Group 1 - The report emphasizes maintaining duration as the year-end approaches, with a focus on medium to long-term credit varieties, particularly 4-5 year products which show marginal improvement in cost-performance despite still low spread levels [2][10][12] - The current yield range for long-term credit bonds (5 years and above) rated AA+ and above is between 2.16% and 2.66%, indicating a certain level of yield cost-performance [3][10] - The report notes that funds have significantly increased their allocation to 5-year and above credit bonds, reflecting a trend towards extending duration for yield [3][10] Group 2 - The report highlights key policies and events, including Tianjin's measures to support high-quality development of REITs, which aim to enhance capital market services for the real economy [4][19] - The upcoming revision of the "Commercial Bank M&A Loan Management Measures" is expected to broaden the scope of applicable loans and optimize loan conditions, which could facilitate mergers and acquisitions [4][19][24] - The report mentions that the National Development and Reform Commission has recommended 105 infrastructure REITs projects to the CSRC, with 83 already issued, indicating a normalization in the issuance of infrastructure REITs [4][19][24] Group 3 - The report indicates that the credit bond market has seen a majority of yields decline, with financial bonds performing better, while credit spreads have shown divergence [6][10] - The issuance scale of credit bonds this week was 269.9 billion, a decrease of 20.5 billion from the previous week, with net financing also down [7][10] - The report notes a decrease in trading activity in both the interbank and exchange markets for credit bonds, suggesting a decline in market liquidity [7][10]

Investment Rating - The report maintains a positive investment recommendation for the controllable nuclear fusion industry, indicating an upward trend in capital expenditure and technological breakthroughs [1]. Core Insights - The controllable nuclear fusion industry is experiencing accelerated capital expenditure, with significant recent developments in financing and technological advancements [1][8]. - The report highlights that the domestic nuclear fusion projects are expected to see a peak in bidding and investment over the next 3 to 5 years, with an estimated total investment of 146.5 billion yuan [8][19]. Summary by Sections Capital Expenditure - On November 12, the Institute of Plasma Physics at the Chinese Academy of Sciences announced a new tender worth 1.3454 billion yuan, focusing on high-value areas such as fuel cycle and tritium recovery [1][8]. - In the first half of November, the total tender amount from the Institute and Fusion New Energy in Anhui reached 1.976 billion yuan, with five projects exceeding 200 million yuan [7][19]. Financing - On November 10, Xinneng Xuanguang completed a Pre-A round financing of several hundred million yuan, led by Ant Group, aimed at enhancing the performance of its in-construction devices and expanding its team [1][8]. Technological Breakthroughs - On November 6, the Southwest Institute of Nuclear Physics completed the final design review of the ITER Langmuir probe, marking a significant advancement in the development of key diagnostic systems for the ITER project [2][10]. Recommended Companies - The report continues to recommend Lianchuang Optoelectronics and Hezhu Intelligent, while suggesting to pay attention to Guoguang Electric [3]. - In the magnet segment, companies such as Western Superconducting, Yongding Co., and Jingda Co. are highlighted for their high value contribution [3][34]. - For structural components and others, the report recommends companies like Sichuan Electronics, Yingliu Co., and Wanyi Technology, with a suggestion to monitor Antai Technology [3][35].

Investment Rating - The report maintains a "Recommended" rating for the pharmaceutical sector, particularly focusing on innovative drugs and medical devices [53]. Core Views - The report emphasizes the transition of the domestic innovative drug industry from quantity logic to quality logic, highlighting the importance of differentiated products and internationalization by 2025 [9][10]. - It identifies significant growth potential in the medical device sector, particularly in imaging equipment and home medical devices, driven by policy support and market demand [9][10]. - The report suggests that the innovative chain (CXO + life science services) is entering a recovery phase, with increasing investment and demand expected [9][10]. - The pharmaceutical industry is anticipated to enter a new growth cycle, particularly in specialty APIs and formulations, with a focus on companies like Tonghua Dongbao and Huahai Pharmaceutical [9][10]. Summary by Sections Market Review - The report notes a 3.29% increase in the CITIC pharmaceutical index, outperforming the CSI 300 index by 4.37 percentage points, ranking third among 30 primary industries [6]. Innovative Drugs - The report highlights the expected increase in the proportion of innovative drug revenue for companies like Xinlitai, projecting that by 2025, innovative drugs will account for over 50% of their revenue [16][17]. - It lists key companies to watch, including BeiGene, Innovent, and Junshi Biosciences, which are expected to lead in product differentiation and international expansion [9][10]. Medical Devices - The report identifies a recovery in bidding volumes for imaging equipment and a growing market for home medical devices, with companies like Mindray and United Imaging being key players [9][10]. - It emphasizes the acceleration of domestic substitution in the medical device market, particularly in high-value consumables and IVD products [55][58]. Innovative Chain (CXO + Life Science Services) - The report indicates a potential recovery in overseas investment and a bottoming out of domestic investment in the innovative chain, with a focus on high-profit elasticity for companies entering the return phase [9][10]. Traditional Chinese Medicine - The report suggests that the market for essential medicines will see significant growth, particularly for unique products, and highlights companies like Kunming Pharmaceutical and Kangyuan Pharmaceutical as key players [11][68]. Pharmacy Sector - The report expresses optimism about the pharmacy sector, driven by the acceleration of prescription outflow and an improving competitive landscape, recommending companies like YaoXing and YiFeng Pharmacy [65]. Medical Services - The report highlights the potential for private medical services to enhance competitiveness due to anti-corruption measures and the expansion of commercial insurance, recommending companies like GuoShengTang and AiEr Eye Hospital [67].

1. Report Industry Investment Rating There is no information provided in the report regarding the industry investment rating. 2. Core Views of the Report - On November 14, the convertible bond market contracted in volume and declined, with compressed valuations. The CSI Convertible Bond Index decreased by 0.58% compared to the previous day, and the trading sentiment in the convertible bond market weakened. The total trading volume of the convertible bond market was 71.351 billion yuan, a 9.71% decrease from the previous day [1]. - The convertible bond price center declined, and the proportion of high - priced bonds decreased. The overall weighted average closing price of convertible bonds was 135.02 yuan, a 0.64% decrease from the previous day. The valuation was compressed, with the 100 - yuan par - value fitted conversion premium rate at 31.82%, a 0.82 - percentage - point decrease from the previous day [2]. - In the stock market, more than half of the underlying stock industry indices declined. Among A - share markets, the top three industries with the largest declines were electronics (-3.09%), communication (-2.46%), and media (-2.16%); the top three industries with the largest increases were real estate (+0.39%), banking (+0.26%), and pharmaceutical biology (+0.17%). In the convertible bond market, 23 industries declined, with the top three industries with the largest declines being communication (-2.52%), national defense and military industry (-1.85%), and automobile (-1.66%); the top three industries with the largest increases were steel (+2.31%), environmental protection (+0.82%), and public utilities (+0.27%) [3]. 3. Summary by Relevant Catalogs Market Overview - **Index Performance**: The CSI Convertible Bond Index decreased by 0.58% compared to the previous day, the Shanghai Composite Index decreased by 0.97%, the Shenzhen Component Index decreased by 1.93%, the ChiNext Index decreased by 2.82%, the SSE 50 Index decreased by 1.15%, and the CSI 1000 Index decreased by 1.16% [1]. - **Market Style**: Large - cap value stocks were relatively dominant. Large - cap growth stocks decreased by 2.20%, large - cap value stocks decreased by 0.55%, mid - cap growth stocks decreased by 1.48%, mid - cap value stocks decreased by 1.19%, small - cap growth stocks decreased by 1.45%, and small - cap value stocks decreased by 0.85% [1]. - **Fund Performance**: The trading sentiment in the convertible bond market weakened. The trading volume of the convertible bond market was 71.351 billion yuan, a 9.71% decrease from the previous day; the total trading volume of the Wind All - A Index was 1980.382 billion yuan, a 4.13% decrease from the previous day; the net outflow of the main funds in the Shanghai and Shenzhen stock markets was 62.011 billion yuan, and the yield of the 10 - year treasury bond increased by 0.14 bp to 1.81% [1]. Convertible Bond Price and Valuation - **Convertible Bond Price**: The overall weighted average closing price of convertible bonds was 135.02 yuan, a 0.64% decrease from the previous day. The closing price of equity - biased convertible bonds was 178.79 yuan, a 1.27% decrease; the closing price of bond - biased convertible bonds was 121.53 yuan, a 0.10% decrease; the closing price of balanced convertible bonds was 130.91 yuan, a 0.31% decrease. The proportion of high - priced bonds above 130 yuan was 62.34%, a 0.75 - percentage - point decrease from the previous day. The price median was 133.72 yuan, a 0.93% decrease from the previous day [2]. - **Convertible Bond Valuation**: The valuation was compressed. The 100 - yuan par - value fitted conversion premium rate was 31.82%, a 0.82 - percentage - point decrease from the previous day; the overall weighted par value was 104.59 yuan, a 0.52% decrease from the previous day. The premium rate of equity - biased convertible bonds was 10.60%, a 1.34 - percentage - point decrease; the premium rate of bond - biased convertible bonds was 84.51%, a 0.54 - percentage - point decrease; the premium rate of balanced convertible bonds was 22.78%, a 0.24 - percentage - point decrease [2]. Industry Performance - **Underlying Stock Industry**: Among A - share markets, the top three industries with the largest declines were electronics (-3.09%), communication (-2.46%), and media (-2.16%); the top three industries with the largest increases were real estate (+0.39%), banking (+0.26%), and pharmaceutical biology (+0.17%) [3]. - **Convertible Bond Industry**: In the convertible bond market, 23 industries declined, with the top three industries with the largest declines being communication (-2.52%), national defense and military industry (-1.85%), and automobile (-1.66%); the top three industries with the largest increases were steel (+2.31%), environmental protection (+0.82%), and public utilities (+0.27%) [3]. - **Key Indicators by Sector**: - Closing price: The large - cycle sector decreased by 0.15%, the manufacturing sector decreased by 1.11%, the technology sector decreased by 1.59%, the large - consumption sector decreased by 0.64%, and the large - finance sector decreased by 0.66% [3]. - Conversion premium rate: The large - cycle sector decreased by 0.57 percentage points, the manufacturing sector decreased by 0.37 percentage points, the technology sector increased by 0.3 percentage points, the large - consumption sector decreased by 0.29 percentage points, and the large - finance sector increased by 0.051 percentage points [3]. - Conversion value: The large - cycle sector increased by 0.51%, the manufacturing sector decreased by 0.87%, the technology sector decreased by 1.74%, the large - consumption sector decreased by 0.64%, and the large - finance sector decreased by 1.01% [3]. - Pure bond premium rate: The large - cycle sector decreased by 0.23 percentage points, the manufacturing sector decreased by 1.7 percentage points, the technology sector decreased by 2.3 percentage points, the large - consumption sector decreased by 0.82 percentage points, and the large - finance sector decreased by 0.79 percentage points [4].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - After the production rush at the end of the third quarter in October, the economy weakened again at the beginning of the quarter. Coupled with the high base in the service industry, the estimated monthly GDP was around 4.5%, a relatively low level since the beginning of the year [10]. - The incremental impact of the "two 50 billion" in October has not yet appeared, including less - than - expected credit and infrastructure investment effects [12]. - The "broad credit" verification from November to December is still an important observation clue for the fundamentals. The effects of this round of policy tools are expected to continue until the first quarter of 2026 [17]. 3. Summary by Relevant Catalogs 3.1 "Broad Credit" Effect May Appear with a Lag - **GDP Estimation**: In October, affected by factors such as the end of the peak season in the service industry, weak exports, and more holidays, the GDP dropped to about 4.5%, a low level since the beginning of the year [10]. - **Influence of "Two 50 Billion"**: In October, the incremental impact of the "two 50 billion" was not evident. The new medium - and long - term corporate loans decreased year - on - year, and infrastructure investment was weaker than the seasonal average, with a lower leveraging effect than in 2022 [12]. - **Reasons**: Policy tools were gradually launched from the end of September to the end of October, and the capital effects may not be fully reflected. There may be an overlap between policy - supported projects and special bond projects, and the project scope has expanded to light - asset industries, resulting in a weaker loan - leveraging effect [17]. - **Outlook**: The "broad credit" verification from November to December is crucial. Considering the high base formed by the strong "good start" this year, macro - policies in 2026 may need to be implemented earlier, and the effects of this round of tools are expected to last until the first quarter of 2026 [17]. 3.2 October Data Interpretation: Mild Slowdown of Economic Momentum at the Beginning of the Quarter 3.2.1 Infrastructure - **Investment Situation**: From January to October, the cumulative year - on - year growth rate of infrastructure investment (excluding electricity) was - 0.1%, and the full - scale infrastructure investment was + 1.5%, showing a further decline. In October, the year - on - year growth rate of infrastructure investment excluding electricity was - 8.9%, and the full - scale infrastructure was - 12.1%, accelerating the decline [18]. - **Future Outlook**: Although 50 billion of policy - based financial instruments were fully invested by the end of October, and the new orders and business activity expectations in the construction industry PMI improved, the actual workload may be postponed, and the investment data from November to December need to be verified [18]. 3.2.2 Real Estate - **Investment and Sales**: From January to October, the cumulative year - on - year growth rate of real estate investment was - 14.7%, and the single - month year - on - year was - 23.0%. The decline in construction narrowed, while the decline in new construction and completion expanded. In October, the year - on - year decline in residential sales area was - 19.6%, and the decline had been expanding for three consecutive months. The month - on - month decline in new and second - hand residential sales prices also expanded [23]. - **Future Outlook**: Attention should be paid to the probability of further adjustment of purchase - restriction policies in first - tier cities and the tone of the Central Economic Work Conference at the end of the year [23]. 3.2.3 Manufacturing Investment - **Investment Performance**: In October, the cumulative year - on - year growth rate of manufacturing investment was + 2.7%, and the single - month year - on - year was - 6.7%, with the decline expanding by 4.8 percentage points. Except for the automobile manufacturing and equipment transportation manufacturing industries, the single - month year - on - year growth rates of other industries turned negative [27]. - **Reasons and Outlook**: Due to the high base formed by the concentrated implementation of the equipment renewal policy from October to the end of last year and the bottom - up recovery of corporate profits and capacity control, manufacturing investment may continue to be in an adjustment period in the short term [27]. 3.2.4 Consumption - **Overall Situation**: In October, the year - on - year growth rate of social retail sales was + 2.9%, a slight decline from the previous month. The month - on - month seasonally adjusted growth rate recovered to + 0.16%, a relatively weak seasonal level [31]. - **Sub - items**: In terms of catering, the year - on - year growth rate was + 3.8%, and the month - on - month growth rate was + 15.3%, better than the average of the past three years. In terms of commodity retail, the year - on - year growth rate of above - quota commodity retail was + 1.4%, a decrease of 1.3 percentage points from September. Most subsidized categories showed a decline, while non - subsidized categories such as gold and silver jewelry performed well. The year - on - year growth rate of online commodity retail slowed down [36]. 3.2.5 Industry - **Production Situation**: In October, the year - on - year growth rate of industrial production was + 4.9%, and the month - on - month seasonally adjusted growth rate was + 0.17%, a seasonal decline and a relatively weak level since 2019. The decline in exports and the season - beginning effect dragged down manufacturing production [38]. - **Future Outlook**: In November, with the disappearance of holiday disturbances and the release of policy funds, industrial production may experience seasonal recovery [41].

Group 1: Financial Data Overview - In October 2025, new social financing (社融) amounted to 815 billion, a decrease from the previous value of 3.53 trillion[2] - The year-on-year growth of social financing stock was 8.5%, down from 8.7%[2] - M2 year-on-year growth was 8.2%, a decline from 8.4%[2] - New M1 year-on-year growth was 6.2%, down from 7.2%[2] Group 2: Key Insights - The continuous decrease in corporate medium to long-term loans for four months indicates a potential improvement in supply-demand balance[4] - The decline in household loans over the same period is more closely related to operational loans rather than consumer loans, which still show growth compared to 2024[4] - The significant increase in entrusted loans in October may be linked to the deployment of policy financial tools, although the impact on policy banks' balance sheets appears limited[4] - Direct financing through corporate bonds and domestic stock financing has shown consistent year-on-year growth, indicating a positive trend for high-tech and innovative enterprises[4] Group 3: Deposit Trends - Non-bank financial institution deposits increased by 770 billion year-on-year, suggesting stability in equity market transaction volumes[5] - The new M1's year-on-year decline is attributed to seasonal factors, with a notable drop from September's high growth[5] - The old M1 is expected to show a year-on-year decline, potentially dropping from 6.2% in September to around 3.4% by year-end, still above the -1.4% expected for the end of 2024[5] Group 4: Economic Indicators - Economic cycle indicators have shown a shift from the upward trend observed in the first eight months of the year, with September and October maintaining a fluctuating trend[6] - The change in the enterprise-resident deposit scissors difference indicates a potential slowdown in economic activity, which could impact future corporate profits[6]

Report Industry Investment Rating There is no information provided in the report regarding the industry investment rating. Core Viewpoints - In October 2025, new RMB loans were 220 billion yuan, a year-on-year decrease of 280 billion yuan, and the credit balance growth rate dropped to 6.5%. The new social financing scale was 815 billion yuan, a year-on-year decrease of 597 billion yuan, and the social financing stock growth rate declined from 8.7% to 8.5%. The year-on-year growth rate of M2 decreased from 8.4% to 8.2% due to the base effect, and the growth rate of the new M1 caliber dropped from 7.2% to 6.2%. Overall, October is a small month for credit at the beginning of the quarter, mainly relying on on-balance-sheet bills to make up for the shortfall. Among them, short-term household loans are the main drag, and the "shopping festival" effect has limited driving force. In the fourth quarter, due to the high base of government bond issuance, the growth rate of social financing continues to decline. The M2 growth rate slightly declines, with non-bank deposits being the main supporting item, and the M1 growth rate ends its six-month upward trend [1][7]. Summary by Related Catalogs Credit: Short-term Household Loans as the Main Drag, and Long-term Corporate Loans Weakening - **Household Sector**: In October, short-term household loans decreased by 286.6 billion yuan, a year-on-year decrease of 335.6 billion yuan, continuing to be significantly lower than the seasonal level. Long-term household loans decreased by 70 billion yuan, recording a negative growth for the first time in recent years, a year-on-year decrease of 180 billion yuan. The month-on-month sprint effect of new and second-hand housing sales is not significant. Under the high base and policy stability, the overall sales performance is weaker than that in September [2][10]. - **Corporate Sector**: In October, long-term corporate loans only increased by 30 billion yuan, a year-on-year decrease of 140 billion yuan. The relatively strong corporate loans at the end of September may have partially overdrawn the quota for October. Coupled with the limited driving force of policy-based financial instruments and the approach of the economic "off-season" at the end of the year, it is difficult for long-term corporate loans to have a significant increase. In terms of bills, bill financing increased by 500.6 billion yuan in the same month, a year-on-year increase of 331.2 billion yuan, and the demand for bills to "make up for the shortfall" significantly increased [2][15]. Social Financing: The Support of Government Bonds Declines at the End of the Year, and Entrusted Loans Increase - **Government Bonds**: The issuance of government bonds decreased in October, with new government bonds of 489.3 billion yuan, a year-on-year decrease of 560.2 billion yuan. In the fourth quarter, it enters the off-season for bond issuance. The net financing of government bonds from November to December may be 1.8 trillion yuan, a year-on-year decrease of 1.1 trillion yuan. The growth rate of social financing may decline to around 8.2% by the end of the year [3][17]. - **Entrusted Loans and Undiscounted Bills**: Driven by the "500 billion" policy-based financial instruments, entrusted loans increased by 165.3 billion yuan in October, a year-on-year increase of 187.2 billion yuan, becoming an important supporting item for social financing. In addition, undiscounted bills decreased by 289.4 billion yuan in October, 149.8 billion yuan lower than the same period last year. Due to the relatively strong credit performance in September, the conversion of undiscounted bills to on-balance-sheet was limited. In October, banks' concentrated "ticket grabbing" in the secondary market led to a significant decrease in off-balance-sheet bills [3][23]. Deposits: High Growth of Non-bank Deposits, Possibly Driven by Both Wealth Management Growth and the Equity Market - **M1 and M2 - M1 Spread**: The month-on-month increase of the new M1 caliber was lower than that of the same period last year, and the M2 - M1 spread slightly widened. In October last year, there was a high base for M1. In October, the new M1 caliber decreased by 1.1 trillion yuan, 1.0 trillion yuan more than the decrease in 2024. In terms of growth rate, the year-on-year reading of M1 decreased from 7.2% to 6.2% [4][27]. - **Non-bank Deposits and Household Deposits**: Among the M2 components, non-bank deposits increased significantly beyond the seasonal level again, while household deposits were slightly lower than the historical average. By sector, non-bank deposits increased by 1.85 trillion yuan in October, 770 billion yuan more than the same period in 2024. Household deposits decreased by 1.34 trillion yuan in the same month, 770 billion yuan more than the decrease in the same period last year. Since October, the equity market has continued to be strong, and the growth of wealth management product scale at the beginning of the quarter may jointly drive the decrease in household deposits and the significant increase in non-bank deposits [4][31].

Investment Rating - The report maintains a "Strong Buy" rating for 康耐特光学 (02276.HK) [1] Core Views - The company has seen a significant increase in sales of smart glasses, with a 25-fold year-on-year growth in transaction value during the Double Eleven shopping festival, ranking as the top seller in the smart glasses category on Tmall [1] - The company is expected to benefit from its strong position in the XR (Extended Reality) market, with a focus on consumer-grade products gaining traction [1] - The company is actively expanding its production capacity, with a new factory in Japan expected to enhance its North American business and reduce tariffs [1] - The report projects steady revenue growth, with total revenue expected to reach 2,061 million HKD in 2024, growing to 3,380 million HKD by 2027, representing a CAGR of approximately 19.2% [1][7] - Net profit is forecasted to grow from 428 million HKD in 2024 to 869 million HKD in 2027, with a CAGR of about 25% [1][7] - The target price for the stock is set at 63.63 HKD, reflecting a valuation of 40 times earnings for 2026 [2][6] Financial Summary - Total revenue projections: - 2024A: 2,061 million HKD - 2025E: 2,347 million HKD - 2026E: 2,835 million HKD - 2027E: 3,380 million HKD - Net profit projections: - 2024A: 428 million HKD - 2025E: 564 million HKD - 2026E: 696 million HKD - 2027E: 869 million HKD - Earnings per share (EPS) projections: - 2024A: 0.89 HKD - 2025E: 1.18 HKD - 2026E: 1.45 HKD - 2027E: 1.81 HKD - Price-to-earnings (P/E) ratio projections: - 2024A: 47 - 2025E: 40 - 2026E: 33 - 2027E: 26 [1][7]

Investment Rating - The report maintains a "Strong Buy" rating for the company, expecting it to outperform the benchmark index by over 20% in the next six months [2][9]. Core Views - The company reported a revenue of 4.03 billion yuan in Q3 2025, a year-on-year decrease of 4.4%. The net profit attributable to shareholders was 920 million yuan, down 10.3% year-on-year [2][9]. - The traditional business is under pressure due to industry conditions, but the company is actively developing new products and moving towards smart ecosystems to mitigate the impact of low demand in the real estate sector [9]. - The company is making significant progress in its new energy business, which is expected to form a second growth curve in the future [9]. - The gross margin for Q3 2025 was 41.7%, a decline of 1.8 percentage points year-on-year, primarily due to the increasing revenue share from the lower-margin new energy business [9]. - Operating cash flow improved significantly, with a net cash flow of 1.24 billion yuan in Q3 2025, up 90.2% year-on-year [9]. Financial Summary - Total revenue projections for 2024A, 2025E, 2026E, and 2027E are 16.83 billion, 16.66 billion, 17.81 billion, and 18.71 billion yuan respectively, with a year-on-year growth rate of 7.2%, -1.0%, 6.9%, and 5.0% [4][10]. - Net profit attributable to shareholders is projected to be 4.27 billion, 3.99 billion, 4.38 billion, and 4.66 billion yuan for the same years, with corresponding growth rates of 10.4%, -6.6%, 9.7%, and 6.3% [4][10]. - The earnings per share (EPS) forecast for 2025E is 2.21 yuan, with a price-to-earnings (P/E) ratio of 20 [4][10]. - The target price is set at 54.6 yuan, compared to the current price of 43.80 yuan [4][10].

Quantitative Models and Construction Methods 1. Model Name: A-share Market Cap/GDP Ratio (Buffett Indicator) - **Model Construction Idea**: The ratio of the total market capitalization of the stock market to GDP is used to measure the alignment between market valuation and the economic fundamentals. A lower ratio indicates the market is undervalued relative to the economy, suggesting potential room for a bull market, while a higher ratio signals potential market bubbles[16][17]. - **Model Construction Process**: - The formula is: $ \text{Buffett Indicator} = \frac{\text{Total Market Cap of A-share}}{\text{GDP}} $ - Interpretation: - Below 60%: Severely undervalued, often seen during major bear markets or periods of extreme economic pessimism (e.g., 2005, 2008, 2013-2014, 2018, and October 2022)[16] - Above 100%: Significantly overvalued, indicating potential market bubbles (e.g., 150% during the 2007 bull market peak, 120% during the 2015 bull market peak)[17] - **Model Evaluation**: This indicator is a useful tool for long-term asset allocation and strategic market timing. However, it should not be used as the sole decision-making tool and is not suitable for short-term trading[20]. 2. Model Name: Ratio of Household Deposits to Total Market Cap - **Model Construction Idea**: This ratio reflects the relative abundance of "off-market funds" compared to "on-market assets." It is conceptualized as the "water reservoir" (household deposits) versus the "irrigated farmland" (stock market capitalization)[21]. - **Model Construction Process**: - The formula is: $ \text{Ratio} = \frac{\text{Household Deposits}}{\text{Total Market Cap of A-share}} $ - Interpretation: - A higher ratio indicates more off-market funds relative to the stock market, suggesting potential for market inflows - A lower ratio indicates a higher proportion of funds already invested in the market - **Model Evaluation**: Similar to the Buffett Indicator, this ratio provides a general indication of market conditions but cannot pinpoint exact turning points. It is also slightly overestimated as it does not account for Chinese investments in overseas markets like Hong Kong and the US[24]. 3. Model Name: Financing Balance/Total A-share Free-float Market Cap Ratio (Leverage Activity Indicator) - **Model Construction Idea**: This ratio measures the activity level of leveraged funds in the A-share market and serves as a barometer for market risk appetite. It evaluates the proportion of the market driven by borrowed funds[25]. - **Model Construction Process**: - The formula is: $ \text{Leverage Activity Ratio} = \frac{\text{Financing Balance}}{\text{Total A-share Free-float Market Cap}} $ - Interpretation: - A higher ratio indicates high investor sentiment and optimism, with more willingness to leverage - A lower ratio indicates lower investor confidence - **Model Evaluation**: While this indicator is useful for gauging market trends, it should be used cautiously as leverage can amplify both market gains and losses. It is essential to remain aware of the potential risks associated with high leverage[28]. 4. Model Name: Stock-Bond Investment Cost-Effectiveness (Equity Risk Premium) - **Model Construction Idea**: This model compares the expected returns of stocks and bonds to determine which asset class offers better value. It measures the equity risk premium, which is the additional return investors expect for taking on the higher risk of stocks[29]. - **Model Construction Process**: - The formula is: $ \text{Equity Risk Premium} = \text{Expected Stock Market Return} - \text{Bond Yield} $ - Interpretation: - Equity risk premium > 4%: Stocks are undervalued and have high cost-effectiveness - Equity risk premium between 2%-4%: Stocks are slightly more attractive, suggesting a balanced allocation - Equity risk premium < 2%: Bonds become more attractive due to their defensive value - **Model Evaluation**: This indicator is a reliable measure of relative attractiveness between stocks and bonds. However, it should be used in conjunction with other macroeconomic indicators for a comprehensive analysis[32]. 5. Model Name: Market Overall Valuation - **Model Construction Idea**: This indicator evaluates the overall valuation level of the market. When the valuation reaches historically high levels, it signals that asset prices are expensive, and market sentiment is overly optimistic, potentially forming a market top[33]. - **Model Construction Process**: - The valuation is calculated based on historical data and compared to previous market peaks - Historical reference points include 2015 (valuation of 23.11) and 2018 (valuation of 19.12) - **Model Evaluation**: While this indicator is useful for identifying potential market tops, it should be used alongside macroeconomic factors. High valuations do not always indicate an imminent market top, as markets can remain overvalued for extended periods[36]. 6. Model Name: Low-Priced Stock Ratio - **Model Construction Idea**: This indicator analyzes the proportion of low-priced stocks in the market, which tends to increase during the late stages of a bull market due to speculative behavior. It serves as an auxiliary indicator for market trend analysis[37]. - **Model Construction Process**: - The ratio is calculated as the proportion of low-priced stocks in the market - Historical trends are analyzed to identify correlations between low-priced stock ratios and market trends - **Model Evaluation**: This indicator is not an absolute signal but serves as a supplementary tool for market analysis. It is particularly useful for identifying speculative bubbles in the market[40]. 7. Model Name: Shareholder Reduction - **Model Construction Idea**: This indicator tracks the behavior of corporate insiders (e.g., shareholders) who are considered to have the best understanding of a company's intrinsic value. A significant increase in shareholder reduction may indicate overvaluation[41]. - **Model Construction Process**: - Monthly frequency data is used to calculate: $ \text{Net Reduction Events} = \frac{\text{Reduction Events} - \text{Increase Events}}{\text{Total Number of Stocks}} $ - **Model Evaluation**: This indicator is more effective in identifying market bottoms when shareholder increases outnumber reductions. It is less reliable for identifying market tops but can still provide valuable insights when combined with other indicators[44]. 8. Model Name: Small Transaction Volume - **Model Construction Idea**: This indicator reflects market sentiment and changes in participant structure. It is based on the logic of the transition between "retail investors entering" and "smart money exiting"[45]. - **Model Construction Process**: - The indicator is calculated as follows: 1. Calculate the ratio of small order net active buy volume to total trading volume for each stock on a weekly basis 2. Select the top 10% of stocks with the highest retail participation 3. Compute the average of the indicator for these stocks and standardize it using a 150-week rolling z-score - **Model Evaluation**: This indicator is a useful supplementary signal for market sentiment. However, it should be used in conjunction with other indicators, as small transaction volume alone may not provide a complete picture of market conditions[48]. 9. Model Name: CSI 300 Turnover Ratio - **Model Construction Idea**: This indicator measures the proportion of CSI 300 turnover relative to the total A-share market turnover. It is used to assess changes in market capital flow and risk appetite, providing insights into whether the market is driven by value or speculation[49]. - **Model Construction Process**: - The formula is: $ \text{CSI 300 Turnover Ratio} = \frac{\text{CSI 300 Turnover}}{\text{Total A-share Turnover}} $ - A 5-day moving average is used for stability - **Model Evaluation**: This indicator is effective in identifying market tops, especially when the ratio exceeds 45%. Currently, the ratio is at 26%, indicating a healthy market condition[53]. 10. Model Name: Proportion of Equity Fund Issuance - **Model Construction Idea**: This classic market sentiment indicator examines the relationship between equity fund issuance and market performance. Extreme values and trends in this ratio are considered warning signs of market overheating[54]. - **Model Construction Process**: - The formula is: $ \text{Proportion of Equity Fund Issuance} = \frac{\text{Monthly Equity Fund Issuance}}{\text{Total A-share Free-float Market Cap}} $ - **Model Evaluation**: The peak values of this indicator have a strong correlation with market trends. Currently, the proportion is relatively low, indicating a healthy market condition[57]. --- Model Backtesting Results 1. A-share Market Cap/GDP Ratio (Buffett Indicator) - Current value: 88%[17] 2. Ratio of Household Deposits to Total Market Cap - Current value: 47.35%[24] 3. Financing Balance/Total A-share Free-float Market Cap Ratio - Current value: 2.5%[28] 4. Stock-Bond Investment Cost-Effectiveness (Equity Risk Premium) - Current value: 3.96%[32] 5. Market Overall Valuation - Current value: 17.33[36] 6. Market Low-Priced Stock Ratio - Current value: