Market Overview - The Hang Seng Index increased by 2.01%, the Hang Seng Tech Index rose by 4.31%, and the Hang Seng China Enterprises Index gained 2.85% during the week from December 29, 2025, to January 2, 2026[4]. - Net selling through the Hong Kong Stock Connect amounted to 3.4 billion CNY, while southbound funds recorded a net purchase of 1,301.5 billion CNY in 2025, equivalent to 174.92% of the total net purchases for 2024[4]. AI Sector Developments - Meta acquired AI startup Manus for over 2 billion USD, which will continue to operate independently[4]. - Baidu's subsidiary Kunlun Chip submitted a confidential listing application to the Hong Kong Stock Exchange on January 2, 2026[6]. - MiniMax launched the MiniMax M2.1 model and went through the listing hearing with the Hong Kong Stock Exchange[4]. Investment Recommendations - For Tencent Holdings, a PE ratio of 18X is projected for 2026, with expectations of accelerated growth in domestic gaming and healthy overseas growth[4]. - Kuaishou is expected to have a PE ratio of 11X for 2026, with stable growth and potential investment opportunities following any short-term volatility[4]. - Alibaba is projected to have a FY27 PE of 16X, with new AI models and hardware developments to watch[4]. Consumer Sector Insights - Suplay submitted its prospectus for listing on the Hong Kong Stock Exchange, aiming to capitalize on its leading position in the collectible card market[6]. - Pop Mart's valuation is at 14X PE for 2026, with potential sales boosts from the holiday season and strong IP performance expected[4]. Risks - Geopolitical risks may impact overseas revenues and competitiveness, potentially affecting stock prices[22]. - Regulatory risks in the internet sector could influence industry and individual stock performance[22].

Group 1 - The report addresses three core questions regarding the RMB exchange rate in 2026: 1) How to assess the rise of the RMB? 2) How will the exchange rate rise and how will the central bank regulate it? 3) What impact does RMB appreciation have on stocks and bonds? [2][8] - The current appreciation of the RMB is deemed reasonable, supported by a decline in the US dollar index (over 10%), a narrowing of the China-US interest rate differential (approximately 110 basis points), and a decrease in the attractiveness of the RMB as a financing currency [2][7][10]. - The expected central level for the RMB exchange rate is around 6.8, with the central bank's regulation being crucial to avoid unnecessary overshooting [2][23]. Group 2 - The central bank's regulation follows a "symmetrical principle," meaning that just as it previously prevented excessive depreciation, it should also focus on regulating excessive appreciation to balance the economic impact of exchange rate fluctuations [2][23]. - Key regulatory measures include the use of the counter-cyclical factor in the central parity rate, guiding expectations through official channels, and reducing the reserve requirement for forward foreign exchange purchases [2][23][44]. - The report suggests that the RMB's appreciation can be divided into "non-overshooting" and "overshooting" phases, with historical data indicating that after overshooting, the central bank tends to gradually open the door to rate cuts, aiding in the return of liquidity to a neutral environment [2][47]. Group 3 - In the non-overshooting phase, the stock market benefits from cyclical recovery, favoring cyclical sectors, while the bond market may face pressure unless driven by overseas quantitative easing [2][56]. - Conversely, in the overshooting phase, economic expectations may suffer negative impacts, leading to generally subdued stock market performance, while the bond market may see increased probabilities of appreciation [2][56]. - Historical data shows that during non-overshooting phases, the stock market, represented by indices like the CSI 300, tends to perform well, while the bond market may not necessarily decline [2][56].

Investment Rating - The report maintains a "Recommended" rating for the commercial aerospace industry [4] Core Insights - The commercial aerospace sector is expected to transition from initial scale expansion to a critical development phase focused on quality improvement and efficiency enhancement by 2026, as highlighted in a recent speech by President Xi Jinping [8] - The introduction of the Shanghai Stock Exchange's guidelines for commercial rocket companies is anticipated to accelerate the IPO process for private enterprises in the sector, particularly those with reusable rocket technology [8] - The efficiency of satellite constellation deployment is expected to improve, driven by advancements in rocket capacity and cost control, with reusable rockets playing a crucial role [8] - The concept of space computing is moving towards practical implementation, with SpaceX planning an IPO in 2026, which may influence domestic developments in space computing [8] Summary by Sections - **Rocket Sector**: The report indicates that 2026 will see the listing of main rocket manufacturers and a potential turning point for reusable technology, which is expected to enhance the launch capabilities of private companies [8] - **Satellite Sector**: The report emphasizes that the acceleration of low Earth orbit satellite launches will depend on the management of launch costs and rocket capacity, with reusable rockets being a key driver [8] - **Space Computing**: The report outlines a government-led initiative to develop a multi-core plan for space computing, focusing on specialized computing constellations and the integration of terrestrial and space computing capabilities [8] - **Investment Recommendations**: The report suggests focusing on leading companies in rocket components and satellite operations, which are likely to benefit from increased launch capacity and reduced costs [8]

Investment Rating - The report maintains a "Recommendation" rating for the industry [3] Core Insights - The domestic tourism market has shown a strong start for the New Year holiday, with significant increases in travel bookings and consumer spending [8] - The report highlights the impressive performance of duty-free sales and the rising popularity of hotel bookings during the holiday period [8] - The report suggests that the industry is stabilizing and recovering, with a focus on companies that demonstrate both certainty and reasonable growth potential [8] Summary by Sections Domestic Travel - Ice and snow tourism remains a top choice, with bookings in Baishan City increasing by 57% year-on-year, and train ticket bookings to Changbai Mountain up by 110% [2] - Mountain scenic spots continue to attract visitors, with ticket bookings for mountain attractions increasing by over 150%, including a 544% increase in orders for Huangshan [2] - New Year concerts have become a significant driver of tourism, with orders in Zhuji increasing over 25 times due to a concert by Wang Leehom [2] Inbound and Outbound Travel - Inbound tourism is experiencing strong growth, with daily inbound and outbound travelers expected to exceed 2.1 million, a 22.4% increase from the previous year [8] - Duty-free shopping in Hainan has seen a surge, with sales reaching 5.05 billion yuan, a 121.5% increase year-on-year [8] - Outbound travel has also surpassed previous years, with a 102.8% increase in travelers to Hong Kong on the first day of the holiday [8] Industry Performance - Duty-free sales have performed exceptionally well, with significant increases in both sales volume and average spending per customer [8] - Hotel bookings have seen a nearly 50% increase in popularity during the holiday period, indicating a recovery in the hospitality sector [8] - Restaurant sales have also surged, with a 4.6% increase in daily sales in Beijing and a 36.5% increase in Nanjing [8] Investment Recommendations - The report suggests focusing on companies such as Huazhu Group, Tongcheng Travel, Jinjiang Hotels, ShouLai Hotels, China Duty Free Group, Guoquan, Green Tea Group, and Changbai Mountain for potential investment opportunities [8]

Group 1 - The investment rating for the company is "Recommended" [3] - The core viewpoint of the report emphasizes that the company is positioned as a global source for new drug development, leveraging innovative gene editing technology and a robust antibody platform to drive growth [8][9] - The report highlights three main business segments: preclinical products and services, antibody platform, and clinical research organization (CRO) services, all of which are experiencing high growth due to favorable industry conditions [8][30] Group 2 - The company is expected to achieve significant revenue growth, with projected revenues of 9.80 billion RMB in 2024, 13.52 billion RMB in 2025, and 18.11 billion RMB in 2026, reflecting compound annual growth rates (CAGR) of 41.96% from 2019 to 2024 [2][30] - The net profit is forecasted to increase dramatically, with estimates of 34 million RMB in 2024, 155 million RMB in 2025, and 321 million RMB in 2026, indicating a CAGR of 362.6% from 2024 to 2025 [2][30] - The company has established a strong international presence, with overseas revenue accounting for 68% of total revenue in the first half of 2025, driven by a mature U.S. subsidiary and a diverse customer base [16][43] Group 3 - The report outlines the company's innovative gene editing technology as a key competitive advantage, enabling the development of customized animal models and enhancing the efficiency of drug development processes [48][51] - The antibody development business is expected to grow significantly, with revenues projected to reach 3.18 billion RMB by 2024, supported by a large library of antibody sequences and a flexible revenue model [39][40] - The company has a well-defined growth strategy, focusing on expanding its international market share and enhancing its service offerings to meet the evolving needs of pharmaceutical companies [8][30]

Economic Performance - The U.S. economy has shown resilience with a real GDP annualized growth rate consistently above 2% in the first three quarters of 2025, excluding tariff impacts[5] - However, there is a stark contrast between macroeconomic data and micro-level experiences, with declining employment market activity and falling consumer confidence[5] Structural Issues - The economic growth is characterized by a "K-shaped" divergence, where a narrow prosperity in certain sectors, like AI, contrasts with widespread slowdown in others[5] - AI-related investments contributed 0.8 percentage points to the real GDP growth, while personal consumption expenditures contributed 1.8 percentage points, indicating a dual-driven economic model[13] Industry Disparities - Traditional cyclical industries, particularly real estate, are experiencing downturns due to high interest rates and housing prices, with residential investment maintaining negative growth[17] - The real estate sector is under pressure, with mortgage burdens at historical highs, limiting demand and investment willingness[17] Consumer Behavior - Wealth concentration is evident, with the top 20% of income earners holding nearly 90% of stock and mutual fund assets, exacerbating the K-shaped economic divide[23] - Consumer spending is increasingly reliant on high-end sectors, while essential goods and services show weaker performance, reflecting structural imbalances in consumption[34] Political Implications - The upcoming 2026 elections are expected to focus on improving living standards, with the Trump administration likely to adopt a dual strategy of encouraging AI investment and enhancing social welfare[36] - The administration's policies may aim to address economic disparities to regain public support, especially as approval ratings decline[36] Risks - Potential risks include aggressive policies leading to economic downturns, unexpected tariff expansions causing global economic slowdowns, and geopolitical tensions increasing asset price volatility[47]

Group 1: PMI Overview - In December 2025, China's Manufacturing Purchasing Managers' Index (PMI) rose to 50.1%, an increase of 0.9 percentage points from the previous month, marking a return to the expansion zone[4] - This is the first time in eight months that the PMI has returned to the expansion zone, indicating a significant reversal of the typical seasonal decline usually seen in December[4] - Key indicators showing unusual growth include the PMI Production Activity Expectation Index (up 2.8 percentage points), PMI Production Index (up 2.2 percentage points), and PMI Purchase Volume (up 1.8 percentage points) compared to historical averages[4] Group 2: Factors Influencing Expansion - The late timing of the Spring Festival this year led companies to adjust production schedules to avoid disruptions, resulting in a "production rush" phenomenon[4] - Inefficient low-cost production capacities have been curtailed, allowing high-efficiency and compliant enterprises to expand production as market conditions improve[4] - The price index reflects the deepening effects of "anti-involution" policies, with the PMI Raw Material Purchase Price Index decreasing by 0.5 percentage points while the PMI Factory Price Index increased by 0.7 percentage points[4] Group 3: Export and Non-Manufacturing Insights - The PMI New Export Orders Index increased by 1.4 percentage points in December, contrary to the typical seasonal decline, indicating enhanced resilience in Chinese exports[4] - The construction PMI surged by 3.2 percentage points to 52.8%, returning to the expansion zone, supported by new policy financial tools and project acceleration[4] - In contrast, the service sector PMI only slightly increased by 0.2 percentage points and remains in the contraction zone, highlighting uneven recovery in domestic consumption[4]

Group 1 - The report highlights that the liquidity remains ample as of late December 2025, with bank lending exceeding 60 trillion yuan, and key rates such as DR001 and R001 showing narrow fluctuations [10][24][39] - The People's Bank of China emphasizes a monetary policy focused on expanding domestic demand and optimizing supply, indicating a potential alignment with fiscal debt issuance in 2026 [11][24] - The report notes a significant increase in the issuance of long-term local government bonds, particularly 30-year bonds, which have improved liquidity and attracted institutional investors [18][20][39] Group 2 - The analysis of government debt issuance reveals that national bonds follow a strict issuance plan, while local bonds have more flexible issuance schedules, leading to discrepancies between planned and actual issuance [20][39] - The report outlines that local government bonds are primarily aimed at debt replacement, with average costs decreasing by over 2 percentage points in many regions, thus alleviating repayment pressures [21][39] - The planned issuance of local government bonds for Q1 2026 totals 1.61 trillion yuan, with a focus on potentially reducing the supply of 30-year bonds in favor of shorter maturities [22][39] Group 3 - The report indicates that the net financing from local government bonds was negative in recent weeks, highlighting the need for careful monitoring of future issuance strategies [42][39] - The analysis of the interbank market shows that the demand for short-term bonds remains strong, with significant net purchases observed in the secondary market [48][39] - The report suggests that the pricing of long-term bonds may not be attractive currently, with better value found in shorter maturities, reflecting market dynamics [49][39]

1. Report Industry Investment Rating The document does not mention the industry investment rating. 2. Core Views of the Report - The Huaxia CNNC Clean Energy REIT project has certain new - share subscription cost - effectiveness. Its underlying asset, the Popona Hydropower Station, is a mature clean - energy infrastructure with stable operation history and good cash - flow sustainability. The short - term and long - term revenue paths are clear, and it is supported by the regional power supply - demand environment [5]. - The competition risk is controllable in the short term, and in the long term, it is expected to benefit from the synergistic effect of upstream reservoirs. The original equity holder has strong strength, which provides a solid guarantee for the project operation. The valuation and distribution of this project are higher than comparable projects [5]. - In the current REITs market after adjustment, the project's new - share subscription is expected to attract investors who focus on stable returns and the energy infrastructure sector. Its listing performance may be promoted by both the support of asset fundamentals and the marginal improvement of market sentiment [5]. 3. Summary According to the Directory 3.1 Project Basic Situation - The Huaxia CNNC Clean Energy Closed - end Infrastructure Securities Investment Fund was registered by the China Securities Regulatory Commission on December 9, 2025. The underlying asset is the Popona Hydropower Station in Xinjiang, and the main source of cash - flow is electricity sales revenue [8]. - The project was completed in 2016, with a total installed capacity of 150,000 kilowatts and a designed annual power generation of 666 million kWh. From 2022 to 2025 H1, the company's gross profit margin maintained a good level, with fluctuations mainly due to equipment maintenance,停机避沙, and changes in power generation and electricity price structure [9]. - Except for 2024, the project's water abandonment rate remained at a relatively low level. In 2024, the water - available power generation and actual power generation reached 785 million kWh and 679 million kWh respectively [12]. 3.2 Hydropower Industry Pattern Analysis - Hydropower is an important part of the clean - energy system, currently accounting for about 15% of the national power supply. China's hydropower resources are becoming scarcer, with the installed capacity of conventional hydropower reaching 436 million kilowatts by the end of 2024 [15]. - In 2024, China's power supply - demand was in a "tight balance" state, with the highest power consumption load hitting a record high. The power consumption demand continued to grow steadily, while the new - energy installed capacity expanded rapidly, but its output was volatile [16]. - In Xinjiang, the hydropower operation environment has certain support. The power - market reform is advancing, and the water abandonment situation has improved. The Karakash River Basin has a clear hydropower development plan, and the planned new projects are progressing slowly in the short term, with uncertain long - term impacts [17][18][19]. - In the long - term, the hydropower industry has stable development potential. Pumped - storage power is expected to become a main regulating power source, and hydropower can play a greater role in promoting the "integration of wind, solar and hydropower" [20]. 3.3 Project Stability 3.3.1 Hydrological Conditions and Operation Basis - The hydrological conditions of the Karakash River are stable in the long term. The project can rely on the upstream Wuluwati Water Conservancy Project and its own facilities to adjust operation, which helps to stabilize power generation [22]. 3.3.2 Power Consumption and Dispatching Environment - The Hotan region has long - term power consumption capacity, and the "Power Transmission from Xinjiang" project provides stable support. Hydropower is in the priority dispatching sequence in the local power grid and is less affected by the rapid growth of photovoltaic installation [23]. 3.3.3 Upstream Reservoir and Power Grid Dispatching Synergy Relationship - The project can benefit from the regulation of upstream reservoirs and the "solar - hydro complementarity" dispatching mode. The future upstream reservoir is expected to increase the annual power generation of the Popona Hydropower Station by 5% [24]. 3.3.4 Electricity Price Mechanism and Water Abandonment Situation - In 2025, the power generation of the Popona Hydropower Station is fully included in the priority power - generation plan. From 2026, it will gradually participate in the market - oriented transaction, and the predicted market - oriented electricity price is about 0.25 yuan/kWh (tax - included) [25][26]. - The proportion of market - oriented transactions has been increasing. In 2024, the water - abandonment rate increased significantly due to insufficient grid consumption capacity. In the long - term, the water - abandonment pressure is expected to be alleviated with the improvement of demand and grid capacity [27][30]. 3.4 Original Equity Holder - The original equity holder is Xinjiang Xinhua Hydropower Investment Co., Ltd., which is controlled by the State - owned Assets Supervision and Administration Commission of the State Council. It is the largest hydropower operator in Xinjiang, with stable operation and profitability [31][33][34]. - After the fund issuance, the wholly - owned subsidiary Yulong Company will be responsible for project operation management, with more than 10 years of operation experience in the Popona Hydropower Station, providing a guarantee for stable project operation [40]. 3.5 Valuation and Distribution Rate 3.5.1 Historical Review of Energy Infrastructure - related REITs - REITs have certain "convertible - bond - like" attributes, related to interest - rate trends and the equity market. Energy infrastructure - related REITs have seen weakening performance since July 2025, but the new - share subscription income of new - issued REITs is still expected to be at a relatively ideal level [41]. 3.5.2 Valuation Analysis - The estimated value of the project's asset group is 1.253 billion yuan (as of June 30, 2025). The estimated annual power generation is 658 million kWh, which is a conservative assumption. The net cash - flow distribution rates for July - December 2025 and 2026 are 6.03% (annualized) and 5.64% respectively, and the IRR for fund investors during the fund's duration is 6.10% [44][45]. - Compared with the only comparable listed hydropower REIT (China Asset Management China Power Construction Clean Energy REIT), the Huaxia CNNC Clean Energy REIT is superior in asset value and cash - flow distribution ability, with more advantages in cash - flow return and distribution stability [46][49].

1. Report Industry Investment Rating No relevant content provided. 2. Report's Core View - This week, the entire curve of US Treasury yields declined slightly by 3 - 5bp. Although inflation and employment data are favorable for the bond market, the decline in interest rates is not significant. This is because the market doubts the validity of the data from October and November, and the expected change in the interest - rate cut path is small [2][11]. - The Bank of Japan raised the policy rate to 0.75%, but the yen continued to weaken. The "limited hawkish" stance of the Bank of Japan is due to the need to balance multiple pressures. As the yen approaches the "intervention level", the actions of the Japanese Ministry of Finance may affect the pricing of US Treasuries and the stock market [3][12]. - The US employment situation shows that the labor market has not changed significantly, with employers reluctant to increase recruitment significantly but not initiating large - scale layoffs. The economic growth momentum is weakening, and inflation is showing a downward trend [21][22][24]. - In the asset market, German medium - and long - term bonds and Japanese bonds rose; the global equity market was highly differentiated; black - series and chemical commodities strengthened, while grains and digital assets were under pressure; most global foreign exchange markets declined, with only the Russian ruble supported [26][27][28][29]. 3. Summary According to the Directory 3.1 US Treasury Yield Review - **Yield Changes**: From December 12 to December 19, 2025, the yields of 1 - month, 1 - year, 2 - year, 5 - year, 10 - year, and 30 - year US Treasuries decreased by 5bp, 3bp, 4bp, 5bp, 3bp, and 3bp respectively, reaching 3.71%, 3.51%, 3.48%, 3.70%, 4.16%, and 4.82% [2][11]. - **Reasons for the Limited Decline**: The market doubts the validity of the data from October and November, and the expected change in the interest - rate cut path is small [2][11]. - **Japanese Interest - Rate Hike Impact**: The Bank of Japan raised the policy rate to 0.75%, but the yen continued to weaken. As the yen approaches the "intervention level", the actions of the Japanese Ministry of Finance may affect the pricing of US Treasuries and the stock market [3][12]. - **Auction Results**: On December 17, the auction of 20 - year US Treasuries was robust, with a winning bid rate of 4.798%, a bid - to - cover ratio of 2.67 times (higher than the previous value of 2.41 times), and a tail spread of - 2.500 (higher than the previous value of - 0.200) [17]. 3.2 US Macroeconomic Indicator Review - **Employment**: In November, the seasonally - adjusted non - farm payrolls in the US increased by 64,000, higher than the forecast of 50,000 and the previous value of - 105,000. The unemployment rate was 4.6%, higher than the forecast of 4.5% and the previous value of 4.4%. The average hourly wage growth rate was 0.1% month - on - month, lower than the forecast of 0.3% and the previous value of 0.4%. The number of initial jobless claims in the week of December 13 decreased to 224,000 [21]. - **Business Index**: In December, the US Markit manufacturing PMI was 51.8, lower than the forecast of 52.0 and the previous value of 52.2; the service PMI was 52.9, lower than the forecast of 54.0 and the previous value of 54.1, hitting a six - month low. The US Philadelphia Fed manufacturing index was - 10.2, lower than the forecast of 2.5 and the previous value of - 1.7 [4][22][24]. - **Inflation**: In November, the US CPI increased by 2.7% year - on - year, lower than the previous value of 3.0% and the forecast of 3.1%. Some officials believe that there is a large space for the Fed to cut interest rates [4][22][24]. - **Housing Market**: In November, the annualized total of existing home sales in the US was 4.13 million units, with a median price of $409,200, a year - on - year increase of 1.2%. The housing market showed a significant differentiation, with low - priced housing sales under pressure and the high - end market relatively strong [24]. 3.3 Major Asset Review - **Bonds**: German medium - and long - term bonds and Japanese bonds rose. The yields of German 7 - year, 10 - year, 15 - year, and 30 - year bonds increased by 1bp, 3bp, 4bp, and 6bp respectively. The yields of Japanese 1 - year, 7 - year, 10 - year, 15 - year, and 20 - year bonds increased by 1.4bp, 0.7bp, 1.6bp, 2.4bp, and 1.6bp respectively [26]. - **Equities**: The global market was highly differentiated. The Vietnam VN30, UK FTSE 100, and France CAC40 rose by 3.55%, 2.57%, and 1.03% respectively, while the South Korea Composite Index, Japan's Nikkei 225, and Hong Kong's Hang Seng Index fell by 3.52%, 2.61%, and 1.10% respectively [27]. - **Commodities**: Black - series and chemical commodities strengthened, while grains and digital assets were under pressure. The coke index, coking coal index, and soda ash index rose by 9.82%, 9.11%, and 4.53% respectively, while CBOT wheat, CBOT soybeans, and Bitcoin fell by 3.68%, 2.55%, and 2.37% respectively [28]. - **Foreign Exchange**: Most global foreign exchange markets declined, with only the Russian ruble supported. The ruble rose by 0.35%, while the South Korean won, euro, and British pound fell by 0.62%, 0.37%, and 0.33% respectively [29]. 3.4 Market Tracking The report provides multiple charts, including the latest target - rate expectations of FED WATCH, the simulated trends of the US dollar, US stocks, US Treasuries, gold, and Bitcoin this week, the auction panel of US Treasuries, and the yield curves of US Treasuries, Japanese bonds, and German bonds, etc., to track the market situation [13][14][17].