Economic Indicators - July manufacturing PMI recorded at 49.3%, down from 49.7% in the previous month[5] - Service industry business activity index at 50.1%, a decrease from 50.5%[5] - New export orders PMI at 47.1%, down from 47.7% last month, indicating continued pressure on exports[5] High-Tech Industry Performance - High-tech industry PMI at 50.6%, slightly down from 50.9%, remaining above the threshold[5] - Production and new orders PMI for high-tech sectors at 50.5% and 49.4%, respectively, showing resilience compared to traditional industries[5] - Confidence in high-tech sectors bolstered by "anti-involution" policies, leading to increased expectations for production activities, with PMI rising to 52.6%[5] Market Dynamics - "Anti-involution" policies have positively impacted prices in high-tech industries, with significant increases in factory and raw material purchase price indices[5] - Service sector maintained above the threshold, driven by summer holiday effects, with indices for related sectors like rail and air transport exceeding 60.0%[5] - The ongoing economic transition emphasizes the importance of domestic demand as export momentum weakens post-Geneva negotiations[5]

1. Report's Investment Rating for the Industry The document does not mention the industry investment rating. 2. Core Viewpoints of the Report - The convertible bond market has a reasonable correction, and the bullish logic remains unchanged. Although there are concerns about high valuations and profit - taking emotions, there is no need for excessive worry. The convertible bond still has upward potential, and it can be appropriately bought at lower prices if the price continues to decline [5][8]. - The equity market is expected to be relatively certain before September. The valuation and pricing of convertible bonds are supported by the increasing demand for fixed - income plus products and the relatively low convertible bond positions. The upward channel of the market is clear, driven by the improvement of grass - roots governance capabilities and technological competitiveness [5][8]. 3. Summary According to the Directory 3.1 Convertible Bond Viewpoint: Convertible Bonds Have a Reasonable Correction, and the Bullish Logic Remains Unchanged - The convertible bond market has risen continuously in the past few weeks under the drive of the underlying stocks, and the valuation has continued to soar. The short - term fluctuations in the equity market have become an outlet for the market sentiment. However, there is no need to be overly concerned [5][8]. - The equity market reached 3636 points this week and then showed some fear of high prices, closing at 3560 points. The market heat has not decreased, and trading volume and margin trading remain high. Domestic meetings and Sino - US tariff negotiations have no unexpected content. The market is still bullish in the future [5][8]. - After 5 consecutive weeks of rising, the market reached a high and then declined this week. The convertible bonds fell significantly, with the average daily trading volume slightly decreasing to 77.217 billion yuan. The CSI Convertible Bond Index dropped 1.37%, the parity center dropped 1.1% to 105.8 yuan, and the conversion premium rate center dropped 0.3% to 21.8% [5]. 3.2 Convertible Bond Review: Convertible Bonds Significantly Corrected with the Underlying Stocks 3.2.1 Overall Market Performance: The Stock Market Reached a High and Then Declined, and the Convertible Bond Valuation Significantly Decreased - From July 28th to August 1st, after 5 consecutive weeks of upward movement, the equity market corrected. The Shanghai Composite Index fell 0.94%, the Shenzhen Component Index fell 1.58%, the CSI 300 fell 1.75%, the CSI 1000 fell 0.54%, the ChiNext Index fell 0.74%, the STAR 50 fell 1.65%, and the Beijing Stock Exchange 50 fell 2.70%. In terms of industries, medicine, biology, communication, and media led the gains, while coal, non - ferrous metals, and real estate led the losses. The average daily trading volume decreased slightly by 332.89 billion to 1.81 trillion yuan [13]. - The top ten convertible bonds in terms of gains last week were Qizheng, Dongjie, Tianlu, Jing 23, Haibo, Weixin, Titan, Huicheng, Taifu, and Songlin Convertible Bonds. In terms of trading volume, Tianlu, Saili, Dayu, Qizheng, Jing 23, Borui, Dongjie, Yingji, Sheyan, and Huicheng Convertible Bonds were relatively active [13]. 3.2.2 Slight Reduction in Trading Volume, Smaller Declines in High - priced, Medium - and Low - Rated Convertible Bonds - After 5 consecutive weeks of rising, the market reached a high and then declined this week. Convertible bonds fell significantly, and the average daily trading volume slightly decreased to 77.217 billion yuan. The CSI Convertible Bond Index dropped 1.37%, the parity center dropped 1.1% to 105.8 yuan, and the conversion premium rate center dropped 0.3% to 21.8%. In terms of style, high - priced, medium - and low - rated convertible bonds had smaller declines this week, while medium - and high - rated, large - cap, and low - priced convertible bonds had larger declines [5][15].

Employment Data Summary - In July 2025, the U.S. added 73,000 non-farm jobs, significantly below the expected 110,000[6] - The unemployment rate rose to 4.2%, up from 4.1% in June 2025[6] - The labor force participation rate decreased to 62.2%, down from 62.3%[6] Employment Sector Analysis - The service sector contributed the most to job growth, adding 96,000 jobs, primarily in education and healthcare[6] - The leisure and hospitality sector saw a minimal increase of 5,000 jobs, while professional and business services experienced a decline of 14,000 jobs[8] - Goods-producing industries continued to struggle, with a loss of 13,000 jobs, marking three consecutive months of decline[8] Data Revisions and Trends - Job data for May and June were significantly revised downwards, with May's figures adjusted from 144,000 to 19,000 and June's from 147,000 to 14,000, totaling a downward revision of 258,000 jobs[6] - The three-month moving average for new jobs has fallen to 35,000, the lowest level since the pandemic began in 2020[6] Market Implications - Following the disappointing employment data, the market reacted negatively, but this is viewed as a short-term trend[6] - The probability of a 25 basis point rate cut by the Federal Reserve in September 2025 is now approximately 80%[6] - By the end of 2025, the market is pricing in a total rate cut of about 60 basis points[6] Risks and Considerations - There are risks of persistent discrepancies in employment data expectations[3] - The potential for the U.S. economy to enter a recession remains a concern[3] - There is also a risk of inflation rising above expectations[3]

Investment Rating - The report maintains a "Buy" rating for the company [5] Core Views - The company is accelerating its diversification growth strategy through overseas expansion and capacity expansion, particularly with the establishment of a production base in Australia [1][8] - The earnings forecast has been adjusted downward due to unexpected pressure on performance in 2024 and the first quarter of 2025, with projected EPS for 2025-2027 at 0.65, 0.76, and 0.88 yuan respectively [2][9] - The company is expected to benefit from the restructuring of its e-commerce and KA channels, as well as the localization strategy in overseas markets, which may open new growth opportunities [2][9] Financial Information Summary - Revenue for 2023 is reported at 7,056 million yuan, with a projected decline of 5.1% year-on-year. The revenue is expected to recover gradually, with growth rates of 3.2%, 4.5%, and 4.7% for 2025, 2026, and 2027 respectively [4][11] - Operating profit for 2023 is 951 million yuan, with a year-on-year decrease of 6.9%. The operating profit is expected to recover to 697 million yuan in 2025, with growth rates of 4.8%, 18.9%, and 14.8% for the following years [4][11] - The net profit attributable to the parent company for 2023 is 749 million yuan, down 6.5% year-on-year, with projections of 568 million yuan in 2025 and growth rates of 4.7%, 18.4%, and 14.5% for the subsequent years [4][11] - The company’s gross margin is expected to be 25.8% in 2023, decreasing to 24.1% in 2025, before recovering to 26.2% by 2027 [4][11] - The price-to-earnings ratio for 2025 is set at 18 times, corresponding to a target price of 11.70 yuan [2][9]

Group 1: Market Overview - The fixed income market is experiencing a decline in investment returns, prompting investors to seek "fixed income plus" products to enhance yields while managing withdrawal risks[14]. - The recent policy to restore value-added tax (VAT) on bond interest income is expected to reduce returns by 5-10 basis points (bp) for bond investors[14][15]. - The bond market is currently seeing a recovery in sentiment, with significant fluctuations in interest rates and a high issuance volume of government bonds[40][44]. Group 2: Investment Strategies - The North Exchange's online IPOs offer low-cost, high-yield opportunities, making them suitable for "fixed income plus" strategies[16]. - Historical data shows that the average first-day return for new stocks listed on the North Exchange in 2024 was 245%, with no instances of price drops below the issue price[16]. - A strategy involving the maximum subscription amount (5% of the initial issuance) yields an average return of 0.17%, while optimizing for minimum investment can lower returns to 0.12%[21][27]. Group 3: Recommendations - Investors are advised to focus on "fixed income plus" opportunities due to the low withdrawal risk associated with the North Exchange's IPO strategy[35]. - The optimal investment strategy involves adjusting the investment amount to achieve a balance between success probability and return efficiency, with a target return of 0.20% when investing 2.5 times the minimum subscription amount[30][31].

Economic Growth Insights - The actual GDP growth rate for Q2 2025 was 3%, significantly above the expected 2.6% and a recovery from the previous quarter's -0.5%[6] - Personal consumption increased by 1.4% compared to the previous quarter's 0.5%, while private investment saw a sharp decline of -15.6% from a prior growth of 23.8%[6] - Domestic final sales, which exclude trade, inventory, and government impacts, recorded a mere 1.2% growth, down from 1.9%, indicating a weakening underlying economic momentum[6] Consumption and Investment Trends - Personal consumption, a critical component of GDP, showed a slight recovery but remained low at 1.4%, with goods outperforming services[6] - Private investment's significant contraction of -15.6% contributed to a 3.1% drag on GDP, with both residential and non-residential investments shrinking for two consecutive quarters[6] - The decline in consumer confidence and income growth is expected to further suppress consumer demand moving forward[6] Inflation and Policy Outlook - The PCE price index for Q2 2025 rose to 2.6%, exceeding expectations, while the core PCE index reached 2.8%[6] - The impact of tariffs is becoming evident in consumer prices, with notable increases in durable goods and services[6] - The market may be overestimating both economic growth and inflation, with potential for monetary policy easing in 2026, contrary to current market pricing[6]

Group 1: Federal Reserve Policy Insights - The Federal Reserve maintained the federal funds rate target range at 4.25%-4.50%, aligning with market expectations[7] - The decision was not unanimous, with a vote of 9 in favor and 2 against, indicating growing internal divisions within the Fed[7] - The Fed's description of the U.S. economic outlook was slightly downgraded, reflecting concerns over economic activity slowing down[7] Group 2: Inflation and Economic Risks - Inflation risks are currently perceived to be higher than growth risks, complicating the Fed's decision-making process[7] - The market anticipates an 80% probability of a rate cut in September and a 95% probability of cumulative cuts by October, suggesting a significant expectation of easing monetary policy[7] - The report highlights risks of a hard landing for the U.S. economy and a potential rebound in inflation, which could hinder future rate cuts[3] Group 3: Diverging Opinions within the Fed - Three distinct factions have emerged within the Fed regarding interest rate policy: those favoring no cuts, those advocating for delayed cuts, and those pushing for immediate cuts[7] - The internal divisions are primarily driven by differing views on inflation and ongoing political pressures affecting the Fed's independence[7] - The report suggests that the current inflation rebound is largely driven by high import dependence and low inventory levels, while domestic service inflation continues to decline[7]

Investment Rating - The industry investment rating is "Buy" for companies with strong functional attributes and emotional consumption characteristics, particularly those with good digital infrastructure [4][9]. Core Insights - The report emphasizes that digital capabilities will become a core competitive advantage for consumer goods companies in the future [3]. - The domestic market is expected to continue experiencing consumption differentiation, with intense competition among existing players. Local brands with strong functional and emotional attributes are likely to perform better [4][9]. - The report highlights the importance of digitalization and artificial intelligence as strategic focuses for overseas consumer brands, which are increasingly investing in product innovation and operational efficiency [9]. Summary by Sections Industry Overview - The textile and apparel industry is undergoing transformation, with a focus on brands that possess genuine brand power [8]. - Traditional luxury brands are facing sales pressure in the Chinese market, with many reporting declines in sales [9]. Investment Recommendations - The report suggests focusing on companies in the outdoor sports, beauty, and jewelry sectors that exhibit strong functional attributes and emotional consumption characteristics, such as Anta Sports, Bosideng, and Proya [4][9]. - The report notes that brands with strong efficacy and emotional value continue to see good growth in the Chinese market, contrasting with the struggles of traditional luxury brands [9]. Market Dynamics - The report indicates that the Asia-Pacific market, particularly China, accounts for a significant portion of overseas brands' revenue, making localization strategies essential for these brands [9]. - The report also mentions that the application of digitalization and AI is becoming increasingly important for enhancing product innovation and consumer engagement [9].

Group 1 - The credit bond market is entering an adjusted allocation window, expected around mid-August, following a brief adjustment period. The market anticipates no significant negative factors post-equity and commodity shocks, with liquidity remaining relatively loose. The consensus on weak economic expectations and challenges in PPI recovery will likely lead to a decline in market risk appetite, presenting a buying opportunity during the current adjustment phase [5][8][9] - The strategy for city investment bonds remains unchanged, focusing on short-term positions and exploring yield curve "convexity points." The recommendation is to dig deeper into bonds with maturities of 3 years or less, while maintaining a longer duration in high-quality areas. The report emphasizes the importance of seizing post-adjustment allocation opportunities without overly shortening durations [9][11] - In the industrial bond sector, valuation is primarily supported by the credit backing of central and state-owned enterprises rather than fundamentals. The report highlights the potential for yield compression opportunities in August, despite the lack of a "de-involution" market. The focus is on medium to large-sized entities with attractive coupon yields [11][29] Group 2 - The weekly review indicates a significant reduction in credit bond issuance, with a 49% decrease to 179.2 billion yuan, while the total repayment volume also decreased to 165.8 billion yuan, resulting in a net inflow of 13.4 billion yuan. The report notes that the issuance cost for medium-rated new bonds has increased, with average coupon rates for AAA and AA+ rated bonds at 2.01% and 2.46%, respectively [18][19] - The secondary market shows a comprehensive valuation recovery across all grades and maturities, with a central downward adjustment of approximately 3 basis points. Short-term credit spreads have narrowed by 2-3 basis points, while long-term spreads have widened by about 1 basis point [23][24][25] - The report highlights that credit spreads for city investment bonds have generally widened by about 1 basis point, with notable variations across provinces. For instance, Qinghai experienced the largest widening of 5 basis points, indicating ongoing differentiation in credit risk across regions [28][30]

Group 1 - The report highlights the impact of the restoration of VAT on pure bond markets, predicting a reduction in interest income for bond investors by 5-10 basis points [9][10][11] - Short-term effects of the VAT policy may lead to a scarcity of tax-exempt existing bonds, potentially triggering a buying spree [9][10] - In the medium term, the VAT restoration could slow the inflow of funds into the bond market, as institutions may seek higher yields from other asset classes [10][11] Group 2 - The report emphasizes the advantages of participating in the Beijing Stock Exchange (BSE) new share offerings, which offer low costs and high returns, making them suitable for enhancing fixed income+ products [11][12] - Historical data shows that new shares listed on the BSE have maintained significant first-day price increases, averaging over 300% since 2025 [12][13] - The report suggests that the optimal strategy for new share subscriptions involves balancing the amount of capital invested with the probability of successful allocation, with findings indicating that investing 1.7 times the minimum subscription amount yields the highest efficiency [23][25] Group 3 - The report notes that the fixed income market is currently facing challenges due to declining returns, prompting investors to explore fixed income+ strategies [8] - It outlines the expected issuance of 8,285 billion in interest rate bonds this week, indicating a high level of activity in the bond market [27][29] - The sentiment in the bond market is recovering, with various interest rate bonds showing a downward trend in yields, suggesting a favorable environment for bond investors [32][33]