Market and Industry Overview - In the past month, major domestic market indices have generally risen, with the CSI 500, National Index 2000, CSI 1000, Shanghai-Shenzhen 300, and SSE 50 increasing by 6.17%, 3.99%, 3.56%, 2.28%, and 2.07% respectively [1][12] - Among the 19 industries in the CITIC first-level industry classification, the defense and military industry, non-ferrous metals, telecommunications, and comprehensive finance saw significant gains, with the defense and military industry leading at a monthly increase of 21.24% [1][12] - Conversely, the pharmaceutical, food and beverage, and real estate industries lagged behind, with monthly declines of -4.09%, -4.34%, and -4.47% respectively [1][12] Industry Rotation Strategy Performance - In December, the performance of factors was notable, with profitability, quality, valuation momentum, and analyst expectations all achieving positive IC values, particularly the profitability factor with an IC of 55.67% [2][21] - All factors contributed positively to long-short returns, with the analyst expectations factor yielding a long-short return of 6.16%, while profitability, quality, and valuation momentum provided returns of 3.75%, 3.47%, and 3.88% respectively [2][21] - For the year 2025, quality, valuation momentum, analyst expectations, and research activity factors all showed positive IC averages of 7.27%, 1.37%, 2.44%, and 7.34% respectively [2][22] Current Industry Recommendations - The January recommendations from the enhanced industry rotation strategy include real estate, non-ferrous metals, defense and military, basic chemicals, and electronics, with significant changes from the previous month [4][49] - The defense and military industry received joint recommendations from both the enhanced strategy and the research-selected strategy, indicating a higher level of attention [5][49] - The research-selected strategy for January includes computer, transportation, coal, steel, and defense and military industries, with increased research activity noted in the computer and transportation sectors [4][51]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - Credit - related data shows that among discounted - traded bonds, "23 Chanjin 09" has a large deviation in bond valuation price; among bonds with rising clean prices, "22 Vanke 06" ranks high in valuation price deviation; among secondary and perpetual bonds with falling clean prices, "22 Industrial Bank Secondary 01" has a small valuation price deviation; among commercial financial bonds with falling clean prices, "25 Weihai Bank Small - and - Micro - enterprise Bond" has a small valuation price deviation; among bonds with a trading yield higher than 5%, real - estate bonds rank high [2]. - Credit bond valuation yield changes are mainly distributed in the (0, 5] range. Non - financial credit bond trading terms are mainly distributed between 2 and 3 years, with the 3 - to 4 - year variety having the highest proportion of discounted trades; secondary and perpetual bond trading terms are mainly distributed between 4 and 5 years. By industry, bonds in the agriculture, forestry, animal husbandry, and fishery industry have the largest average valuation price deviation [2]. 3. Summary According to Relevant Catalogs 3.1 Discounted - Traded Bond Tracking - Bonds such as "23 Chanjin 09", "24 Chanjin 08", etc. in the non - bank financial industry have relatively large valuation price deviations, with "23 Chanjin 09" having a deviation of - 1.05% and a remaining term of 2.69 years, and a trading volume of 16 million yuan [4]. - Bonds in other industries like "20 Boshui 02" in agriculture, forestry, animal husbandry, and fishery, and "Shaanxi Coal KY13" in the coal industry also have certain valuation price deviations [4]. 3.2 Tracking of Bonds with Rising Clean Prices - "22 Vanke 06", "22 Vanke 04", and "22 Vanke 02" in the real - estate industry have large positive deviations in valuation prices, with "22 Vanke 06" having a deviation of 4.15% and a trading volume of 297 million yuan [5]. - Many urban investment bonds also show positive deviations in valuation prices, such as "20 Zunhe 02" and "25 Raochuang 04" [5]. 3.3 Secondary and Perpetual Bond Trading Tracking - Secondary and perpetual bonds of various banks, including state - owned banks, joint - stock banks, and city commercial banks, have a valuation price deviation of - 0.01%. For example, "22 Industrial Bank Secondary 01" has a trading volume of 112,946 million yuan [6]. 3.4 Commercial Financial Bond Trading Tracking - "25 Weihai Bank Small - and - Micro - enterprise Bond" and "25 Weihai Bank Green Bond" have a valuation price deviation of 0.00%, with trading volumes of 32,901 million yuan and 11,966 million yuan respectively [7]. - Some commercial financial bonds have a valuation price deviation of - 0.01%, such as "23 Beijing Rural Commercial Small - and - Micro - enterprise Bond" and "25 CITIC Baixin Bank Small - and - Micro - enterprise Bond 01" [7]. 3.5 Tracking of Bonds with a Trading Yield Higher than 5% - Real - estate bonds like "22 Vanke 06", "22 Vanke 04", etc., and non - bank financial bonds such as "23 Chanjin 05", "23 Chanjin 13" are among the bonds with a trading yield higher than 5% [8]. 3.6 Distribution of Credit Bond Trading Valuation Deviations on the Day - Credit bond valuation yield changes are mainly distributed in the (0, 5] range [2]. 3.7 Distribution of Non - financial Credit Bond Trading Terms on the Day - Non - financial credit bond trading terms are mainly distributed between 2 and 3 years, and the 3 - to 4 - year variety has the highest proportion of discounted trades [2]. 3.8 Distribution of Secondary and Perpetual Bond Trading Terms on the Day - Secondary and perpetual bond trading terms are mainly distributed between 4 and 5 years [2]. 3.9 Discounted - Trade Ratio and Trading Volume of Non - financial Credit Bonds in Each Industry - Bonds in the agriculture, forestry, animal husbandry, and fishery industry have the largest average valuation price deviation, while different industries have different trading volumes [2][18].

Economic Outlook - 2026 is crucial for the "14th Five-Year Plan," aiming for a strong economic start with significant long-term implications[2] - The focus will be on investment-driven growth, particularly in infrastructure, healthcare, and urban renewal[2][4] Fiscal Policy - Central and state-owned enterprises will lead infrastructure investments, with a focus on addressing local fiscal challenges[2][7] - The shift from "three guarantees" (people's livelihood, wages, and operations) to "five guarantees" (including debt repayment) highlights the need for sustainable fiscal policies[2][11] Budget and Spending - The general public budget expenditure for 2026 is expected to increase by over 1 trillion yuan compared to 2025, with a deficit expansion contributing 220 billion yuan[2][14][16] - The 2026 deficit rate is projected to remain similar to 2025, with efforts to enhance tax collection and streamline fiscal policies to boost revenue[2][14] Investment Strategy - Investment recovery is critical, with a focus on major projects that can stimulate demand and stabilize the economy[5][6] - The government plans to allocate 220 billion yuan for early-stage construction projects, emphasizing urban infrastructure and public services[6][7] Risks and Challenges - There is a risk of misinterpretation of policies, which could hinder investment recovery[3][18] - Local governments face significant debt pressures, potentially limiting their ability to drive investment growth[18]

Macroeconomic Liquidity - The US dollar index has rebounded, and the degree of inversion in the China-US interest rate differential has deepened. The nominal and real interest rates of 10Y US Treasury bonds have both increased, indicating a rise in inflation expectations [2][13] - Offshore dollar liquidity has marginally loosened, while the domestic interbank funding situation remains balanced, with a narrowing of the yield spread between 10Y and 1Y bonds [2][18] Market Trading Activity, Volatility, and Liquidity - Overall market trading activity has continued to rise, with trading heat in sectors such as military, textiles, light industry, retail, and consumer services all above the 80th percentile [3][24] - The volatility of major indices has also increased, with sectors like communication, electric power, electronics, and chemicals remaining above the 80th percentile historically [3][31] - Market liquidity indicators have declined, although the liquidity indicators for the oil and petrochemical sector remain above the 80th historical percentile [3][36] Institutional Research - The sectors with the highest research activity include electronics, pharmaceuticals, machinery, electric power, and computers, while research interest in retail, oil and petrochemicals, automobiles, and home appliances has also increased [4][42] Analyst Forecasts - Analysts have adjusted the net profit forecasts for the entire A-share market for 2025/2026, with increases in sectors such as real estate, transportation, chemicals, electric power, and machinery [4][21] - The proportion of stocks in the entire A-share market with upward revisions to their 2025/2026 net profit forecasts has increased, while the proportion of stocks with downward revisions has decreased [4][18] - The net profit forecasts for the ChiNext Index for 2025/2026 have been downgraded, while those for the Shanghai 50 and CSI 300 have been adjusted up and down, respectively [4][23] Northbound Trading Activity - Northbound trading activity has rebounded significantly, with a notable net purchase of A-shares, particularly in sectors such as non-ferrous metals, military, and automobiles [5][31] - The ratio of total buy and sell amounts in the top 10 active stocks has increased in sectors like non-ferrous metals, military, and automobiles, while it has decreased in electronics, communication, and electric power [5][32] Margin Financing Activity - Margin financing activity has slightly decreased but remains at a relatively high level since November 2025, with net purchases primarily in military, electric power, and media sectors [6][35] - The proportion of financing purchases in electric power, public utilities, home appliances, and food and beverage sectors has increased [6][38] Active Equity Fund Positions - The positions of actively managed equity funds have continued to rise, with significant increases in sectors such as communication, electric power, and electronics, while reductions were seen in military and consumer services [7][45] - The correlation of actively managed equity funds with large/mid-cap growth and mid/small-cap value has increased, while the correlation with small-cap growth and large-cap value has decreased [7][48] - New equity fund establishment sizes have decreased, with actively managed funds seeing a decline while passive funds have seen an increase [7][50]

- The report discusses a rotation model for micro-cap stocks, which uses the relative net value of micro-cap stocks to the "Mao Index" as a key indicator. If the relative net value is above its 243-day moving average, it suggests investing in micro-cap stocks; otherwise, it suggests investing in the Mao Index. Additionally, the 20-day closing price slope of both indices is used to determine potential style shifts. When the slopes diverge and one is positive, the model recommends investing in the index with a positive slope[17][24][29] - A timing risk control indicator is constructed based on the 10-year government bond yield (threshold: 0.3) and the volatility crowding degree of micro-cap stocks (threshold: 0.55). If either indicator reaches its threshold, a closing signal is triggered[17][24][29] - The report evaluates eight major stock selection factors across different stock pools (All A-shares, CSI 300, CSI 500, and CSI 1000). Among these, technical factors (IC mean: 9.30%) and volatility factors (IC mean: 6.86%) performed well, while consensus expectation factors (IC mean: -3.20%) and market capitalization factors (IC mean: -2.71%) showed weaker performance[44][45][46] - For convertible bonds, the report constructs quantitative bond selection factors, including equity-related factors (e.g., equity growth and financial quality) and valuation factors (e.g., parity and floor premium rates). The IC mean and long-short portfolio net value of these factors are tracked regularly[53][54][57]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - The reading of the bond market micro - trading thermometer dropped to 40%, possibly affected by the light trading before the New Year's Day holiday. Most indicator quantiles declined, while a few increased. The proportion of indicators in the over - heated range remained at 25%, with changes in the distribution of indicators across different intervals [14][18]. 3. Summary by Relevant Catalogs 3.1. Micro - trading Thermometer Reading Drops to 40% - The "Guojin Securities Fixed Income - Bond Market Micro - trading Thermometer" dropped 6 percentage points to 40%. Most indicator quantiles declined, such as institutional leverage, 1/10Y Treasury turnover rate, etc., while some like bond fund profit - taking pressure increased [14]. 3.2. Proportion of Indicators in the Over - heated Range Remains at 25% - Among 20 micro - indicators, 5 (25%) were in the over - heated range, 5 (25%) in the neutral range, and 10 (50%) in the cold range. Some indicators changed their intervals, like 1/10Y Treasury turnover rate and institutional leverage moving from over - heated to neutral, and long - term Treasury trading proportion moving from neutral to over - heated [18]. - The average value of various spreads decreased significantly. The trading heat quantile average dropped 16 percentage points, the institutional behavior quantile average dropped 7 percentage points, the spread quantile average dropped 5 percentage points, and the comparison quantile average dropped 4 percentage points [18]. 3.2.1. Institutional Leverage Quantile Drops Significantly - In trading heat indicators, the proportion of over - heated indicators dropped to 50%, neutral to 33%, and cold remained at 17%. Institutional leverage and 1/10Y Treasury turnover rate dropped 57 and 39 percentage points respectively, moving from over - heated to neutral, while long - term Treasury trading proportion rose 18 percentage points, moving from neutral to over - heated [19]. 3.2.2. Bond Fund Profit - taking Pressure Increases - In institutional behavior indicators, the proportion of over - heated indicators rose to 13%, neutral dropped to 25%, and cold rose to 63%. Bond fund profit - taking pressure rose 55 percentage points from cold to over - heated, and the expectation of monetary tightness dropped 16 percentage points from neutral to cold [24]. 3.2.3. Spread Quantiles Drop - The policy spread widened by 2bp to - 2bp, with its quantile dropping 6 percentage points to 76%. The market spread quantile dropped 5 percentage points to 46%, remaining in the neutral range [31]. 3.2.4. Real Estate Comparison Quantile Drops Significantly - All comparison indicators were in the cold range. Stock - bond and commodity comparison quantiles dropped 3 and 1 percentage points respectively, and the real estate comparison quantile dropped 14 percentage points [33].

Group 1 - The bond market experienced significant volatility throughout 2025, with a notable concentration of investor positions in 1 to 3-year interest-bearing assets as a defensive strategy against net value uncertainty [2][10][11] - In December, the yield on 30-year government bonds reached a high of 2.2925%, reflecting the market's fragile sentiment and the impact of year-end assessments [10][11] - The introduction of new regulations regarding redemption fees for bond funds provided some relief to the anxious bond market, potentially reshaping investment strategies going into 2026 [10][11] Group 2 - The regulatory environment has shifted positively, with the new redemption fee rules easing previous constraints, which may lead to a recovery in the bond market [3][27] - The pricing of 5-year bank subordinated bonds is expected to see a valuation recovery of 5 to 10 basis points, with new pricing logic anticipated to return to the range of 2.1% to 2.15% [4][43] - The high yields on long-term credit bonds are influenced not only by the new redemption regulations but also by inherent liquidity issues, which may limit trading activity [3][38] Group 3 - The market has shifted focus from seeking excess returns to strictly controlling drawdowns, as evidenced by the significant trading volume in medium-term municipal bonds [11][22] - Fund managers have been the primary drivers of mid-term bond allocations, with net purchases reaching a weekly high of 21.2 billion, surpassing the average weekly volume from October to year-end [11][20] - The strategy of investing in 3-year AA+ municipal bonds has proven to be the most effective in December, highlighting the trend towards medium-term securities [22][23]

Investment Rating - The report maintains a "Buy" rating for the company, with expected dynamic PE ratios of 30x, 23x, and 20x for the years 2025, 2026, and 2027 respectively [5] Core Insights - The company announced a stock option incentive plan for 2025, proposing to grant a total of 15.4 million stock options, accounting for 0.92% of the total share capital prior to the announcement [2] - The performance targets for the stock option plan are set with a base of the net profit attributable to the parent company for 2024, aiming for a CAGR of at least 107%, 73%, and 62.5% for the years 2026, 2027, and 2028 respectively [3] - The company is positioned as a "Grand Slam" player in the specialty glass fiber market, with accelerated capacity expansion and market share growth expected from the successful implementation of a private placement to fund specialty glass fiber projects [4] Financial Projections - The projected net profits attributable to the parent company for 2025, 2026, and 2027 are estimated at 2.002 billion, 2.608 billion, and 3.060 billion RMB respectively, reflecting a significant recovery from a low of 892 million in 2024 [5] - Revenue is expected to grow from 23.984 billion RMB in 2024 to 30.073 billion RMB in 2025, representing a growth rate of 25.39% [9] - The company anticipates a return on equity (ROE) of 10.19%, 12.30%, and 13.28% for the years 2025, 2026, and 2027 respectively, indicating improving profitability [9]

Group 1: U.S. Involvement in Venezuela - Trump has shown a Monroe Doctrine inclination, favoring ideologically aligned regimes in the Western Hemisphere, particularly against Maduro's government[4] - The best-case scenario for Trump is to establish a pro-U.S. regime in Venezuela, which could help lower oil prices ahead of elections[5] - U.S. intervention is likely to focus on controlling "exportable crude oil" through regulatory and transactional structures rather than direct asset takeover[16] Group 2: Venezuela's Oil Production Potential - Venezuela holds approximately 303 billion barrels of proven oil reserves, accounting for about 17% of the global total, but actual production has plummeted to around 1 million barrels per day, only about 1% of global output[6] - The country’s oil production capabilities are severely hampered by aging infrastructure and international sanctions, requiring an estimated $8 billion investment to restore production to 1990s levels[7] - Venezuela's refining capacity is significantly underutilized, with actual throughput around 300,000 barrels per day, just 20% of its nominal capacity of 1.46 million barrels per day[8] Group 3: Impact on Global Oil Prices - If the U.S. promotes a "U.S. company-controlled" increase in Venezuelan production, short-term oil prices may be supported by "risk premiums" and OPEC+ supply control rather than falling due to production increases[18] - OPEC+ has maintained a production cut of approximately 3.24 million barrels per day, indicating a clear intent to defend prices[18] - Even with potential production recovery in Venezuela, OPEC+ has room to adjust output to mitigate price declines, suggesting a gradual rather than rapid recovery in oil supply[18]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - The duration of general credit bonds has significantly shortened. As of December 31, the weighted average trading terms of urban investment bonds and industrial bonds were 1.58 years and 2.19 years respectively. Among commercial bank bonds, the weighted average trading terms of secondary capital bonds, bank perpetual bonds, and general commercial financial bonds were 4.01 years, 3.31 years, and 1.73 years respectively. The duration of other financial bonds, such as securities company bonds, securities subordinated bonds, insurance company bonds, and leasing company bonds, also shortened compared to the previous week [2][9]. - The coupon duration congestion index has decreased. After reaching its peak in March 2024, the index has declined. This week, it decreased compared to last week and is currently at the 40.9% level since March 2021 [12]. 3. Summary by Relevant Catalogs 3.1 Full - Variety Term Overview - As of December 31, the weighted average trading terms of urban investment bonds and industrial bonds were 1.58 years and 2.19 years respectively. Among commercial bank bonds, secondary capital bonds, bank perpetual bonds, and general commercial financial bonds had weighted average trading terms of 4.01 years, 3.31 years, and 1.73 years respectively. General commercial financial bonds were at a relatively low historical level, while secondary capital bonds were at a relatively high historical level. The durations of securities company bonds, securities subordinated bonds, insurance company bonds, and leasing company bonds were 1.41 years, 1.43 years, 3.06 years, and 1.35 years respectively, and all shortened compared to the previous week. Securities company bonds and securities subordinated bonds were at low historical percentiles [2][9]. - The coupon duration congestion index decreased. After reaching its peak in March 2024, it declined this week compared to last week and is at the 40.9% level since March 2021 [12]. 3.2 Variety Microscope Urban Investment Bonds - The weighted average trading term of urban investment bonds hovered around 1.65 years. The duration of Shaanxi provincial - level urban investment bonds extended to 4.88 years, while the trading duration of Hebei provincial - level urban investment bonds shortened to around 0.61 years. The historical percentiles of the durations of Fujian district - level and Gansu provincial - level urban investment bonds exceeded 90%, and the duration of Gansu provincial - level urban investment bonds was approaching its highest since 2021 [3][16]. Industrial Bonds - The weighted average trading term of industrial bonds shortened compared to the previous week, generally around 1.84 years. The trading duration of the basic chemical industry extended to 2.33 years, while that of the food and beverage industry shortened to 0.80 years. The trading duration of the real estate industry was at a low historical percentile, and that of the pharmaceutical and biological industry was at a high historical percentile [3][21]. Commercial Bank Bonds - The duration of general commercial financial bonds shortened to 1.73 years, at the 13.6% historical percentile, lower than the same period last year. The duration of secondary capital bonds extended to 4.01 years, at the 81.1% historical percentile, lower than the same period last year. The duration of bank perpetual bonds shortened to 3.31 years, at the 45.3% historical percentile, lower than the same period last year [3][23]. Other Financial Bonds - In terms of the weighted average trading term, insurance company bonds > securities subordinated bonds > securities company bonds > leasing company bonds, at the 54.5%, 4%, 14%, and 79.9% historical percentiles respectively, and their durations all shortened compared to the previous week [3][26].