Investment Rating - The report indicates a strong investment rating for the securities industry, suggesting a relative increase of over 10% compared to the CSI 300 index [18]. Core Insights - The meeting held by the China Securities Association on December 30, 2025, focused on "risk prevention, strong regulation, and promoting high-quality development," aiming to clarify the direction of risk management for the securities industry during the 14th Five-Year Plan [7][11]. - A proactive risk management model is being established, transitioning from traditional compliance-based controls to a forward-looking, embedded approach throughout business processes [8]. - The report emphasizes the importance of a comprehensive risk management framework that includes "full coverage and penetrating" self-regulatory rules, particularly for complex businesses like cross-border and derivative transactions [8][9]. - The integration of technology, such as artificial intelligence and big data, is highlighted as a means to enhance risk warning and response capabilities [9][10]. - The establishment of a collaborative risk management ecosystem is proposed, which includes regular communication platforms and industry training to promote information sharing and mutual learning [10]. Summary by Sections 1. Meeting Main Content - The meeting outlined a clear action framework for the next phase of risk management in the securities industry, focusing on proactive risk control and the development of a comprehensive self-regulatory rule system [8]. - The emphasis is on refining existing regulations to enhance their forward-looking and preventive nature, particularly in monitoring complex business areas [8]. 2. Impact on Capital Markets - The proactive risk management approach is expected to significantly enhance market stability and predictability, preventing individual risks from escalating into systemic risks [11]. - A robust risk management system is essential for securities firms to effectively perform their financing intermediary functions, aligning with recent reforms in evaluating investment banking quality [11][12]. - The initiative aims to improve the international reputation and attractiveness of China's capital markets by establishing a comprehensive risk management system that aligns with international standards [12]. 3. Impact on the Securities Industry - Comprehensive risk management capabilities are transitioning from being a cost center to becoming a core competitive advantage, directly influencing business qualifications and capital efficiency [13]. - The focus on technology in risk management is expected to drive increased investment in financial technology, creating differentiated competitive advantages for firms that effectively integrate technology into their risk management processes [14]. - The industry is anticipated to shift from a growth model based on scale expansion to one driven by quality and functionality, emphasizing capital-saving and service-oriented business models [14].

Group 1: Report Industry Investment Rating - Not provided in the given content Group 2: Core Viewpoints of the Report - In December 2025, the manufacturing PMI unexpectedly rebounded to 50.1%, up 0.9 percentage points from the previous month, returning to the expansion range above the boom - bust line and indicating a positive signal of stabilizing and rising manufacturing prosperity [3][8]. - The supply and demand sides improved synergistically. The production index was 51.7% in December, up 1.7 percentage points from the previous month, and the new order index was 50.8%, up 1.6 percentage points. The new export order index was 49.0%, up 1.4 percentage points. High - tech manufacturing had strong momentum and provided structural support [3][9]. - Inventory is still at the bottom - grinding stage, and the purchase price index declined slightly. The raw material inventory index rose by 0.5 percentage points to 47.8%, and the finished - product inventory index rose by 0.9 percentage points to 48.2%. The purchase price index was 53.1%, down 0.5 percentage points from the previous month [12][13]. - The rebound of PMI is expected to be the starting point for the rebound of the nominal GDP growth rate in 2026. With policy support, improved expectations, and the accumulation of internal momentum, the economy in 2026 is expected to start steadily [4][15]. Group 3: Summary by Related Catalogs Event - On December 31, 2025, the National Bureau of Statistics announced the December PMI. The manufacturing PMI in December was 50.1%, up 0.9 percentage points from the previous month [2][7] 12 - month Manufacturing PMI Rebound - The December PMI of 50.1% was significantly higher than the market expectation of 49.6%, returning to the expansion range for the first time since April 2025. It was a counter - seasonal rebound, and its signal and continuity are worthy of attention [3][8] Supply - Demand Synergy Improvement - In terms of production, the December production index was 51.7%, up 1.7 percentage points. In terms of demand, the new order index was 50.8%, up 1.6 percentage points, and the new export order index was 49.0%, up 1.4 percentage points. High - tech manufacturing, equipment manufacturing, and consumer goods industries showed strong momentum [3][9] Inventory and Purchase Price - The raw material inventory index rose to 47.8%, and the finished - product inventory index rose to 48.2%, still in the passive replenishment stage but showing marginal improvement. The purchase price index was 53.1%, down 0.5 percentage points. The anti - involution policy's price - pulling effect may shift to mid - stream manufacturing [12][13] PMI Rebound and Economic Outlook - The rebound of PMI in December is expected to be the starting point for the marginal improvement of the economy in 2026. With the joint action of policies, expectations, and internal momentum, the economy in 2026 is expected to start steadily [4][15]

Report Summary 1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Viewpoints - In 2026, a more proactive fiscal policy will continue to be implemented, with an emphasis on improving precision and effectiveness, optimizing increments, and revitalizing stocks [3][8]. - Policies focus on supporting the construction of a strong domestic market, emphasizing boosting consumption, expanding effective investment, and promoting the construction of a unified national market [9]. - There is a stronger emphasis on supporting the in - depth integration of scientific and technological innovation and industrial innovation, using fiscal funds to guide social capital into key areas and stimulating enterprise innovation [3][9][10]. - Fiscal policy is the key measure, and there is a greater emphasis on the "integration effect". Fiscal policy will intensify efforts in two main directions: expanding the central fiscal deficit ratio and issuing ultra - long - term special treasury bonds, and increasing transfer payments and consumption subsidies for the resident sector [4][11]. 3. Summary by Related Content 3.1 Fiscal Policy Direction - The National Fiscal Work Conference proposed five key work guidelines: expanding the fiscal expenditure scale, optimizing the government bond tool combination, improving the efficiency of transfer payment funds, continuously optimizing the expenditure structure, and strengthening fiscal - financial coordination [3][8]. - It is estimated that in 2026, the deficit ratio will remain at around 4.0%, and the budget deficit scale will reach about 5.9 trillion. The net financing scale of new treasury bonds is expected to reach about 6.7 trillion, and the new local bond quota will be approximately 7.6 - 7.8 trillion [8]. 3.2 Support for the Domestic Market - In 2026, the focus is on six aspects of work, with the first being to adhere to domestic demand - led and support the construction of a strong domestic market. This involves boosting consumption, expanding investment, and promoting the construction of a unified national market to achieve coordinated supply and demand [9]. 3.3 Support for Innovation - Through "increasing investment" and "improving fund management", fiscal funds will guide social capital into basic research and key core technologies. By strengthening the main position of enterprises, it promotes the in - depth integration of innovation chains, industrial chains, capital chains, and talent chains [3][9][10]. 3.4 Fiscal Policy Intensification - Fiscal policy will intensify efforts in two directions: expanding the central fiscal deficit ratio and issuing ultra - long - term special treasury bonds, with funds invested in major "14th Five - Year Plan" projects and "15th Five - Year Plan" new infrastructure; increasing transfer payments and consumption subsidies for residents to expand total demand from both public investment and private consumption [11].

Economic Outlook - The global economy is expected to continue a moderate recovery, with 2025 and 2026 GDP growth projected at 3.2% and 3.1% respectively, reflecting a slowdown from 2024's 3.3%[29] - The IMF has revised its global economic growth forecast for 2025 down by 0.5 percentage points to 2.8% due to increased tariff disturbances and uncertainties[16] - The effective tariff rate in the U.S. remains high at approximately 19%, contributing to ongoing trade tensions and economic uncertainty[20] Domestic Economic Performance - China's GDP growth for 2025 is projected to be around 5%, with Q1 growth at 5.4%, driven by policy implementation and increased local government bond issuance[36] - In Q3 2025, GDP growth slowed to 4.8%, continuing the trend from Q2's 5.2% growth, influenced by reduced fixed asset investment and external tariff pressures[36] - The contribution of final consumption expenditure to GDP growth reached 56.6% in Q3, indicating a strong domestic demand despite external challenges[41] Inflation and Monetary Policy - Global inflation is expected to decline to 4.2% in 2025 and further to 3.7% in 2026, with significant variations across countries[23] - The U.S. CPI is projected to rise by 2.4% in 2026, remaining above the target level, indicating persistent inflationary pressures[26] - Major central banks, including the Federal Reserve, have slowed their rate-cutting pace due to resilient inflation and economic activity, with expectations of three rate cuts in 2026[25] Risks and Uncertainties - Key risks include potential overheating of risk asset prices, increased public finance pressures, and the impact of geopolitical tensions on economic stability[33] - The ongoing uncertainty surrounding tariffs and trade policies poses a significant risk to global economic recovery, with potential for further adjustments in trade routes and economic efficiency[20]

Investment Rating - The industry investment rating is not explicitly stated in the report, but it implies a positive outlook for the securities industry due to the new regulations aimed at enhancing self-regulation and promoting high-quality development [21]. Core Insights - The report discusses the implementation of new self-regulatory measures by the China Securities Association to foster a more effective, stable, and compliant industry ecosystem [4][8]. - It emphasizes a shift from reactive to proactive regulation, focusing on prevention and clear operational standards in investment banking [5][12]. - The report highlights the need for a transformation in the operational models of securities firms, moving towards comprehensive services and technology-driven approaches [16]. Summary by Sections Policy Background - The capital market is undergoing significant reforms, with the new "National Nine Articles" outlining the direction for high-quality development and risk prevention [9][10]. - The implementation of the registration system has raised the standards for intermediary institutions, emphasizing compliance and risk management [9]. Main Content - The new regulations stress the importance of a forward-looking and preventive self-regulatory framework, moving away from post-violation penalties [12]. - It establishes comprehensive standards for investment banking practices, including a prohibition on tiered pricing and a focus on the quality of pricing reports [12][13]. - The regulations aim to create a balanced pricing ecosystem by enhancing the responsibilities of brokers in managing offline investors [13]. Impact on the Industry - The new measures are expected to strengthen the competitive advantage of leading securities firms while pressuring smaller firms to seek niche markets [16]. - The operational models of securities firms will evolve towards integrated services, technology-driven solutions, and specialized divisions [16][17]. - The regulations will encourage a more professional approach to project quality and service delivery, enhancing the overall pricing capability and professional image of the industry [17].

Economic Performance - In April, industrial added value increased by 6.1% year-on-year, exceeding the expected growth of 5.2% but down from the previous month's growth of 7.7%[10] - From January to April, fixed asset investment grew by 4.0% year-on-year, below the expected 4.3% and the previous value of 4.2%[10] - Social retail sales in April rose by 5.1% year-on-year, lower than the expected 5.5% and the previous month's growth of 5.9%[10] Sector Analysis - The production sector showed a slowdown but maintained rapid growth, with service industry growth steady and equipment manufacturing and high-tech manufacturing performing well[7] - Despite increasing tariff impacts, export growth of 8.1% in April exceeded expectations of 0.8%, partially mitigating tariff disruptions[11] Consumer Trends - Consumption showed signs of slowing down, but structural highlights were evident, with both social retail sales and service retail sales showing recovery trends[12] - Significant growth in specific consumer goods was noted, with home appliances and communication equipment sales increasing by 38.8% and 19.9% respectively[12] Investment Insights - Fixed asset investment growth was below expectations across all three major components, indicating a need for policy support[13] - Infrastructure investment growth was recorded at 10.9% year-on-year, while real estate investment declined by 10.3%[14] Future Outlook - The report suggests that while short-term tariff impacts may ease, long-term uncertainties remain, with ongoing supply exceeding demand posing risks to economic stability[8] - Recent policies aimed at boosting domestic demand are expected to enhance consumption and stabilize market confidence, with close monitoring of policy implementation and US-China tariff negotiations recommended[8]

Inflation Data - April CPI decreased by 0.1% year-on-year, slightly better than the expected -0.2% and the previous value of -0.1%[11] - April PPI fell by 2.7% year-on-year, also better than the expected -2.8% and the previous value of -2.5%[11] Economic Stability - The year-on-year CPI remained stable compared to March, with a two-year average growth rate slightly improving to 0.1%[12] - The month-on-month CPI increased by 0.1%, recovering from a 0.4% decline in March, outperforming the historical average of -0.1%[12] Core CPI and Demand - Core CPI remained low, indicating weak terminal demand and sluggish consumption, necessitating accelerated domestic demand policies[7] - Food prices showed a seasonal increase, with a 0.2% month-on-month rise, driven by supply factors[12] Policy Response - The Central Political Bureau proposed more proactive macro policies to address domestic demand shortages and external shocks[8] - A package of financial policies was launched in early May, including interest rate cuts and structural tools to stimulate domestic demand[8] Risks and Considerations - Potential risks include unexpected central bank adjustments, inflation exceeding expectations, and escalating trade tensions[17] - Ongoing monitoring of policy implementation, US-China tariff negotiations, and fiscal measures is essential for future economic stability[8]

Group 1: Monetary Policy Insights - The central bank's new focus on "macro-prudential" measures aims to prevent systemic financial risks and maintain financial stability[3] - Long-term interest rates have rebounded to approximately 1.86%, indicating a shift in the bond market's dynamics[3] - The central bank may aim to keep long-term interest rates within the 1.8% to 2.0% range, reflecting a cautious approach to monetary policy[4] Group 2: Market Reactions and Predictions - The expectation of rate cuts may not significantly benefit the bond market, as recent adjustments have tempered previous optimistic forecasts[11] - The bond market is currently in a negative carry state, with one-year interbank deposit rates around 1.95%, which complicates the recovery of this state[14] - Economic fundamentals are showing signs of marginal improvement, but the overall market sentiment remains cautious due to potential volatility[13] Group 3: Risks and Recommendations - Risks include unexpected changes in the economic environment, significant adjustments in monetary policy, and fluctuations in bond supply and demand[5] - The recommendation is to maintain a bearish outlook on the bond market in the short term, given the current economic indicators and market conditions[16] - The central bank's focus on supporting technology innovation financing may influence future market dynamics, particularly in the bond sector[19]

Core Insights - The construction machinery industry is expected to improve as Komatsu's working hours in China show a year-on-year increase, indicating a positive trend in demand for construction equipment [7][24]. - In January and February 2025, excavator sales in China saw significant growth, with domestic sales increasing by 99.4% to 11,640 units, and total sales reaching 19,270 units, a 52.8% year-on-year increase [23][24]. - The Chinese government plans to issue long-term special bonds worth 1.3 trillion yuan and local government bonds of 4.4 trillion yuan, which is expected to boost infrastructure projects and overall demand for construction machinery [25]. Industry Dynamics - The SW mechanical equipment index fell by 0.68% to 1,777.06 points, underperforming the CSI 300 index by 2.27 percentage points [10]. - The mechanical equipment sector's rolling price-to-earnings ratio is 42.08 times, with a premium of 119.01% over the entire A-share market, indicating a high valuation compared to historical averages [17]. - The demand for excavators is anticipated to improve further as the traditional peak sales season from March to May approaches, driven by increased infrastructure project initiation [24]. Key Data Tracking - The China Machinery Industry Association reported that excavator sales in January and February totaled 31,782 units, marking a 27.2% year-on-year increase, ending a three-year decline [23][24]. - The China Engineering Machinery Market Index (CMI) for February was 106.68, reflecting a year-on-year increase of 13.53% and a month-on-month increase of 5.44% [23]. - Komatsu's excavator working hours in China reached 122.8 hours in January and February, the highest since 2022, indicating a recovery in construction activity [24].

Investment Rating - The industry investment rating is "Outperform the Market" [4] Core Viewpoints - The construction machinery industry is expected to improve due to positive growth in operating hours for Komatsu excavators in China, with a year-on-year increase of 100.7% in February 2025 [7][24] - The domestic and export sales of excavators have both achieved positive growth in January and February 2025, with domestic sales increasing by 99.4% to 11,640 units and export sales rising by 12.69% to 7,630 units [23][24] - The government plans to issue long-term special bonds worth 1.3 trillion yuan and arrange local government special bonds of 4.4 trillion yuan, which is expected to boost infrastructure projects and overall demand in the construction machinery sector [25] Summary by Sections Market Review and Investment Strategy - The SW machinery index fell by 0.68% to 1,777.06 points, underperforming the CSI 300 index by 2.27 percentage points [10] - The sales volume of excavators in January and February 2025 reached 31,782 units, a year-on-year increase of 27.2%, ending three consecutive years of decline [23] Industry Dynamics - The China (Hunan) Free Trade Zone Changsha area established a remanufacturing and maintenance base for construction machinery, aiming to create the first remanufacturing and maintenance standard system in China [28] Key Data Tracking - The China Machinery Industry Association reported that the construction machinery market index (CMI) for February 2025 was 106.68, reflecting a year-on-year increase of 13.53% [23] - The operating hours for Komatsu excavators in China reached 122.8 hours in January and February 2025, the highest since 2022, indicating a rise in construction project initiation [24]