovery in market performance [3][4] Electronics Industry - The electronics sector is experiencing a structural recovery, with high growth in AI-related hardware and a stable performance in consumer electronics, supported by government subsidies [19][16] - Sub-sectors like semiconductors are witnessing a resurgence, with domestic replacements accelerating and a strong performance from leading companies [16][19] - The report notes a divergence in performance among companies within the consumer electronics space, with some benefiting from AI and global expansion while others face challenges from competition and demand weakness [17][19] Military Industry - The recent India-Pakistan conflict has highlighted China's military exports, with Pakistan being a significant customer for Chinese military equipment, which may enhance China's military trade reputation [22][23] - The report anticipates increased demand for military equipment due to the conflict and suggests that domestic military enterprises are less affected by US tariff wars, presenting a stable investment opportunity [24][22] - The long-term outlook for the military sector remains positive, with expectations of sustained high demand leading up to the centenary of the Chinese military in 2027 [24][22] Construction Materials - The construction materials sector is showing signs of recovery, with a notable improvement in profitability in Q1 2025 compared to the previous year, driven by stabilizing infrastructure investment and a gradual recovery in demand [27][30] - The report indicates that cement prices may see upward pressure due to improved demand and supply optimization, while glass fiber and other materials are also expected to benefit from emerging market demand [30][27] - The construction materials market is anticipated to continue its recovery, supported by favorable policies and a focus on renovation and upgrading existing properties [30][28] Banking Sector - The banking sector is benefiting from a series of financial policies aimed at optimizing credit structures and enhancing profitability, with a notable increase in bank stock performance [32][37] - The report emphasizes the importance of structural monetary policy tools and the potential for increased capital inflows into the banking sector, which may further enhance its valuation [33][37] - The outlook for the banking sector remains positive, with expectations of continued support from government policies and a focus on technological financial services [36][37]