1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The convertible bond price is steadily recovering, and the convertible bond index outperforms the equity index. The convertible bond market and equity market declined due to Trump's tariff hikes but gradually recovered. Multiple industries and individual bonds saw price increases, and the convertible bond valuation is differentiated with the overall conversion premium rate decreasing [3][103]. - The issuance pace of convertible bonds has slowed down, and the net financing amount is at a relatively low level. The pre - issuance scale varies among different industries, with the high - end manufacturing industry having a relatively large pre - issuance scale. The un - converted balance of convertible bonds also shows significant differences among industries [3][103]. - The tariff disturbance is coming to an end, and the negative impact of tariffs on the convertible bond market will fade. The US is facing inflation pressure, and it has started economic and trade consultations with many countries, so high tariffs are expected to be unsustainable [3][76][103]. - Policies to expand domestic demand and promote consumption are frequently introduced. As the policy effects continue to emerge, the upward trend of relevant convertible bonds is expected to continue. The growth rate of necessary consumption is constantly recovering, and the "trade - in" policy promotes the consumption growth of household appliances and communication equipment [4][104]. - The profitability of multiple underlying stock industries has improved, and the net profit of individual bonds has increased, further enhancing the intrinsic value of convertible bonds. Most underlying stock industries have positive median net profit growth rates both quarter - on - quarter and year - on - year [6][105]. 3. Summary According to the Directory 3.1 Convertible Bonds: Price Steadily Recovering, Individual Bond Valuation Volatility and Differentiation - **The convertible bond and equity indexes first declined and then rose, and the bond yield fluctuated downward**: Affected by Trump's "reciprocal tariff", the domestic equity market declined in the second quarter and then gradually recovered. The bond market yield showed a fluctuating downward trend, mainly due to the central bank's moderately loose monetary policy [10][11]. - **The convertible bond and equity indexes are highly correlated, and the convertible bond index outperforms the equity index**: The convertible bond market index and the equity market index have a similar trend, and the convertible bond index has a higher return rate. The convertible bond index also shows a certain correlation with the bond yield [15][16]. - **Multiple convertible bond industries rose, and the rise - fall direction is consistent with that of the underlying stocks**: Most convertible bond industries showed an upward trend, and the rise - fall amplitude of convertible bond industries was relatively less differentiated compared to that of underlying stock industries [22]. - **Most individual bond prices rose, and the proportion of rising bonds in many industries exceeded half**: Most convertible bonds rose compared to the previous quarter. In different industries, the number of rising convertible bonds was large, and the price fluctuations of individual convertible bonds were relatively large [25]. - **The convertible bond valuation is differentiated, and the overall conversion premium rate is decreasing**: The conversion premium rate of most individual bonds is decreasing, and there is no significant correlation between the conversion premium rate and the bond balance. The different quantiles of the conversion premium rate of individual bonds have all decreased [29]. 3.2 Convertible Bond Net Financing is at a Low Level, and the Supply Pace is Slowing Down - **The issuance of convertible bonds has slowed down, and the net financing is at a low level in the same period**: The issuance scale of convertible bonds has decreased, and the net financing amount is at a low level. The maturity scale of convertible bonds is relatively stable and at a low level [35]. - **The pre - issuance of different industries is differentiated, and the high - end manufacturing industry has a large scale**: The pre - issuance scale of convertible bonds is relatively sufficient, and there are significant differences among different industries. The high - end manufacturing industry has a relatively high pre - issuance scale [37]. - **The proportion of un - converted balance of convertible bonds is relatively high, and there are significant industry differences**: Most convertible bonds still have a relatively high balance. The proportion of the convertible bond balance to the initial issuance scale varies greatly among different industries [38]. 3.3 Tariff Disturbance is Approaching the End, and the External Negative Impact on the Convertible Bond Market is Fading - **Trump imposed tariffs randomly, covering goods from multiple countries and multiple fields**: Trump's government imposed several rounds of tariffs on goods exported to the US in 2025, involving goods from multiple countries and a wide range of products [43]. - **Tariffs impacted the equity and convertible bond indexes to decline and then gradually recovered steadily**: Trump's tariff hikes caused a sharp decline in the US equity market index, an increase in the demand for bond hedging, and a decrease in the US Treasury bond yield. As the tariffs eased, the US stock index gradually recovered, and the US Treasury bond yield gradually rebounded. In China, the A - share market, Treasury bond yield, and convertible bond market index also declined due to tariff impacts but gradually recovered [48][49][52]. - **Exports increased against the trend, and the impact of tariffs on investment and consumption has not yet appeared**: In terms of trade, the export growth rate continued to increase, and the import growth rate continued to improve. In terms of production, the growth rate of industrial added value was not significantly affected by tariffs, but the manufacturing PMI was significantly affected. In terms of investment, the impact of tariffs on fixed - asset investment and its main components has not yet appeared. The consumption growth rate increased marginally, and the consumer and producer price indexes decreased marginally [56][60][62]. - **Tariffs are unsustainable, and the external impact on the convertible bond market is expected to fade**: Trump's tariff hikes are likely a means to expand revenue, and the impact of tariffs in the first half of the year is expected to gradually subside. The US is facing inflation pressure, and high tariffs may prevent prices from falling. The US has conducted consultations on economic and trade issues with many countries, so high tariffs are not expected to last [76][77]. 3.4 Policies to Promote Consumption are Continuously Advancing, and the Upward Trend of Relevant Convertible Bonds is Expected to Continue - **Favorable policies to promote consumption are frequently introduced, and the recovery progress of necessary consumption is accelerating**: A series of favorable policies and specific measures to promote consumption have been introduced, and the support for consumption is extensive. The recovery progress of necessary consumption has accelerated, and the "trade - in" policy has promoted the consumption growth of household appliances and communication equipment [78][81][86]. - **The convertible bond consumption sector as a whole rose, and the rise - fall of individual bonds is differentiated**: Benefiting from the multiple favorable policies to promote consumption, the prices of convertible bonds in consumption - related fields generally increased, but the rise - fall of individual bonds was differentiated [90]. - **The "trade - in" policy continues to advance, and attention should be paid to the over - heating risk of new consumption**: The favorable policies to promote consumption are still advancing, and it is expected that consumption will remain an important engine for economic growth in the second half of the year. The continuous advancement of the "trade - in" policy is expected to continue to benefit the convertible bonds in related consumption fields. Attention should be paid to new consumption formats such as self - pleasing consumption and the "gacha economy", but the short - term over - heating risk should be noted [93][94][95]. 3.5 The Performance of Underlying Stocks has Improved, and the Intrinsic Value of Convertible Bonds may be Further Enhanced - **The net profit of underlying stock industries has achieved positive growth, and the net profit of individual bond underlying stocks has improved overall**: Most underlying stock industries have positive median net profit growth rates both quarter - on - quarter and year - on - year. The net profit of individual bond underlying stocks has improved comprehensively compared to the previous quarter [96][99]. - **Most underlying stocks have positive net profit growth, and their performance is moderate compared to listed companies in the same industry**: Compared with listed companies in the same industry that have not issued convertible bonds, the net profit growth rate of convertible bond underlying stocks is moderate. The net profit growth rate of convertible bond underlying stocks is differentiated, and in some industries, most underlying stocks have positive net profit growth rates [101]. 3.6 Convertible Bond Strategy: It is Recommended to Focus on Convertible Bonds for Expanding Domestic Demand, High Dividends, and High Growth - It is recommended to focus on the following main lines in the convertible bond market: expanding domestic demand, especially in the fields related to boosting consumption; high - dividend sectors such as banks; and individual bonds with high - growth underlying stocks [6][106].

Production Insights - As of the fourth week of June, the national blast furnace operating rate was 83.84%, stable compared to the previous period and above last year's average[11] - The rebar operating rate increased to 43.62%, up by 3.10 percentage points from the previous period, also above last year's average[11] - Cement mill operating rate decreased to 38.14%, down by 4.91 percentage points, slightly below last year's average[11] Inventory Trends - As of the fourth week of June, rebar inventory was 185.65 million tons, up by 1.85 percentage points from the previous period, but below last year's average[28] - Port iron ore inventory decreased to 139.27 million tons, down by 0.05 percentage points, also below last year's average[28] - Cement capacity utilization ratio was 62.76%, down by 0.68 percentage points, remaining stable compared to last year's average[28] Demand Dynamics - In June, the sales area of commercial housing in 30 cities increased by 45.73 percentage points, exceeding last year's average[55] - The average daily sales of passenger cars reached 95,374 units, reflecting an increase of 18.44% month-on-month and 3.00% year-on-year[82] - The total box office revenue for movies was 53.9 million yuan, up by 22.78% month-on-month, but still lower than last year's level[82] Trade and Pricing - The Shanghai Container Freight Index (SCFI) fell to 1861.51, down by 0.43% from the previous period, while the China Container Freight Index (CCFI) rose to 1369.34, up by 2.00%[89] - The average price of cement was 355.26 yuan per ton, down by 2.05% from the previous period, below last year's average[66] - The price of rebar was 3,070.50 yuan per ton, showing a slight increase of 0.10% from the previous period, but still below last year's average[67]

Group 1: Legislative Progress - The "Big and Beautiful Act" narrowly passed in the Senate with a vote of 51:50 and will be sent to the House for a final vote[1] - The Senate version of the bill differs significantly from the House version submitted in May, necessitating a return to the House for a new vote[1] - House Speaker Mike Johnson aims to pass the bill before July 4[1] Group 2: Budgetary Differences - The Senate's revised budget plan is projected to increase the deficit by $3.4 trillion, compared to the House's $2.4 trillion increase[2] - Including interest costs, the Senate's total potential debt impact is $3.94 trillion, while the House's is $2.97 trillion[2] - The Senate version proposes a $5 trillion increase in the debt ceiling, while the House version suggests a $4 trillion increase[2] Group 3: Key Issues and Risks - Major points of contention between the two chambers include Medicaid cuts, SNAP reductions, and the SALT deduction cap[2] - Internal divisions within the Republican Party may affect the speed and success of the bill's passage[4] - The potential for the House to reject the revised Senate version remains, depending on the extent of disagreements[3]

Group 1: Manufacturing PMI Insights - Manufacturing PMI recorded at 49.7%, an increase of 0.2 percentage points from the previous month, but still below the critical threshold[8] - New orders index for manufacturing rose to 50.2%, indicating a return to expansion territory, while the backlog of orders index remains below the threshold at 45.2%[13] - Production index improved to 51%, indicating an increase in manufacturing activity, while the employment index fell to 47.9%, suggesting ongoing labor market challenges[15] Group 2: Service and Construction PMI Insights - Service sector PMI decreased to 50.1%, but remains in the expansion zone, with new orders index at 46.9%, indicating insufficient demand[23] - Construction PMI increased to 52.8%, reflecting improved business activity, although the new orders index is still below the threshold at 44.9%[29] - Employment index in the construction sector recorded at 39.9%, indicating a lack of hiring activity[29] Group 3: Inventory and Price Trends - Manufacturing raw material inventory index at 48%, and finished goods inventory at 48.1%, both below the critical point, indicating insufficient replenishment[17] - Input prices for manufacturing recorded at 48.4%, while output prices at 46.2%, both below the threshold, suggesting pressure on profit margins[17] - Service sector input prices index at 50.2%, while sales prices index at 48.9%, indicating insufficient pricing power in the service industry[25] Group 4: Trade and Economic Outlook - Manufacturing import index at 47.8% and new export orders index at 47.7%, both below the threshold, indicating trade challenges[20] - Overall economic outlook remains cautious, with risks including deviations from expected fundamental recovery and geopolitical uncertainties[36]

Investment Rating - The report maintains a "Positive" investment rating for the automotive industry [5]. Core Insights - The automotive industry is undergoing a valuation reconstruction driven by the rise of smart and connected vehicles, which is expected to lead to a "Davis Double" effect in 2025 [3][4]. - The market is shifting from price competition to value competition, with significant growth potential in the smart connected vehicle supply chain [4][19]. Summary by Sections 1. Domestic Automotive Market Analysis - The automotive industry in China has entered the smart connected vehicle era, supported by comprehensive policies [11][15]. - In 2023, China's automotive production reached over 30 million units, with a strong performance from domestic brands [12][19]. - By 2025, the penetration rate of new energy vehicles (NEVs) is expected to exceed 50%, driven by favorable policies and market dynamics [20][21]. 2. Smart Connected Vehicle Supply Chain Development - The smart connected vehicle supply chain is anticipated to experience rapid growth, with the overall market value expected to exceed one trillion [8][19]. - The integration of "vehicle-road-cloud" systems is becoming a new trend, enhancing the smart transportation ecosystem [8][19]. - The penetration rate of advanced driving assistance systems (L2 and above) is projected to increase significantly, benefiting from technological advancements and cost reductions [4][19]. 3. Investment Recommendations - Focus on leading companies and high-growth segments within the supply chain, particularly those with core technologies and significant market shares [4][19]. - In the vehicle segment, domestic brands with strong technology and market presence are expected to maintain their competitive edge [4][19]. - In the smart component segment, companies specializing in intelligent chassis components are likely to receive more orders as the industry matures [4][19].

Fiscal Policy Progress - The general public budget expenditure target for 2025 is set at 29.7 trillion yuan, with 9.358 trillion yuan spent by April, achieving 31.5% of the annual target[1] - The deficit target for 2025 is 5.66 trillion yuan, with 1.2965 trillion yuan utilized by April, resulting in a usage progress of 22.9%[1] - Considering fund transfers and budget carryovers, the deficit usage progress stands at 16.8%[1] National Debt Issuance - The national debt balance for 2024 is 34.572 trillion yuan, with a limit of 35.2008 trillion yuan, leaving a remaining quota of 628.473 billion yuan[2] - As of June 15, the net financing amount for national debt reached 2.2001 trillion yuan, achieving 40.1% of the limit[2] - The issuance of special national bonds for 2025 is complete at 500 billion yuan, with a completion rate of 100%[2] Local Government Bonds - The balance of local government general bonds for 2024 is 16.7013 trillion yuan, with a limit of 17.2689 trillion yuan, leaving a remaining quota of 567.645 billion yuan[3] - By June 15, the net financing for local government general bonds reached 392.16 billion yuan, achieving 28.7% of the limit[3] - The completion rate for local government special bonds is 37.5%, with a remaining quota of 27.52065 trillion yuan[4]

Group 1: Financial Data Overview - The growth rate of social financing (社融) remained stable at 8.7% in May, with new social financing of 2.29 trillion yuan, an increase of 227.1 billion yuan year-on-year[9] - Government bonds, corporate bonds, and foreign currency loans were the main supporting items for social financing, while weak entity credit continued to be the largest drag, indicating a weak internal financing willingness[9] - New corporate short-term loans amounted to 1.1 trillion yuan, a year-on-year increase of 230 billion yuan, while new medium- and long-term loans were 330 billion yuan, a year-on-year decrease of 170 billion yuan[21] Group 2: Household Sector Insights - Household short-term loans decreased by 20.8 billion yuan, a year-on-year decrease of 45.1 billion yuan, while new medium- and long-term loans were 74.6 billion yuan, a year-on-year increase of 23.2 billion yuan[22] - The real estate market showed signs of marginal recovery, with the transaction area of commercial housing in 30 cities decreasing by 3.3% year-on-year, but rebounding by 8.8 percentage points compared to the previous month[22] Group 3: Monetary Supply Trends - M1 growth rate increased by 0.8 percentage points to 2.3%, while M2 growth rate slightly decreased by 0.1 percentage points to 7.9%[35] - The increase in M1 was attributed to a low base effect from last year and a tendency for companies to hold cash rather than invest[35] - The marginal decline in M2 was influenced by a decrease in the attractiveness of deposits relative to wealth management products and an increase in fiscal deposits of 880 billion yuan, a year-on-year increase of 116.7 billion yuan[38] Group 4: Future Outlook and Risks - The outlook for social financing growth is expected to fluctuate within the range of 8.5%-9.0%, with government bonds continuing to act as a stabilizer[44] - Key risks include macroeconomic performance falling short of expectations, slower demand recovery, and potential geopolitical risks[45]

Export Performance - In May, export growth was 4.8%, down 3.3 percentage points from the previous month, indicating a decline in momentum[3] - Cumulative export growth for May was 6.0%, higher than the annual growth rate from last year, suggesting continued resilience[3] - Exports to the US fell sharply by 34.5%, a decline of 13.5 percentage points compared to the previous month[4] Regional Export Trends - Exports to the EU increased by 12.0%, up 3.7 percentage points from the previous month, with Germany contributing a growth rate of 21.5%[4] - Exports to Canada rose by 20.3%, indicating a continuation of transshipment trade[4] - ASEAN exports showed resilience with a contribution of 2.5 percentage points to overall export growth, accounting for 52.6% of the total[4] Product-Specific Insights - Labor-intensive products like bags, textiles, and footwear saw declines in export growth rates of -10.3%, -2.0%, and -5.6% respectively, dragging down overall export growth by 0.3 percentage points[5] - High-tech products, particularly integrated circuits, saw a significant increase in export growth of 33.4%[5] - Automotive exports improved significantly with a growth rate of 13.7%, up 9.3 percentage points from the previous month[5] Import Trends - Import growth fell by 3.4%, a decrease of 3.2 percentage points from the previous month, primarily due to declining prices of bulk commodities like coal and crude oil[7] - Agricultural imports showed recovery with a growth rate of 0.7%, up 17.96 percentage points from the previous month, driven by soybeans and grains[7] Future Outlook - Export resilience is expected to continue in the short term, supported by adjustments in shipping capacity to the US and sustained demand from ASEAN[8] - However, potential pressures on exports are anticipated in the second half of the year due to changes in US tariff policies and the expiration of exemptions on certain goods[8]

Production Side - As of the fourth week of May, the national blast furnace operating rate was 83.89%, up 0.26 percentage points from the previous month[3] - The rebar operating rate was 42.64%, increasing by 0.83 percentage points month-on-month[3] - The cement mill operating rate was at a low level of 41.83%, down 0.40 percentage points from the previous month[3] - The inventory of rebar was 186.42 million tons, down 0.69 percentage points month-on-month[3] Demand Side - In May, the sales area of commercial housing in 30 cities was 201.56 million square meters, down 2.12% month-on-month[60] - The land transaction area was 903.48 million square meters, down 5.97% month-on-month[60] - The average daily sales of passenger cars were 60,823 units, up 18.85% month-on-month[89] Price Trends - The average price of cement was 368.33 yuan/ton, down 1.61% month-on-month[72] - The price of rebar was 3,077.13 yuan/ton, down 2.36% month-on-month[73] - The PPI for copper was 77,042 yuan/ton, down 0.58% month-on-month[99]

Group 1: Manufacturing Sector - The manufacturing PMI for May is 49.5%, an increase of 0.5 percentage points from the previous month, but still below the critical line, indicating weak manufacturing sentiment[7] - The new orders index for manufacturing is at 49.8%, up 0.6 percentage points, but remains below the critical line, suggesting insufficient demand[11] - The inventory indices for raw materials and finished products are both below the critical point, indicating inadequate replenishment sentiment in manufacturing[16] Group 2: Service Sector - The service sector PMI increased to 50.2%, a rise of 0.1 percentage points, indicating continued expansion in business activities[21] - The new orders index for services is at 46.6%, below the critical line, pointing to weak demand conditions[21] - The business activity expectations index is at 56.5%, indicating a positive outlook for future service sector activities[21] Group 3: Construction Sector - The construction PMI is recorded at 51%, a decrease of 0.9 percentage points, but still above the critical line, indicating ongoing expansion albeit at a slower pace[27] - The new orders index for construction is at 43.3%, suggesting pressure on demand[27] - The employment index in construction is at 39.5%, indicating insufficient hiring sentiment in the sector[27] Group 4: Economic Outlook - The overall economic sentiment is supported by recent monetary policy measures, including interest rate cuts and structural adjustments aimed at economic recovery[30] - Risks include deviations from expected fundamental recovery, unexpected macroeconomic policies, and geopolitical uncertainties[31]