Investment Rating - The industry investment rating is "Positive (Maintain)" [5] Core Viewpoints - The ongoing conflict between Israel and Iran has significantly increased the risk premium for oil and gas, impacting prices and market dynamics [8][17] - There is a heightened focus on Iranian chemical products due to their substantial global production and export share, particularly methanol and ethylene glycol [8][17] - The report highlights that even if Iranian oil exports cease, other suppliers like OPEC+ can quickly fill the gap, but damage to Iranian chemical production facilities could have long-term effects [8][17] Price Changes - The report monitors 188 chemical products, with the top three price increases being crude oil (up 13.7%), paraxylene (up 10.5%), and WTI (up 10.4%); the largest declines were in liquid chlorine (down 60.0%), vitamin E (down 14.2%), and acrylic short fiber (down 7.9%) [14][18] - The report also notes significant changes in price spreads, with the largest increases in BDO spread (up 6955.9%), hydrogen peroxide spread (up 500.0%), and butyl acrylate spread (up 97.7%); the largest declines were in R410a spread (down 25100.0%), PTA (down 38.5%), and PTMEG spread (down 22.8%) [18][19] Investment Recommendations - The report recommends buying shares in companies that are expected to benefit from the price increases due to the Israel-Iran conflict, including Huayi Group (600623), Baofeng Energy (600989), Satellite Chemical (002648), and Wankai New Materials (301216) [8] - It also suggests focusing on agricultural chemical companies with differentiated growth logic, such as Yangnong Chemical (600486) and Runfeng Shares (301035), as well as companies less affected by overseas fluctuations, including Guoguang Shares (002749), Hualu Hengsheng (600426), and Huamao Technology (603181) [8]

Group 1: Core Insights - The report emphasizes the strategic and tactical value of investing in the rare earth sector, viewing it as a critical asset in the long-term geopolitical competition between China and the US [2][15]. - It argues that the current market fluctuations in the rare earth and magnetic materials sectors are largely driven by short-term speculative trading rather than long-term fundamentals [8][14]. - The report highlights the unique competitive advantages of China's rare earth refining and separation capabilities, which are difficult for foreign entities to replicate [15][16]. Group 2: Supply Side Analysis - The domestic supply of rare earths is expected to remain stable, with a concentration of production among two major rare earth groups, while illegal mining activities are being strictly controlled [16]. - China's ability to manage both domestic and international rare earth resources is strengthening, which may further enhance the strategic importance of these resources [16] . Group 3: Demand Side Analysis - The demand for high-performance rare earth permanent magnets is anticipated to grow significantly due to emerging industries such as humanoid robots and low-altitude economies [17]. - Recent approvals for export applications have alleviated previous concerns regarding demand for magnetic materials, indicating a positive shift in market sentiment [17]. Group 4: Steel Industry Insights - The steel industry is entering a seasonal downturn, with a notable increase in rebar production and a slight decrease in consumption [18][23]. - Total steel inventory has decreased significantly, both on a week-over-week and year-over-year basis, indicating a tightening supply [25]. - The profitability of long and short process rebar production is diverging, with long process margins showing slight improvement [29][34]. Group 5: New Energy Metals - Lithium production in China saw a substantial year-over-year increase, while hydroxide production experienced a decline [41]. - The production and sales of new energy vehicles in China have surged, reflecting strong demand in the market [45]. - Prices for lithium, nickel, and cobalt have generally declined, indicating a potential softening in the market [51]. Group 6: Industrial Metals - The report notes a continuous decline in electrolytic aluminum inventory, suggesting potential upward pressure on prices [62]. - Global refined copper production has increased, with slight improvements in smelting fees [62].

Report Industry Investment Rating - Not provided in the content Core Views of the Report - The trading volume and liquidity of ultra-long credit bonds have significantly increased in the past two weeks, approaching the historical high in July and August 2024. The market's pursuit of duration for returns is expected to continue this week. The ultra-long credit bond strategy has a certain probability of success but a low odds. Short-duration credit enhancement remains a highly certain strategy [5][8]. - The convertible bond market has a relatively cautious style. In an environment where the equity market is expected to fluctuate, the upward momentum of convertible bonds is limited. However, the current valuation of convertible bonds is not significantly overestimated, and there may be opportunities for capital inflow into high-quality, low-volatility individual bonds. The potential credit risk in June is coming to an end, and if unexpected events occur, the opportunities are considered greater than the risks [5][19]. Summary According to Relevant Catalogs 1 Credit Bond and Convertible Bond Views: How Long Can the Ultra-Long Credit Bond Market Last? - When short-term trading becomes crowded, the market starts to seek returns from duration. This phenomenon is expected to continue this week. The narrowing of short-term spreads has reached an extreme level, forcing liquidity to shift to longer-term bonds of medium-quality issuers. The expansion of fixed-income asset management products and the increasing insurance allocation willingness are expected to bring incremental funds, and the market's offensive on long-term credit bonds is unlikely to end soon [5][8]. - The ultra-long credit bond strategy has execution problems, such as the need for significant interest rate declines or spread compressions to achieve better returns and the lack of stable institutional investors, resulting in rapid loss of liquidity during market corrections. Short-duration credit enhancement is a more certain strategy, and if the liability side is stable, extending duration through secondary perpetual bonds is recommended rather than ultra-long credit bonds [5][13]. - The convertible bond market has a cautious style, with high-rated and low-priced convertible bonds performing better. The three characteristics of the convertible bond market in 2025 remain unchanged. In an environment where the equity market is expected to fluctuate, the upward momentum of convertible bonds is limited, but the long-term allocation logic remains valid, and there may be opportunities for high-quality, low-volatility individual bonds. The potential credit risk in June is ending, and if unexpected events occur, the opportunities are greater than the risks [5][19]. 2 Credit Bond Review: The Spread Compression Market is Becoming More Extreme 2.1 Negative Information Monitoring - There were no bond defaults or overdue payments during the week from June 16 to June 22, 2025. Several companies had their主体评级 or展望下调, and some overseas companies had their ratings downgraded. There were also several significant negative events, such as companies being issued warning letters by regulatory authorities and being listed as dishonest被执行人 [21][22][23]. 2.2 Primary Issuance: Net Financing Continues to Remain at the Billion-Level - From June 16 to June 22, 2025, the primary issuance of credit bonds reached 411.4 billion yuan, with a net financing of 105.4 billion yuan, maintaining a billion-level net financing for three consecutive weeks. Three credit bonds were canceled or postponed for issuance, with a total planned issuance scale of 3.6 billion yuan. The primary issuance costs of medium and high-grade bonds showed a differentiated trend last week [24]. 2.3 Secondary Trading: Liquidity Continues to Strengthen, and Urban Investment Slightly Outperforms Industry - The valuation of credit bonds declined across the board, and the risk-free interest rate curve flattened bullishly. Except for the passive widening of the spreads of low-grade long-term bonds, the spreads of other bonds narrowed or remained unchanged. The term spreads of each grade were mainly flat, but the 3Y - 5Y part of medium and low-grade bonds slightly underperformed. The long-term grade spreads were under pressure to widen. The credit spreads of urban investment bonds in most provinces narrowed by 1 - 3bp last week, with Qinghai having the largest narrowing of 4bp. The industry bonds slightly underperformed urban investment bonds, and the real estate industry's spreads continued to widen by 27bp. The liquidity of credit bonds continued to strengthen, with the turnover rate increasing by 0.27 percentage points to 2.31% [26][30][33]. 3 Convertible Bond Review: The Equity Market Pulled Back, and the Convertible Bond Index Slightly Declined 3.1 Overall Market Performance: The Stock Market Fluctuated and Closed Lower, with Banks and Communications Leading the Gains - From June 16 to June 20, 2025, the Shanghai Composite Index, Shenzhen Component Index, and other major indices mostly closed lower. Only the banking, communications, and electronics sectors rose, while the beauty care, textile and apparel, and pharmaceutical sectors had the largest declines. Most of the leading convertible bonds outperformed their underlying stocks, and the list of popular individual bonds changed little [36]. 3.2 Convertible Bonds Slightly Declined, and the Opportunities Outweighed the Risks - Last week, the convertible bonds slightly declined, with the average daily trading volume significantly decreasing to 61.305 billion yuan. The CSI Convertible Bond Index decreased by 0.17%, the parity center decreased by 1.6% to 94.5 yuan, and the conversion premium rate center increased by 2.2% to 28.7%. High-rated, low-priced, and low-premium convertible bonds performed better, while high-priced, low-rated, and small-cap convertible bonds underperformed. The view on convertible bonds has changed little. In an environment where the equity market is expected to fluctuate, the upward momentum of convertible bonds is limited, but the current valuation of convertible bonds is not significantly overestimated. The long-term allocation logic of the convertible bond market remains valid, and there may be opportunities for capital inflow into high-quality, low-volatility individual bonds. The potential credit risk in June is ending, and if unexpected events occur, the opportunities are greater than the risks [39].

Investment Rating - The industry investment rating is "Positive" and maintained [3] Core Viewpoints - The U.S. Department of Commerce plans to cancel the technology exemption for chip manufacturers operating in China, which may weaken the advantages of overseas companies utilizing resources in mainland China and alter the global supply chain landscape [2][6] - This move is expected to benefit domestic semiconductor manufacturers as it may diminish the competitive edge of foreign companies' factories in China, which are crucial to their global supply chains [6] - The cancellation of the exemption could impact the global supply chain structure of the storage industry, with domestic storage manufacturers likely to benefit [6] Summary by Relevant Sections Semiconductor Industry - The U.S. is set to revoke the technology exemption for major semiconductor manufacturers like TSMC and Samsung, which could lead to a supply risk for advanced process equipment and technology in their Chinese factories [6] - The sales of Samsung's Xi'an factory are projected to grow by approximately 29% year-on-year in 2024, reaching 11 trillion KRW, while TSMC's Nanjing factory is expected to achieve a profit of 25.954 billion TWD, a year-on-year increase of about 19% [6] Domestic Semiconductor Supply Chain - The cancellation of the exemption is likely to encourage the continued push for domestic production across the supply chain, benefiting companies in semiconductor equipment, materials, and EDA [6] - Domestic wafer manufacturers and storage manufacturers will be more motivated to procure domestic alternatives to ensure supply chain security and capacity construction [6] Investment Recommendations - Recommended stocks in the semiconductor wafer foundry, equipment, and materials sectors include: SMIC (688981, Buy), Huahong Semiconductor (01347, Buy), and others [6] - In the storage industry chain, recommended stocks include: Zhaoyi Innovation (603986, Buy), Beijing Junzheng (300223, Buy), and others [6]

Investment Rating - The report maintains a neutral investment rating for the automotive and components industry in China [6]. Core Insights - The report highlights that the domestic luxury car market is still dominated by foreign brands, but is increasingly impacted by the rise of domestic high-end brands. The market share of domestic luxury brands is expected to gradually increase due to enhanced consumer confidence and recognition of domestic luxury brands [9][35]. - The profitability of luxury car manufacturers is higher and more stable compared to general car manufacturers, with brands like Ferrari showing significantly higher net profit margins [9][54]. - The report suggests focusing on domestic luxury car brands such as Jianghuai Automobile and BYD, which are expected to achieve breakthroughs in the high-end market [3][35]. Summary by Sections 1. Domestic Luxury Car Market Dynamics - The domestic luxury car market is primarily composed of foreign brands, with imported luxury car sales declining from approximately 810,300 units in 2020 to an estimated 589,500 units in 2024, representing a 15.6% year-on-year decrease [14][15]. - In 2023, the sales of high-end luxury models were about 531,800 units, accounting for approximately 2.4% of total passenger car sales, which is projected to drop to 1.9% in 2024 [9][15]. 2. Product Strength and Brand Value Enhancement - The report emphasizes that the improvement in product strength and brand value of domestic luxury brands will drive their upward brand positioning. This is supported by the increasing recognition of brands like BYD and Huawei in the luxury market [35][41]. - The integration of intelligent technology into luxury vehicles is becoming a key competitive advantage for domestic brands, allowing them to gradually catch up with traditional foreign luxury brands [37][40]. 3. Profitability Comparison - Luxury car manufacturers exhibit higher and more stable profitability compared to general car manufacturers. For instance, Ferrari's average net profit margin from 2020 to 2024 is projected to be 19.9%, significantly higher than that of other manufacturers [9][54]. - The report notes that while luxury brands maintain high profit margins, the increasing competition from domestic brands is expected to pressure the profitability of traditional luxury brands [59]. 4. Valuation Comparison - The report indicates that overseas ultra-luxury brands enjoy a valuation premium, with Ferrari maintaining a high price-to-earnings (P/E) ratio of 60-80 in 2024-2025, while other brands like Porsche and Mercedes-Benz have lower P/E ratios due to market pressures [9][54]. - If domestic luxury brands can establish stable sales and profitability, they may also achieve higher valuation levels compared to traditional manufacturers [9][54]. 5. Investment Strategies - The report recommends focusing on domestic luxury car brands that are expected to break into the high-end market, particularly highlighting Jianghuai Automobile and BYD as key players [3][35].

Investment Rating - The industry investment rating is maintained as "Positive" [5] Core Viewpoints - AI glasses are evolving from "fashion items" to essential tools for specialized scenarios, with the potential to become the next generation of independent AI smart terminals after incorporating display functions [3][7] - The global smart glasses market is expected to ship 12.05 million units in 2025, representing a year-on-year growth of 18.3%, with non-display audio glasses and audio shooting glasses expected to see shipments more than double [7] - Meta's collaboration with Oakley on new AI glasses focuses on sports scenarios, enhancing functionality and battery life, which is expected to drive market acceptance and further application in specialized fields [7] Summary by Sections Investment Suggestions and Targets - Focus on leading companies in the supply chain of AI glasses, including: 1. Complete machine and PCBA manufacturers: GoerTek (002241, Buy), Longqi Technology (603341, Not Rated), Lens Technology (300433, Buy), Luxshare Precision (002475, Buy), and Huaqin Technology (603296, Buy) [3] 2. SoC suppliers: Hengxuan Technology (688608, Buy) and Amlogic (688099, Buy) [3] 3. Component suppliers: Camera lens glass supplier Yutong Optical (300790, Not Rated), microphone and speaker supplier AAC Technologies (02018, Not Rated), and SiP module supplier Huanxu Electronics (601231, Buy) [3] 4. Waveguide manufacturers: Lantech Optical (688127, Buy), Crystal Optoelectronics (002273, Buy), and Sunny Optical Technology (02382, Buy) [3] Market Trends - The AI glasses market is experiencing rapid growth due to improved hardware and software capabilities, leading to increased value and potential upgrades in the traditional eyewear industry [7] - Major tech companies are expected to release new AI glasses products in the second half of the year, which will catalyze industry growth [7]

Group 1 - The global capital markets demonstrated unexpected resilience despite geopolitical tensions and hawkish policies from the Federal Reserve, with major Asian markets, including South Korea, India, and Japan, showing significant gains of 4.4%, 1.59%, and 1.50% respectively [3][4][14] - The Chinese market experienced a slight decline, with the Shanghai Composite Index dropping 0.51% after failing to break through the critical resistance level of 3400 points, indicating a need for technical correction [3][14][16] - Structural risks in the Chinese market were highlighted, as small-cap stocks showed signs of weakening momentum, with the CSI 1000 Index down 1.74% and the Northern Stock Exchange 50 Index down 2.55% [3][14][16] Group 2 - The core logic supporting global market resilience is the belief that the Middle East geopolitical crisis will not escalate uncontrollably in the short term, with OPEC+ maintaining sufficient spare capacity and the long-term trend of global energy transition mitigating sustained oil price surges [4][14][15] - A differentiated outlook suggests that the Chinese market may outperform global markets in the coming week, as recent technical corrections have preemptively absorbed some risks, allowing for a potential rebound if geopolitical tensions ease [5][16] - The report maintains a positive outlook on the technology sector in the Chinese market, bolstered by supportive policy signals from the recent Lujiazui Forum, which emphasized long-term capital support for technology [6][17] Group 3 - Key investment themes include a focus on technology growth driven by US-China tech competition and new economic transformation, with specific attention to sectors such as robotics, artificial intelligence, autonomous driving, innovative pharmaceuticals, and military technology [7][20] - High dividend stocks are recommended for stable allocation, particularly in sectors like banking, electricity, and home appliances, as the trend of declining risk-free interest rates continues to create demand [7][20] - Cyclical commodities with constrained supply and improving demand are also highlighted, particularly in the rare earth and chemical sectors, which are expected to show resilience [7][21]

Quantitative Models and Construction Methods 1. Model Name: Dividend Impact Prediction Model - **Model Construction Idea**: The model aims to predict the impact of dividends on stock index futures pricing by estimating the dividend points and their influence on futures contracts[6][10][18] - **Model Construction Process**: 1. **Estimate Component Stocks' Net Profit**: Use annual reports, quick reports, earnings warnings, or analysts' profit forecasts to estimate net profits[21][22] 2. **Calculate Pre-Tax Dividend Total**: Based on the assumption that the dividend payout ratio remains unchanged, calculate the total dividend amount as: $$ \text{Estimated Dividend Total} = \text{Estimated Net Profit} \times \text{Dividend Payout Ratio} $$ If no dividends were distributed in the previous year, assume no dividends this year[26] 3. **Calculate Dividend Impact on Index**: - Dividend Yield: $$ \text{Dividend Yield} = \frac{\text{Tax-Adjusted Dividend Total}}{\text{Latest Market Value}} $$ - Dividend Points: $$ \text{Dividend Points Impact} = \text{Stock Weight} \times \text{Dividend Yield} $$ - Adjust stock weights using the formula: $$ w_{it} = \frac{w_{i0} \times (1 + R_1)}{\sum_{1}^{n} w_{i0} \times (1 + R_1)} $$ where \( w_{i0} \) is the initial weight, and \( R_1 \) is the stock's return[23] 4. **Predict Dividend Impact on Futures Contracts**: Aggregate all dividends before the contract's delivery date to calculate the total impact on futures contracts[28] - **Model Evaluation**: The model provides a systematic and logical approach to estimate dividend impacts, but its accuracy depends on the reliability of input assumptions and historical data[18][26] --- Model Backtesting Results 1. Dividend Impact Prediction Model - **Dividend Points for July Contracts**: - SSE 50: 40.84 - CSI 300: 38.26 - CSI 500: 19.23 - CSI 1000: 17.88[6][10] - **Annualized Hedging Costs (Excluding Dividends)**: - SSE 50: -1.91% - CSI 300: 1.35% - CSI 500: 7.37% - CSI 1000: 10.19%[6][10] - **Remaining Dividend Impact on July Contracts**: - SSE 50: 1.53% - CSI 300: 0.99% - CSI 500: 0.34% - CSI 1000: 0.30%[14] --- Quantitative Factors and Construction Methods 1. Factor Name: Theoretical Pricing Model for Stock Index Futures - **Factor Construction Idea**: This factor calculates the theoretical price of stock index futures based on the no-arbitrage principle, considering dividends and risk-free rates[30][31] - **Factor Construction Process**: 1. **Discrete Dividend Distribution**: $$ D = \sum_{i=1}^{m} \frac{D_i}{(1 + r_i)} $$ where \( D_i \) is the dividend amount at time \( t_i \), and \( r_i \) is the risk-free rate between \( t_i \) and \( t \)[30] The theoretical futures price is: $$ F_t = (S_t - D)(1 + r) $$ 2. **Continuous Dividend Distribution**: $$ F_t = S_t \cdot e^{(r-d)(T-t)} $$ where \( d \) is the annualized dividend yield, and \( r \) is the annualized risk-free rate[31] - **Factor Evaluation**: The model is robust under the no-arbitrage assumption but may deviate in real markets due to transaction costs and market frictions[30][31] --- Factor Backtesting Results 1. Theoretical Pricing Model for Stock Index Futures - **Annualized Hedging Costs (Excluding Dividends)**: - SSE 50: -1.91% - CSI 300: 1.35% - CSI 500: 7.37% - CSI 1000: 10.19%[6][10] - **Remaining Dividend Impact on July Contracts**: - SSE 50: 1.53% - CSI 300: 0.99% - CSI 500: 0.34% - CSI 1000: 0.30%[14]

Quantitative Models and Construction Methods - **Model Name**: Maximized Factor Exposure (MFE) Portfolio **Model Construction Idea**: The MFE portfolio aims to maximize the exposure of a single factor while controlling for constraints such as industry exposure, style exposure, stock weight deviation, and turnover rate. This approach evaluates the effectiveness of factors under realistic constraints in enhanced index portfolios [56][57][59] **Model Construction Process**: The optimization model is formulated as follows: $ \begin{array}{ll} max & f^{T}w \\ s.t. & s_{l}\leq X(w-w_{b})\leq s_{h} \\ & h_{l}\leq H(w-w_{b})\leq h_{h} \\ & w_{l}\leq w-w_{b}\leq w_{h} \\ & b_{l}\leq B_{b}w\leq b_{h} \\ & 0\leq w\leq l \\ & 1^{T}w=1 \\ & \Sigma|w-w_{0}|\leq to_{h} \end{array} $ - **Objective Function**: Maximize single-factor exposure, where \( f \) represents factor values, and \( w \) is the stock weight vector - **Constraints**: 1. Style exposure deviation (\( X \)): \( s_{l} \) and \( s_{h} \) are the lower and upper bounds for style factor deviation 2. Industry exposure deviation (\( H \)): \( h_{l} \) and \( h_{h} \) are the lower and upper bounds for industry deviation 3. Stock weight deviation (\( w_{l} \) and \( w_{h} \)): Limits on individual stock weight deviation relative to the benchmark 4. Component weight limits (\( b_{l} \) and \( b_{h} \)): Constraints on the weight of benchmark components 5. No short selling and upper limits on stock weights 6. Full investment constraint: \( 1^{T}w=1 \) 7. Turnover constraint: \( \Sigma|w-w_{0}|\leq to_{h} \), where \( w_{0} \) is the previous period's weight [56][57][59] **Model Evaluation**: The model effectively balances factor exposure and practical constraints, ensuring stable returns and avoiding excessive concentration in specific stocks [60] --- Quantitative Factors and Construction Methods - **Factor Name**: Six-Month UMR **Factor Construction Idea**: The six-month UMR factor measures risk-adjusted momentum over a six-month window, capturing medium-term momentum trends [19][8][44] **Factor Construction Process**: - The UMR (Up-Minus-Down Ratio) is calculated as the ratio of upward movements to downward movements in stock prices over a specified period - The six-month UMR specifically uses a six-month window to compute this ratio, adjusted for risk [19][8][44] **Factor Evaluation**: This factor demonstrates strong performance in various index spaces, particularly in the CSI 500 and CSI All Share indices, indicating its effectiveness in capturing medium-term momentum [8][44] - **Factor Name**: Three-Month UMR **Factor Construction Idea**: Similar to the six-month UMR, this factor focuses on shorter-term momentum trends over a three-month window [19][8][44] **Factor Construction Process**: - The three-month UMR is calculated using the same methodology as the six-month UMR but with a three-month window for data aggregation [19][8][44] **Factor Evaluation**: This factor shows consistent performance across multiple indices, including the CSI 500 and CSI All Share indices, making it a reliable short-term momentum indicator [8][44] - **Factor Name**: Pre-Tax Earnings to Total Market Value (EPTTM) **Factor Construction Idea**: This valuation factor evaluates the earnings yield of a stock, providing insights into its relative valuation [19][8][44] **Factor Construction Process**: - EPTTM is calculated as the ratio of pre-tax earnings to the total market value of a stock, with adjustments for rolling time windows (e.g., one year) [19][8][44] **Factor Evaluation**: EPTTM consistently ranks among the top-performing valuation factors, particularly in the CSI 300 and CSI 800 indices, reflecting its robustness in identifying undervalued stocks [8][44] --- Backtesting Results of Models - **MFE Portfolio**: - The MFE portfolio demonstrates strong performance under various constraints, with backtesting results showing significant alpha generation relative to benchmarks like CSI 300, CSI 500, and CSI 1000 [60][61] --- Backtesting Results of Factors - **Six-Month UMR**: - CSI 500: Weekly return of 0.99%, monthly return of 1.65%, annualized return of -4.07% [26] - CSI All Share: Weekly return of 1.23%, monthly return of 1.59%, annualized return of 7.43% [44] - **Three-Month UMR**: - CSI 500: Weekly return of 0.94%, monthly return of 1.31%, annualized return of 0.68% [26] - CSI All Share: Weekly return of 1.02%, monthly return of 1.63%, annualized return of 5.64% [44] - **EPTTM**: - CSI 300: Weekly return of 0.74%, monthly return of 1.42%, annualized return of 3.89% [22] - CSI 800: Weekly return of 1.00%, monthly return of 1.91%, annualized return of 2.87% [30]

Quantitative Models and Construction 1. Model Name: Hang Seng Hong Kong Innovative Drug Index (CNY) - **Model Construction Idea**: The index selects up to 50 listed companies in the Hong Kong market whose main business involves innovative drug research and development, reflecting the overall performance of innovative drug-themed listed companies in Hong Kong[37][61] - **Model Construction Process**: - **Sample Space**: Combines the sample space of the CSI Hong Kong 300 Index and the CSI Hong Kong Stock Connect Composite Index[38] - **Selection Criteria**: - Liquidity: Average daily turnover over the past year must not be less than HKD 10 million - Business Focus: Companies involved in innovative drug R&D or providing related services are selected - Market Cap: Top 50 securities by average daily market cap over the past year are included, or all securities if fewer than 50 meet the criteria - **Weighting Method**: Free-float market capitalization weighting, with individual stock weights capped at 10%[38] - **Adjustment Frequency**: Semi-annual adjustments in June and December[38] - **Model Evaluation**: The index focuses on mid-to-large innovative drug enterprises, with a high degree of industry purity, as 100% of its constituents belong to the "Pharmaceuticals and Biotechnology" secondary industry[43][44] --- Model Backtesting Results 1. Hang Seng Hong Kong Innovative Drug Index - **Annualized Return**: 8.54% (2019.1.1 - 2025.5.31)[49][50] - **Annualized Sharpe Ratio (IR)**: 0.41[49][50] - **Annualized Volatility**: 35.93%[49][50] - **Maximum Drawdown**: -68.18%[49][50]