Monetary Policy Insights - By the end of 2025, the loan interest rate decreased by 10 basis points to 3.15%, with general loan rates falling by 12 basis points to 3.55%[2][10] - The central bank's excess reserve ratio rose to 1.5% by the end of 2025, up 0.1 percentage points from September and 0.4 percentage points year-on-year[2][10] Fiscal and Monetary Coordination - The report emphasizes the coordination between monetary and fiscal policies, highlighting three main modes of collaboration: supporting government bond issuance, using "re-lending + fiscal subsidies," and risk-sharing mechanisms[3][12] - The government is expected to be the main driver of leverage in 2026, with limited room for significant rate cuts due to the need to maintain low financing costs[3][12] Liquidity and Financial Structure - The central bank aims to merge asset management products with bank deposits to better observe liquidity, indicating that changes in deposit structure do not significantly affect total liquidity[4][13] - The growth rate of combined household and corporate deposits aligns closely with M2 growth, showing no significant volatility in overall liquidity[4][13] Economic Outlook and Policy Focus - The central bank expresses concerns over economic conditions, including trade barriers and inflation risks, while emphasizing the need for macro policy consistency and flexibility in counter-cyclical adjustments for 2026[5][15] - Future monetary policy will focus on expanding domestic demand and optimizing supply, with an emphasis on service consumption and new productive capacities[5][15] Risk Considerations - Potential risks include unexpected policy changes, slower-than-expected economic recovery, and the possibility of historical economic patterns not holding true in the current context[6][19][20]

Group 1: Monetary Policy Insights - By the end of 2025, the loan interest rate from financial institutions decreased by 10 basis points to 3.15% compared to Q3 2025[3] - The general loan interest rate fell by 12 basis points to 3.55%, while the bill and mortgage rates remained stable at 1.14% and 3.06% respectively[3] - The central bank's excess reserve ratio rose to 1.5% by the end of 2025, up 0.1 percentage points from September and 0.4 percentage points year-on-year[3] Group 2: Fiscal and Monetary Coordination - The report emphasizes the coordination between fiscal and monetary policies to support domestic demand, with the government expected to be the main driver of leverage in 2026[4] - The central bank has shifted from a proactive monetary policy to a synchronized approach with fiscal measures, indicating a change in the sequence of policy implementation[4] - The government utilized a limit of 500 billion yuan in local bond reserves in October 2025, prompting the central bank to restart government bond trading[4] Group 3: Liquidity and Financial Structure - The central bank proposed merging asset management products with bank deposits to better observe liquidity in the financial system, indicating a structural change rather than a total liquidity reduction[5] - The growth rate of combined household and corporate deposits is closely aligned with M2 growth, showing no significant volatility in overall liquidity[5] - The central bank aims to shift focus from quantity targets to a price-based model for economic influence through interest rate adjustments[5] Group 4: Economic Outlook and Risks - The central bank expresses heightened concerns about economic conditions, citing challenges such as trade barriers and inflation risks, alongside domestic supply-demand imbalances[6] - Future monetary policy will emphasize macro policy consistency, with a flexible and precise counter-cyclical adjustment expected in 2026[6] - Risks include potential policy changes, slower-than-expected economic recovery, and the possibility of historical experiences becoming less applicable[6]

- The report constructs macro factor variables by regressing macro indices on broad-based indices and proxy macro variables, selecting significant sub-macro variables, and weighting them by the inverse of the past year's standard deviation. The macroeconomic data is adjusted using a one-sided HP filter to eliminate short-term fluctuations and identify long-term trends. Based on the filtered variables, macro trends (upward, downward) are divided using factor momentum, and macro states (high, medium, low) are divided using time series percentiles[2] - The necessity of elevating macro factors is highlighted, as the price transmission of macro factor A to broad-based, style, and industry indices varies with different marginal changes of A. Additionally, the impact of macro factor A on returns is different under various states of macro factor B. The combination of marginal changes and states of macro variables is required to comprehensively consider the trend and time series ranking of macro variables[2] - The small-cap all-index timing strategy, based on a combination of macro variables, achieved an annualized return of 16.56% from the end of January 2012 to January 31, 2026, with an excess return of 10.19% relative to the CSI All Index[3] - The dividend index timing strategy, based on a combination of macro variables, achieved an annualized return of 10.97% from the end of January 2012 to January 31, 2026, with an excess return of 8.49% relative to the dividend index[3] - The style rotation strategy, based on a combination of macro variables, achieved an annualized return of 14.79% from September 30, 2014, to January 31, 2026, with an excess return of 4.61% relative to the equal-weighted style index[3] Model and Factor Construction 1. **Macro Factor Variables** - **Construction Idea**: Regress macro indices on broad-based indices and proxy macro variables, select significant sub-macro variables, and weight them by the inverse of the past year's standard deviation[2] - **Construction Process**: - Regress macro indices on broad-based indices and proxy macro variables - Select sub-macro variables with significant t-values - Weight selected variables by the inverse of the past year's standard deviation - Adjust macroeconomic data using a one-sided HP filter to eliminate short-term fluctuations - Divide macro trends using factor momentum and macro states using time series percentiles[2] - **Evaluation**: The necessity of elevating macro factors is highlighted due to the varying price transmission of macro factors under different marginal changes and states[2] 2. **Small-Cap All-Index Timing Strategy** - **Construction Idea**: Use a combination of macro variables to predict the highest returns when inventory is at a medium upward level[3] - **Construction Process**: - Combine macro variables to construct the timing strategy - Evaluate the strategy's performance from January 2012 to January 31, 2026[3] - **Evaluation**: The strategy achieved significant excess returns relative to the CSI All Index[3] 3. **Dividend Index Timing Strategy** - **Construction Idea**: Use a combination of macro variables to construct the dividend index allocation strategy[3] - **Construction Process**: - Combine macro variables to construct the timing strategy - Evaluate the strategy's performance from January 2012 to January 31, 2026[3] - **Evaluation**: The strategy achieved significant excess returns relative to the dividend index[3] 4. **Style Rotation Strategy** - **Construction Idea**: Use a combination of macro variables to construct the style rotation allocation strategy[3] - **Construction Process**: - Combine macro variables to construct the style rotation strategy - Evaluate the strategy's performance from September 30, 2014, to January 31, 2026[3] - **Evaluation**: The strategy achieved significant excess returns relative to the equal-weighted style index[3] Model Backtest Results 1. **Small-Cap All-Index Timing Strategy** - **Annualized Return**: 16.56% - **Excess Return**: 10.19%[3] 2. **Dividend Index Timing Strategy** - **Annualized Return**: 10.97% - **Excess Return**: 8.49%[3] 3. **Style Rotation Strategy** - **Annualized Return**: 14.79% - **Excess Return**: 4.61%[3]

- The report discusses the trading volume of major stock indices (CSI 300, SSE 50, CSI 500, and CSI 1000), showing a rebound in January 2026 after a decline since September 2025[12][18][11] - The basis ratio for next-month contracts of major indices is tracked, with SSE 50 and CSI 300 showing minimal discount, while CSI 500 and CSI 1000 still exhibit some discount levels[15][22][29] - The structure of stock index futures' premium and discount reflects market sentiment, where premium indicates bullish sentiment and discount suggests bearish sentiment or liquidity concerns[23][44][50] - The VIX index for major options markets increased in January 2026, indicating a rise in market volatility expectations[53][55][57] - The Put/Call Ratio (PCR) for 50ETF and 300ETF options declined in January 2026, signaling cautious market sentiment[59][61][65]

Investment Rating - The industry rating is "Outperform the Market" [8][73] Core Insights - The success of the "Love" series is attributed to a model that emphasizes "relationship continuity + companionship system + key emotional payment nodes," which redefines user retention and monetization in mobile games. This model fosters long-term emotional connections rather than relying on high-frequency online engagement, resulting in stable revenue despite moderate daily active users (DAU) [3][4][62]. - The report suggests focusing on companies that demonstrate longer product lifecycles, smoother revenue curves, and higher value from low-frequency users, shifting valuation from a "hit probability model" to a "relationship asset compounding model" [4]. Summary by Sections 1. User Retention Mechanism - The "Love" series achieves user retention through a non-violent game design that avoids traditional engagement mechanisms, leading to stable and sustainable user retention and payment performance [14][15]. - The DAU is not extreme, but the long-term payment capability remains stable, indicating that users do not need to log in daily but return at key emotional moments [21][22]. - The "Love" series maintains a longer lifecycle than the industry average due to its unique retention mechanisms, allowing users to pause without losing progress [28][40]. 2. Payment Structure - The payment structure of the "Love" series does not rely on high-frequency consumption but is triggered at key relationship nodes rather than daily cycles [45][51]. - Unlike mainstream games that focus on efficiency and competition, the "Love" series allows users to engage at their own pace, leading to a more stable income model that is less dependent on a small number of high-frequency spenders [52][56]. - The emotional density of payments is higher during key narrative moments, which enhances the likelihood of conversion [54][61]. 3. Long-Term Performance - The "Love" series has shown a remarkable ability to maintain user engagement and revenue over extended periods, with "Love and Space" achieving over 50 billion USD in global revenue within its first year and not following the typical decline pattern seen in many new games [23][40]. - The report emphasizes that the relationship between users and characters remains intact even during breaks, allowing for a seamless return to the game without significant barriers [38][39].

Investment Rating - The industry rating is "Outperform the Market" [4][71]. Core Insights - The report highlights that the supply of live pigs is increasing, leading to a rebound in prices followed by a decline. As of February 8, the price of live pigs was 11.84 CNY/kg, down 0.47 CNY/kg week-on-week. The profits for self-bred and purchased piglets were -38.09 CNY and 91.42 CNY per head, respectively, showing significant week-on-week declines [2][10][30]. - The beef market is experiencing price increases due to pre-Spring Festival stocking, with the price of fattened bulls at 25.74 CNY/kg and calves at 33.81 CNY/kg, reflecting a positive trend for beef prices in the long term [3][33]. - The poultry sector is facing downward pressure on prices due to increased output of broilers and a decrease in demand for poultry products, with the price of white feather broilers at 7.53 CNY/kg, down 0.21 CNY/kg week-on-week [3][40]. Summary by Sections Swine Industry - The price of live pigs has shown volatility, with a rebound followed by a decline due to increased supply and faster slaughtering rates. The average weight of pigs at slaughter has decreased to 127.40 kg, down 0.46 kg week-on-week [2][20][30]. - The industry is entering a seasonal consumption peak, with an increase in slaughtering volume and a decrease in frozen product inventory, which is currently at 17.91%, down 0.40 percentage points week-on-week [2][13][30]. Beef Industry - The beef market is seeing an upward trend in prices, driven by increased demand from slaughterhouses as they prepare for the Spring Festival. The long-term outlook for beef prices is positive due to tightening supply from reduced breeding stock [3][33][34]. Poultry Industry - The poultry sector is experiencing a decline in prices due to increased output and reduced demand for poultry products. The price of eggs has also decreased to 7.67 CNY/kg, down 0.78 CNY/kg week-on-week, with expectations for future price recovery driven by supply constraints [3][40][42]. Seed Industry - The 2026 Central Document No. 1 emphasizes the promotion of biological breeding industrialization, which is expected to enhance agricultural productivity and quality. This initiative is likely to benefit leading seed companies [3][55][56].

Investment Themes - The report identifies several investment themes based on market trends, including "right-side breakout" for Huangjiu, soybeans, and epoxy propylene, which are showing sustained performance [4][10] - "Right-side trends" are noted in sectors such as photovoltaics, power IoT, target materials, new energy equipment, and aluminum, indicating ongoing positive momentum [4][10] - New themes showing signs of stabilization at the bottom include generic drugs, service robots, consumer finance, smart logistics, and electric vehicles [4][10] - Newly identified themes indicating a bottom reversal include lithium hexafluorophosphate, lithium battery electrolytes, and mobile phone batteries [4][10] Right-Side Breakout Opportunities - The Huangjiu index has shown a 5% increase over 20 days, while the soybean index has experienced a 3% increase, indicating potential investment opportunities [11] - The epoxy propylene index has a 12% increase over 20 days, suggesting strong performance in the basic chemical sector [11] Right-Side Trend Opportunities - The photovoltaic index has shown a 13% increase year-to-date (YTD), indicating strong growth potential in the power equipment sector [13] - Other indices such as the BC battery index and the power IoT index have also shown positive trends with YTD increases of 17% and 9%, respectively [13] Bottom Stabilization Opportunities - The CAR-T therapy index and the generic drug index have shown signs of stabilization, with the latter having a 3-day performance of 0% [17] - The electric vehicle index has also stabilized, with a slight increase of 1% over 5 days, indicating potential for recovery [17] Bottom Reversal Opportunities - The mobile phone battery index has shown a 2% increase over 5 days, while the lithium hexafluorophosphate index has a 3% increase, suggesting a potential turnaround in these sectors [19] - The lithium battery electrolyte index has also shown a 3% increase, indicating a positive shift in market sentiment [19]

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The basic chemical sector has experienced a decline, with the Shanghai Composite Index down 1.27%, the ChiNext Index down 3.28%, and the CSI 300 down 1.33% during the week [2][14] - Key developments include the H-share listing of Guoen Co., Ltd. and a 20% capacity expansion of TDI at Covestro's Shanghai base [4][5] Industry Performance Overview - The chemical sector's performance this week shows the top five sub-industries with gains: Tires (1.69%), Coatings and Inks (0.13%), Other Chemical Products III (0%), Food and Feed Additives (-0.14%), and Synthetic Resins (-0.25%) [3][17] - The bottom five sub-industries with losses include Viscose (-5.79%), Titanium Dioxide (-4.24%), Pesticides (-4.03%), Phosphate Fertilizers and Phosphate Chemicals (-3.91%), and Membrane Materials (-3.79%) [3][17] Key Industry Dynamics - Guoen Co., Ltd. has officially listed its H-shares on the Hong Kong Stock Exchange, marking a new chapter in its capital market strategy [4] - Covestro has completed a major capacity expansion for TDI production at its Shanghai facility, increasing annual capacity from 310,000 tons to 370,000 tons, a nearly 20% increase [4] Investment Themes - Investment Theme 1: The domestic tire sector shows strong competitiveness, with notable companies such as Sailun Tire, Senqcia, General Motors, and Linglong Tire worth monitoring [5] - Investment Theme 2: The consumer electronics sector is expected to gradually recover, with upstream material companies likely to benefit. Key companies include Dongcai Technology, Stik, Lite-On Optoelectronics, and Ruile New Materials [5] - Investment Theme 3: Focus on resilient cyclical industries and inventory destocking leading to a potential bottom reversal, particularly in phosphate and fluorochemical sectors [5] - Investment Theme 4: As the economy improves and demand recovers, leading companies in the chemical sector are expected to benefit significantly [5]

1. Report Industry Investment Rating No information provided in the report. 2. Core Viewpoints of the Report - The bond market after the Spring Festival is likely to continue the pre - festival trend, and holding bonds during the holiday may be a better choice. Before the implementation of reserve requirement ratio cuts and interest rate cuts, the risk of significant interest rate adjustments is relatively limited [3][4][14]. - Once the 10 - year Treasury bond interest rate breaks through 1.8%, it may change from a resistance level to a support level [5][14][44]. - The short - term bond market will continue to fluctuate strongly. It is recommended to maintain a certain leverage. There is still room for compression in the spread of 3 - 5 - year Tier 2 and perpetual bonds. If the interest rate breaks through key points, there may be band opportunities for 10 - year policy financial bonds and ultra - long Treasury bonds [5][48]. 3. Summary by Directory 3.1 Post - Festival Bond Market Generally Continues the Pre - Festival Trend; Pre - positioned Monetary Policy and Holding Bonds During the Holiday May Still Be the Better Choice - Historically, the bond market after the Spring Festival generally continues the pre - festival trend. In odd - numbered years, interest rates tend to rise around the Spring Festival, while in even - numbered years, they often fall. The exception was 2022, when the central bank cut interest rates before the festival, and interest rates rose after the festival due to profit - taking sentiment and concerns about credit [3][15][20]. - The adjustment of the monetary policy tone since January may be the reason for the bond market's recovery. The central bank's increased demand for stable credit and reduced concerns about the side effects of M2 and social financing growth have led to a repair of bond market sentiment. The State Council Executive Meeting on February 6 proposed that macro - policies should be implemented ahead of schedule, and subsequent monetary policy may continue to be pre - positioned, with the possibility of earlier reserve requirement ratio cuts and interest rate cuts [22][28][29]. 3.2 The Central Bank Creates a Suitable Monetary and Financial Environment for Government Bond Issuance; Once 1.8% Is Broken, It May Change from a Resistance to a Support - Despite the large net payment scale of government bonds in the week before the festival, the central bank's actions such as over - renewing the 3M repurchase and large - scale 14 - day reverse repurchase injections reflect its intention to maintain liquidity. As long as the central bank's attitude remains unchanged, the capital market around the Spring Festival is expected to remain loose [30]. - The net financing of certificates of deposit (CDs) turned positive last week, mainly due to the decline in maturity volume. If the central bank continues to maintain stable funds, the bank's liability pressure after the festival is expected to be stable [33]. - In January, the central bank's bond purchase scale increased, and large - scale banks' net purchases of Treasury bonds in the secondary market reached a record high. They can be regarded as the stabilizing force when the 10 - year Treasury bond interest rate is above 1.8%. If the interest rate breaks through 1.8%, it may change from a resistance to a support [39][41][44].

Investment Rating - The industry rating is "Outperform the Market" [8] Core Insights - The report highlights that the Shanghai government has initiated a pilot program for purchasing second-hand housing, with expectations for further policy support [3] - The report indicates that the effective investment policies discussed in the State Council meeting will focus on infrastructure, urban renewal, public services, and emerging industries, aiming to promote significant projects [3] - The report notes that the real estate market is showing signs of stabilization, with various supportive measures being implemented, including tax reductions and subsidies for home purchases [3] - The construction materials sector is expected to benefit from supply-side reforms and a potential recovery in housing demand due to declining interest rates and improved purchasing power [6] Summary by Sections Recent High-Frequency Data - As of February 6, 2026, the average price of bulk P.O 42.5 cement in China is 329.1 CNY/ton, down 0.2% week-on-week and down 15.3% year-on-year [4][14] - The average price of glass (5.00mm) is 1105.7 CNY/ton, down 0.1% week-on-week but up 2.8% year-on-year [20][24] Sector Review - The Shanghai Composite Index and Shenzhen Composite Index both fell by 1.27%, while the construction materials index rose by 0.7% [5][55] - Sub-sectors such as glass manufacturing (+5.32%) and cement products (+4.74%) performed well, while fiberglass manufacturing (-1.81%) and refractory materials (-3.24%) saw declines [5][55] Investment Recommendations - The report suggests focusing on three main investment lines: 1. High-quality companies benefiting from stock renovation, such as Weixing New Materials and Beixin Building Materials [6] 2. Undervalued stocks with long-term alpha attributes, such as Sankeshu and Dongfang Yuhong [6] 3. Leading cyclical construction material companies showing signs of bottoming out, such as Huaxin Cement and Conch Cement [6]