Group 1: Report Industry Investment Rating - Not provided in the content Group 2: Core Views of the Report - In July 2025, the convertible bond and equity markets both rose rapidly with multiple catalysts, but there was a slight pullback at the end of the month. The valuation of convertible bonds is at a high level, and their elasticity is relatively weak. The current valuation increase is mainly driven by low - price convertible bonds, with a relatively healthy structure. Attention should be paid to potential investment opportunities in low - price and equity - biased convertible bonds [1][26][35] - The convertible bond market is expected to oscillate at a high valuation level. The support from the equity market may remain strong, and the risk of valuation decline is relatively weak. The "Huachuang Convertible Bond" focus portfolio for August 2025 has been adjusted [36][49] Group 3: Summary by Directory I. Convertible Bond Valuation at a High Level, Focus on Structural Opportunities - **Market Review**: In July, the equity and convertible bond markets both rose rapidly with multiple catalysts. The public funds in the Shanghai and Shenzhen stock exchanges increased their holdings of convertible bonds by 3.63%, and the ETF share increased by 19.46%. The small - cap style was strong throughout the month, and there was a slight pullback at the end of the month. The Wind All - A Index rose 4.75%, and the convertible bond index rose 2.87%, with the valuation increasing [1] - **Analysis of High - Valuation Characteristics**: High - valuation convertible bonds have weak elasticity. Reviewing historical high - valuation periods (March 2020, February 2022, August 2022), they were characterized by high - valuation pullback pressure and high Delta. Currently, the rapid increase in convertible bond valuation is due to fund buying and ETF share growth. The low - price varieties are strong, and the current Delta is around 0.55, providing a higher safety margin [2][16] - **Investment Suggestions**: There may be a bubble in convertible bond valuation. Pay attention to low - price and equity - biased convertible bonds. In a high - valuation environment, if there are theme catalysts, focus on equity - biased convertible bonds to increase elasticity, and also participate in low - price convertible bonds for bottom - line protection [3][35] II. Valuation Outlook: High - Level Oscillation, Relatively Healthy Structure - **Support from the Equity Market**: Multiple themes have driven the equity market, and sentiment is positive. The technology sector can continue to be followed [36] - **Healthy Valuation Structure**: The current valuation increase is mainly driven by low - price convertible bonds. Public funds and ETFs have increased their holdings, and the risk of valuation decline is relatively weak. As of July 31, 2025, the 100 - yuan par - value fitted conversion premium rate was 26.83%, up 2.11 pct from the end of June [36] - **Valuation Compression in Different Categories**: As of July 31, compared with the end of June, the conversion premium rates of debt - biased convertible bonds decreased significantly. Most industries, ratings, and scales of convertible bonds saw valuation compression [40][41] III. Key Focus Convertible Bonds - **July Performance**: From July 5 to August 4, the July convertible bond portfolio rose 4.42%, outperforming the benchmark index by 1.17 pct. Huayi, Fenggong, and Rongtai had the highest gains, while some bank convertible bonds adjusted slightly [46] - **August Portfolio Adjustment**: The "Huachuang Convertible Bond" focus portfolio for August is adjusted to include Xingqiu, Mingli, Fenggong, Zhanggu, Huayi, Yifeng, Shangyin, Ziyin, Zhongyin, Qingnong, and Xingye. The portfolio selection strategy combines top - down and bottom - up approaches, with specific selection requirements [49][53][54] IV. Market Review: Both Convertible Bonds and Underlying Stocks Rose, Valuation Significantly Increased - **Overall Market Performance**: In July, the underlying stock market rose, and the convertible bond market followed. The Shanghai Composite Index rose 3.74%, the Shenzhen Component Index rose 5.20%, the Wind All - A Index rose 4.75%, and the convertible bond index rose 2.87%. The valuation increased by 2.11 pct. The small - cap stocks performed better, and the pharmaceutical sector was relatively strong [55] - **(1) Market Performance: Most Convertible Bond Sectors Rose, and the Tibet Revitalization Concept Heated Up Significantly**: Most of the Shenwan primary industry indices rose in July, with steel, pharmaceutical biology, and building materials having the highest gains. In the convertible bond market, building materials, pharmaceutical biology, and household appliances had the highest gains [58] - **(2) Capital Performance: Trading Volume in the Convertible Bond and Equity Markets Continued to Increase**: The average daily trading volume of the CSI Convertible Bond Index in July was 728.88 billion yuan, up 16.32% from June. The average daily trading volume of the Wind All - A Index was 16,336.29 billion yuan, up 22.28% from June. The margin trading balance increased, and most industries received net margin purchases [68][69] V. Supply and Demand Situation: The Supply Scale of New Convertible Bonds Increased Month - on - Month, and the Pace of Pre - plans Slowed Down - **(1) In July, 3 Convertible Bonds Were Issued, and 9 New Convertible Bonds Were Listed**: In July, 3 new convertible bonds were issued, with a total scale of 84.52 billion yuan, and 9 new convertible bonds were listed, with a total scale of 43.52 billion yuan. The online subscription for new convertible bonds heated up, with an average effective subscription amount of 8.32 trillion yuan. The total effective subscription was 24.97 trillion yuan, and the online subscription success rate was 0.0096% [71][76] - **Pending Issuance and New Pre - plans**: The total pending issuance scale is about 84 billion yuan. As of July 31, 2025, 4 listed companies obtained approval for convertible bond issuance, and 3 companies passed the review meeting and were waiting for approval. Two companies announced new board pre - plans, with a total scale of 24.96 billion yuan, a 10.40% decrease from June [78][80] - **Redemption and Downward Revision Announcements**: In July, 5 convertible bonds announced redemption, and 8 convertible bonds announced downward revisions. Many convertible bonds also announced non - downward revisions, proposed downward revisions, or were expected to meet redemption conditions [85][89] - **(2) In July, Holders in the Shanghai and Shenzhen Stock Exchanges Were Cautious Overall, while Public Funds Were Active**: The total convertible bond holding value in the Shanghai and Shenzhen stock exchanges in July was 647.854 billion yuan, a decrease of 73.14 billion yuan from June. Public funds increased their holdings, while enterprise annuities decreased their holdings. Brokerage asset management also showed different trends in the two exchanges [92][98][100]

Group 1: Capital Flow and Liquidity - Southbound funds have seen a cumulative net inflow of over 250 billion yuan in the past three months, with weekly net inflows exceeding 10 billion yuan[14] - Retail investors contributed a net inflow of 134.86 billion yuan in the last week, marking a 22.5 billion yuan increase from the previous value, maintaining a high level at the 76.4 percentile over the past five years[8] - Leverage funds continue to flow in at high levels, with net inflows of approximately 322.8 billion yuan last week, although this is a decrease from the previous week's 446.1 billion yuan[30] Group 2: Market Trends and Investor Sentiment - The Shanghai Composite Index experienced its first decline after five consecutive weeks of increases, indicating a potential shift in market sentiment[8] - The trading heat for the machinery sector increased by 29 percentage points to 86%, while the construction sector rose by 24 percentage points to 72%[9] - The search interest in A-shares has declined, reflecting a cooling investor sentiment despite high net inflows from retail investors[8] Group 3: ETF and Fund Performance - The net subscription for stock ETFs dropped significantly to -38.13 billion yuan, a stark contrast to the previous net inflow of -5.3 billion yuan, placing it at the 1.9 percentile over the past three years[42] - The issuance of new public equity funds decreased to 9.21 billion yuan, which is at the 46 percentile over the past three years, indicating a contraction in new fund launches[50] - The total amount of share buybacks increased to 3.6 billion yuan, up from 1.85 billion yuan, reflecting a strong buyback trend at the 78 percentile over the past three years[46]

Group 1: Fund Liquidity - Southbound funds have seen a cumulative net inflow of over 250 billion CNY in the past three months, with weekly net inflows exceeding 10 billion CNY[5] - Leverage funds continue to see high net inflows, with net inflow of 322.8 billion CNY last week, maintaining a high level at the 93rd percentile over the past three years[11] - Stock-type ETFs experienced a significant net outflow of 381.3 billion CNY, placing it at the 1.9th percentile over the past three years[18] Group 2: Trading Congestion - The trading heat for the machinery sector increased by 29 percentage points to 86%, while the construction sector rose by 24 percentage points to 72%[52] - The insurance sector's trading heat increased by 13 percentage points to 28%, whereas the light industry, photovoltaic, and military industries saw declines of 18, 17, and 16 percentage points, respectively[52] Group 3: Investor Sentiment - The A-share market saw a decline after five consecutive weeks of increases, with a drop in overall search heat for A-shares on social media[65] - Retail investor net inflow in the A-share market was 134.9 billion CNY last week, maintaining a high level at the 76.4th percentile over the past five years[2]

Investment Rating - The report maintains a "Buy" recommendation for the computer industry, particularly focusing on AI application directions [4]. Core Insights - The report highlights the advancements of the Kimi model by Moonshot AI, emphasizing its position in the global open-source SOTA (State of the Art) landscape [2][8]. - Kimi K2, the latest model, has achieved significant breakthroughs in various capabilities, including code generation, reasoning, and automation, establishing a new benchmark in the industry [36][39]. - The report outlines the strategic shift from a single dialogue tool to a comprehensive product matrix, catering to both consumer (C-end) and business (B-end) markets [12][21]. Summary by Sections Industry Overview - The computer industry consists of 337 listed companies with a total market capitalization of approximately 47,787.54 billion [4]. - The industry has shown strong performance, with absolute returns of 61.1% over the past 12 months [5]. Kimi Model Development - Moonshot AI, recognized as one of the leading players in the domestic AI landscape, launched the Kimi model, which supports input of up to 200,000 Chinese characters, marking a significant advancement in long-text processing [12][23]. - The Kimi K2 model, released in July 2025, features a mixture of experts (MoE) architecture with 320 billion active parameters and a total of 1 trillion parameters, achieving a balance between efficiency and performance [34][39]. Performance Metrics - Kimi K2 has outperformed several international models, ranking first in the global open-source model leaderboard and excelling in various benchmark tests, including code generation and mathematical reasoning [47][48]. - The model's performance in the Aider Leaderboard and EQ-Bench3 tests demonstrates its competitive edge in tool usage and emotional intelligence [50][51]. Investment Themes - The report identifies key investment themes, including the cost advantages of Kimi K2, which is expected to drive the commercialization of AI agents and enhance application layer innovations [9][10]. - The strategic focus on open-source models is anticipated to lower development costs and accelerate the adoption of AI applications across various sectors [9][10].

Employment Data Insights - In July, the U.S. non-farm payroll increased by 74,000, falling short of the expected 110,000[4] - The non-farm payroll figures for May and June were significantly revised down, with May's figure adjusted from 144,000 to 19,000 and June's from 147,000 to 14,000[4] - The unemployment rate remained stable at 4.2% from May to July, while hourly wages increased year-on-year from 3.8% to 3.9%[4] Data Quality Concerns - The response rate for employment data surveys has declined, with May's non-farm payroll survey response rate at 42.9%, down from 59% pre-pandemic[5] - The response rate for unemployment rate surveys was 67.4%, compared to 82.3% before the pandemic[5] Federal Reserve Insights - The number of dissenting votes in the July Federal Reserve meeting reached the highest level in 32 years, with two members opposing the decision to keep interest rates unchanged[10] - The overall sentiment remains cautious regarding inflation, with concerns about high tariffs impacting inflation levels[12] Market Expectations - Despite disappointing employment data, investor expectations for short-term inflation remain upward, with the 2-year inflation swap dropping from 3% to 2.9%[16] - The broad dollar speculative net short positions decreased to 20,000 contracts, the lowest level since April, reflecting a reduction of over 50% from five weeks prior[12] Equity Risk Premium - As of August 1, the equity risk premium (ERP) for the CSI 300 index was 5.2%, which is significantly below the 16-year average by more than one standard deviation, indicating potential for valuation uplift[17] Bond Market Insights - The forward arbitrage return for China's 10-year government bonds was 18 basis points as of August 1, which is 48 basis points higher than the level in December 2016[22] - The 3-month dollar-yen basis swap was at -19.4 basis points, indicating a more relaxed offshore dollar financing environment[24] Commodity Indicators - The copper-gold price ratio fell to 2.9, while the offshore RMB exchange rate rose to 7.2, indicating a divergence in signals between RMB and copper trends[29] Stock vs. Bond Performance - The total return ratio of domestic stocks to bonds was 24.9 as of August 1, which is below the average level over the past 16 years, suggesting a return to mean performance between equities and fixed income[31]

Group 1: Overview of Anti-Involution - The report emphasizes that the current framework of "anti-involution" is still being refined and may require further input from industry associations and relevant departments, indicating a dynamic and evolving policy landscape[3] - The anti-involution policy aims to serve the unified market and high-quality development, addressing both competitive malpractices and promoting new products, technologies, and services[3] - The report outlines three phases for addressing "involutionary" competition, focusing initially on behavior norms and market capacity governance, with potential administrative interventions if necessary[3] Group 2: Key Strategies and Actions - The first phase targets traditional high-energy consumption industries and aims to enhance energy efficiency standards to accelerate development model transformation[3] - The second phase focuses on enhancing industrial competitiveness through innovation and appropriate competition, with measures including optimizing competitive order and breaking local protectionism[3] - Specific actions include promoting product quality improvement, ensuring fair competition, and initiating a new round of ten major industries for stable growth[3] Group 3: Industry Implications and Future Outlook - The anti-involution initiative may impact multiple sectors, including new energy vehicles, photovoltaic, lithium batteries, and e-commerce, among others[7] - The report suggests that the anti-involution process will not be rushed, contrasting it with the supply-side reform initiated in 2016, which had different objectives and employment constraints[6] - The report anticipates that if initial phases do not yield results, a third phase with more explicit administrative targets may be implemented to resolve supply-demand conflicts[6]

Investment Rating - The report maintains a "Recommendation" rating for the real estate sector [2] Core Insights - The real estate sector index fell by 3.4%, ranking 29th among 31 industry sectors [8] - New home sales in 20 monitored cities increased by 16% week-on-week, but year-on-year sales decreased by 21% [19] - Second-hand home sales in 11 monitored cities decreased by 8% week-on-week and 4% year-on-year [23] - The report highlights the importance of effective policies and fiscal measures to stabilize the market [32] Summary by Sections Industry Basic Data - Total number of stocks: 107 - Total market value: 1,159.996 billion - Circulating market value: 1,111.33 billion [2] Sales Performance - New home sales in the 31st week amounted to 184 million square meters, with a daily average of 26.3 million square meters [19] - Year-to-date new home sales in 20 cities totaled 60.97 million square meters, down 8% year-on-year [19] - Second-hand home sales in the 31st week totaled 174 million square meters, with a daily average of 24.9 million square meters [23] Financing Activities - New City Holdings issued 1 billion in medium-term notes with a coupon rate of 2.68% [28] - The majority of bond issuances this week were from local state-owned enterprises [31] Investment Strategy - The report suggests focusing on companies with strong product moats and stable rental income from quality commercial real estate [32] - Key companies to watch include Greentown China, China Resources Land, Swire Properties, China Resources Vientiane Life, and Beike-W [32]

Group 1: Overview of Anti-Overcompetition - The report emphasizes that the current "anti-overcompetition" framework is still being refined and may require further input from industry associations and relevant departments, indicating a dynamic and evolving policy landscape[1] - The anti-overcompetition initiative aims to serve the unified market and high-quality development, addressing both improper competitive practices and supporting new products, technologies, and services[1] - The report outlines a three-phase approach to address "overcompetition," focusing initially on behavior regulation and market capacity governance, with potential administrative interventions if necessary[1] Group 2: Historical Context and Future Outlook - The first positioning of anti-overcompetition is to enhance industrial competitiveness and align supply and demand, focusing on improving supply quality and efficiency to avoid waste of resources[2] - The second positioning is to facilitate a unified market, with past initiatives including the issuance of market access guidelines and the elimination of 4,218 regulations that hinder fair competition[3] - The report suggests that the anti-overcompetition initiative is not urgent compared to the supply-side reforms initiated in 2016, due to differences in objectives, employment constraints, and micro-profit pressures[4][21] Group 3: Industry Involvement and Phased Implementation - The initiative may impact various sectors, including new energy vehicles, photovoltaics, lithium batteries, and e-commerce, as identified by official statements and industry performance metrics[27] - The implementation is expected to occur in three stages: 1. Regulating enterprise and government behavior to maintain fair competition[32] 2. Market-driven capacity governance through mergers and restructuring[34] 3. Establishing clear "hard targets" to resolve supply-demand conflicts if previous phases are ineffective[37] Group 4: Key Measures and Risks - Key measures include enhancing legal frameworks, promoting product quality, and initiating a new round of growth actions in ten major industries, such as steel and automotive[40] - Risks highlighted include the potential for policy execution to exceed expectations, which could lead to unintended consequences in the market[8]

Group 1: Macro Insights - The relative value of stocks compared to bonds has significantly improved, indicated by a ten-year divergence in the Sharpe ratio difference between stocks and bonds, suggesting a resurgence in the attractiveness of equities[2][13][17]. - Policy measures have provided a rare certainty that limits downside risks in the stock market, reducing volatility and drawdowns[2][14][19]. - Economic leading indicators have shown signs of bottoming out, with the corporate and household deposit scissors gap improving since September 2024, indicating a potential stabilization in profit growth[2][14][20]. Group 2: Market Trends - The bull market is expected to continue, transitioning from financial re-inflation to real asset re-inflation, with a focus on structural optimization rather than total expansion[3][24]. - New trends above 3500 points include accelerated inflow of incremental funds, with margin trading and active equity funds driving significant volume increases, reaching an average daily turnover of 1.6 trillion CNY in July[3][25]. - The market is witnessing a shift towards mid-cap growth stocks, with a notable increase in earnings per share (EPS) revisions, indicating a recovery in corporate performance expectations[3][27]. Group 3: Fixed Income Adjustments - The recent adjustment in the value-added tax (VAT) on bond interest income is expected to create a favorable environment for older bonds, leading to a decrease in yields and a return of alpha spread value in the bond market[4][29][32]. - The long-term impact of the VAT changes will depend on the issuance of new government bonds and the market's response to these adjustments, with expectations of a potential upward shift in the yield curve[4][32][33]. Group 4: U.S. Federal Reserve Signals - The July Federal Reserve meeting maintained the federal funds rate at 4.25%-4.5%, with indications that inflation risks outweigh employment risks, suggesting a cautious approach to future rate cuts[5][34][35]. - The Fed's stance reflects a focus on managing inflationary pressures while acknowledging the uncertainties surrounding economic growth, particularly in light of tariff impacts on consumer prices[5][34][36].

Investment Rating - The report gives a "Strong Buy" rating for the company [1][8]. Core Views - The company is a leading player in the industrial automation instrumentation sector, with a comprehensive product range and advanced technology that meets domestic and some international standards [6][7]. - The report highlights the significant growth potential in the domestic instrumentation market, driven by the trend of domestic substitution and increasing demand for automation in various industries [6][9]. - The company is expected to benefit from the ongoing capital expenditure in the process industries, particularly in oil, chemical, and metallurgy sectors [8][9]. Financial Summary - Projected total revenue (in million) for 2024A, 2025E, 2026E, and 2027E are 7,592, 7,666, 8,304, and 9,131 respectively, with year-on-year growth rates of 2.4%, 1.0%, 8.3%, and 10.0% [2]. - Projected net profit attributable to shareholders (in million) for the same years are 778, 795, 915, and 1,056, with growth rates of 4.6%, 2.1%, 15.2%, and 15.4% [2]. - Earnings per share (EPS) are expected to be 1.52, 1.55, 1.78, and 2.06 for the years 2024A to 2027E [2]. Company Overview - The company has a stable shareholding structure, with its main shareholder being the Four Link Group, and is transitioning control to the State-owned Assets Supervision and Administration Commission [20][21]. - The company has a strong focus on R&D, with a steady increase in R&D expenditure from 282 million in 2020 to 535 million in 2024, reflecting a commitment to innovation and technology advancement [35][36]. Industry Analysis - The industrial automation instrumentation market in China is characterized by a wide application range, high technical barriers, and a low concentration of industry players [40][41]. - The market for industrial automation instruments has shown consistent growth, with revenues surpassing 1 trillion yuan in 2023, reflecting a compound annual growth rate (CAGR) of 8.3% from 2019 to 2024 [43][44]. - The report identifies significant opportunities for domestic brands to increase their market share in the face of foreign competition, particularly in key product categories such as control valves, flow meters, temperature instruments, and pressure transmitters [50][55][62].