Inflation Data - In February 2025, the CPI decreased by 0.7% year-on-year and 0.2% month-on-month, marking the first year-on-year decline since February 2024[2] - The core CPI also fell by 0.1% year-on-year and 0.2% month-on-month, the first negative year-on-year change since February 2021[3] - The CPI's performance is weak, influenced by the Spring Festival, with a significant seasonal drop in food prices contributing to the decline[3] PPI Trends - The PPI decreased by 2.2% year-on-year and 0.1% month-on-month, with the decline narrowing by 0.1 percentage points compared to the previous month[7] - The PPI's decline is primarily due to slow recovery in domestic demand, despite a slight rebound in international commodity prices[10] - The expectation is that the PPI may turn positive year-on-year by the third quarter of 2025 if domestic demand recovers as anticipated[20] Economic Outlook - The government has set a 2025 inflation target of around 2%, down from 3%, reflecting a pragmatic assessment of the inflation situation[16] - The GDP deflator index has been negative for seven consecutive quarters, indicating ongoing deflationary pressures[21] - Continuous policy support, particularly in fiscal measures, is deemed necessary to achieve reasonable price recovery[16] Consumer Behavior - The recovery of core CPI is contingent on improved consumer demand, with a marginal increase in consumer spending observed[18] - The supply of pork is expected to gradually recover, which may suppress pork prices and impact overall CPI negatively if prices remain weak[18] - The PPI-CPI gap is narrowing, suggesting a slow recovery in corporate profitability, which is expected to continue into the latter part of 2025[23]

Investment Rating - The industry investment rating is "Outperform the Market," indicating that the industry index is expected to perform better than the benchmark index in the next 6-12 months [28]. Core Insights - The 2025 government work report highlights multiple aspects related to the pharmaceutical and biotechnology sector, including "Three Medical Collaborations," drug procurement, innovative drug catalog, and basic medical content [19][20]. - The Shenyuan Pharmaceutical Index increased by 1.06% from March 3 to March 7, 2025, ranking 19th among Shenyuan's primary industries, underperforming the CSI 300 Index by 0.32 percentage points [2][10]. - All sub-sectors within the pharmaceutical and biotechnology industry saw an increase, with the medical services sector outperforming the CSI 300 Index [11]. Summary by Sections Industry Performance - The Shenyuan Pharmaceutical Index's TTM price-to-earnings ratio is 26.36, showing a recovery compared to the low valuation in July-August 2024, but still below the high valuation in 2021 [14]. - The medical services index rose by 2.63%, outperforming the CSI 300 Index by 1.25% during the same period [11]. Government Policy Impact - The government aims to promote the coordinated development of medical services, medical insurance, and pharmaceuticals, emphasizing the importance of quality and safety in medical services [19]. - Drug procurement policies will be optimized, with the 11th batch of drug procurement scheduled for the first half of 2025 and the sixth batch of high-value medical consumables in the second half [20]. Investment Recommendations - Focus on clinical necessities and related sectors such as CXO and research services, which are gradually recovering. Suggested stocks include Sanyou Medical, Aikang Medical, and Yinos [4]. - Attention is also recommended for companies related to AI in healthcare, such as Ping An Good Doctor for online consultations and Meinian Health for health check-ups [4].

Stock Market Performance - The stock market quickly recovered from last week's losses, with the CSI 2000 rising by 4.0% and the CSI 1000 by 3.8%[1] - The Hang Seng Index increased by 5.6%, reaching a nearly three-year high, while the Hang Seng Tech Index surged by 8.4%[1] - Only 5 out of 31 primary industries experienced declines, with sectors like non-ferrous metals, military industry, computer, and media rising over 5%[1] Trading Volume and Valuation - Average daily trading volume decreased to CNY 1.7 trillion, a 15% drop from last week's CNY 1.99 trillion[1] - The price-to-earnings (P/E) ratio for the CSI 300 stood at 12.6, with a Z-Score of -0.1, while the CSI 1000 had a P/E of 39.6 and a Z-Score of -0.3[1] Bond Market Trends - The bond market showed weakness, with yields rising significantly due to various factors, including policy adjustments and market expectations[1] - The central bank's emphasis on flexible monetary policy led to a decline in market interest rate expectations, contributing to rising yields[1] Currency and Commodity Movements - The US dollar index fell by 3.4% to 103.9, while the euro appreciated by 4.3%, marking its largest weekly gain in nearly a decade[5] - Gold prices rose by 1.8% to USD 2909 per ounce, while Brent crude oil and WTI saw declines of 3.7% and 4.1%, respectively[5]

Investment Rating - The industry investment rating is "Outperform the Market," indicating that the industry index is expected to perform better than the benchmark index over the next 6-12 months [10]. Core Insights - The report highlights that the positive statements regarding monetary policy in the government work report are beneficial for maintaining liquidity and active trading in the A-share market, which supports the continuous recovery of the industry fundamentals [5][3]. - The report emphasizes the importance of reforming and optimizing the stock issuance and merger restructuring systems, which will enhance the quality of listed companies and improve market resource allocation, aiding in technological innovation and industrial upgrading [5]. - The report suggests that the current low valuation of the brokerage sector presents ongoing investment opportunities, particularly in firms with strong financial technology layouts and wealth management capabilities [3][5]. Summary by Sections Industry Investment Rating - The industry is rated as "Outperform the Market," with expectations of better performance compared to the benchmark index in the coming months [10]. Policy Impact - The government work report's commitment to a moderately loose monetary policy is expected to sustain market liquidity and trading activity, providing support for the industry's fundamental recovery [5]. - The focus on promoting long-term capital inflows into the market is anticipated to enhance market stability and create growth opportunities for brokerage firms and wealth management businesses [5]. Investment Recommendations - The report recommends focusing on brokerage firms that lead in financial technology and have significant advantages in wealth management, as they are more likely to achieve performance resilience in the current market environment [3]. - Specific firms to watch include Dongfang Caifu, CITIC Securities, and Huatai Securities, with an emphasis on mergers and acquisitions that align with long-term strategic goals and enhance resource integration [3].

Investment Rating - The industry investment rating is "Outperform the Market" [25] Core Insights - The report emphasizes the importance of boosting domestic demand and developing new productive forces, with AI+ expected to drive upgrades in edge devices and strengthen China's technological capabilities [1][6] - The report highlights significant government initiatives, including a special bond of 300 billion yuan to support consumption upgrades and the promotion of AI-enabled consumer electronics [6][7] - The transition to a green economy is expected to accelerate the penetration of new energy vehicles, with a projected increase in market share [8] - The report identifies "embodied intelligence" as a key area for future industrial development, with government support for humanoid robotics [9] - The optimization of computing power resources is crucial for AI technology, with significant investments anticipated in the domestic AI sector [12][13] Summary by Sections Investment Recommendations - Recommended companies in the cloud-side AI sector include Cambrian, Haiguang Information, and Shengke Communication - Recommended companies in the edge-side AI sector include Hengxuan Technology, Rockchip, and Allwinner Technology - Recommended companies in the storage sector include Zhaoyi Innovation and Demingli - Recommended companies in the consumer electronics sector include GoerTek and Lens Technology - Recommended companies in the intelligent driving sector include Horizon Robotics and Weir Shares - Recommended companies in the embodied intelligence sector include Zhaowei Electromechanical and Obike Technology - Recommended companies in the autonomous controllability sector include SMIC and North Huachuang [3][18]

Investment Rating - The report rates the chemical industry as "Outperform the Market" [1] Core Views - The report highlights the decline in international oil prices and the mixed performance of chemical product prices, with TDI prices decreasing and refrigerant prices increasing. It suggests focusing on potential price increases in agricultural chemicals, textile chemicals, and refrigerants during the peak season in March and April. Additionally, it emphasizes the importance of annual and quarterly report seasons for major energy state-owned enterprises and leading companies in the light hydrocracking sub-industry. The report also notes the rapid development of downstream industries, recommending attention to electronic materials and new energy materials companies, as well as the overall improvement in macroeconomic expectations, indicating that leading companies in the industry are entering a long-term allocation phase [1][3][9] Summary by Sections Industry Dynamics - In the week of March 3 to March 9, 2025, among 101 tracked chemical products, 24 saw price increases, 49 experienced declines, and 28 remained stable. The average price of products increased by 23.76% month-on-month, while 48.51% decreased, and 27.72% remained unchanged. The report also notes that WTI crude oil futures closed at $67.04 per barrel, with a weekly decline of 3.90%, and Brent crude oil futures at $70.36 per barrel, down 3.85% [5][31][32] Investment Recommendations - The report recommends focusing on products likely to see price increases in March and April, such as agricultural chemicals, textile chemicals, and refrigerants. It also suggests paying attention to the performance of major energy state-owned enterprises and leading companies in the light hydrocracking sub-industry during the annual and quarterly report seasons. Furthermore, it highlights the rapid development of downstream industries and recommends monitoring electronic materials and new energy materials companies. The overall improvement in macroeconomic expectations indicates that leading companies in the industry are entering a long-term allocation phase [1][9][31] Price Trends - The report indicates that TDI prices have decreased, with the average domestic market price at 12,125 yuan per ton, down 5.50% from the previous week. Conversely, refrigerant prices have increased, with R32 priced at 45,000 yuan per ton, up 1.12% week-on-week and 80% year-on-year. The report anticipates continued price increases for refrigerants due to strong domestic and export demand [1][31][32]

Core Insights - The report highlights that the recent National People's Congress (NPC) has boosted market confidence, with a more positive macro policy tone compared to last year, particularly in fiscal policy, which is expected to support A-share earnings recovery [3][8] - The report emphasizes that the current market is in a "window of opportunity" for humanoid robots and technology growth sectors, suggesting that tactical value in these areas should not be overlooked [2][26] - The AI product chain is experiencing significant catalysts, with key manufacturers accelerating orders in the computing power sector, indicating a potential new market cycle for the AI industry [2][38] Market Trends and Style - The NPC's positive macro policy stance, including a projected fiscal deficit rate of around 4% for 2025, is significantly higher than the past five years, indicating a willingness to increase government leverage [8] - The report notes that the market is entering a critical verification window for fundamental expectations, with upcoming social financing and inflation data expected to increase short-term volatility [10] - A-share valuations remain attractive, with the current valuation percentile at approximately 52%, compared to 79% for US stocks, suggesting a trend of valuation recovery for Chinese assets [10] Industry and Sector Performance - The defense and military industry saw the highest gains this week, influenced by annual defense budget growth and geopolitical tensions [23] - The report indicates that the humanoid robot sector is viewed as a barometer for risk appetite in A-shares, with significant trading activity observed [25][26] - The AI sector is highlighted as a new focus, with the introduction of the Manus AI agent marking a significant milestone in AI application engineering, potentially accelerating the deployment of AI applications across various industries [36][38] Economic Data and External Factors - Recent economic data shows a decline in export growth, with February's export amount showing a year-on-year increase of only 2.3%, down from 5.9% [14] - The report discusses the uncertainty in external demand, particularly due to fluctuating US economic indicators and trade policies, which may impact China's export outlook [9][10] - The report also notes that the recent decline in international oil prices has significantly affected the oil and petrochemical sectors [23]

Macroeconomic Overview - The fiscal expenditure in 2025 is expected to increase significantly, with a deficit rate planned at around 4% and a deficit scale of CNY 5.66 trillion, which is an increase of 1 percentage point from 2024[9][16]. - The government aims for a GDP growth of approximately 5%, with an urban unemployment rate target of around 5.5% and over 12 million new urban jobs[16][9]. Asset Performance - The Shanghai Composite Index rose by 1.39% this week, while the CSI 300 Index futures increased by 1.16%[2][8]. - The yield on ten-year government bonds increased by 9 basis points to 1.80%, while the active ten-year government bond futures fell by 0.44%[2][8]. - Commodity futures saw declines, with coking coal futures down 1.42% and iron ore main contracts down 3.43%[2][8]. Investment Strategy - The recommended asset allocation order is equities > commodities > bonds > cash, indicating a bullish stance on stocks[5][9]. - Stocks are overweight due to the focus on the implementation of "incremental" policies, while bonds and cash are underweight due to potential short-term impacts from the stock-bond "teeter-totter" effect[4][9]. Consumer and Trade Data - In the first two months of 2025, China's total goods trade value was CNY 6.54 trillion, a year-on-year decrease of 1.20%, with exports at CNY 3.88 trillion (up 3.40%) and imports at CNY 2.66 trillion (down 7.30%)[16][20]. - The government is focusing on boosting consumption, particularly in the automotive and real estate sectors, to stimulate economic growth[9][29].

Investment Rating - The report rates the food and beverage industry as "Outperforming the Market" [1] Core Views - The 2025 government work report emphasizes expanding domestic demand and promoting consumption, highlighting the current valuation recovery opportunities in the consumption sector [1][3] - The food and beverage sector's valuation is at a historical low, with expectations for gradual improvement in the industry fundamentals under the backdrop of domestic demand recovery [3] Summary by Sections Market Review - Last week, the food and beverage sector saw a gain of +0.7%, ranking 22nd among Shenwan's primary industries. The liquor sub-sector performed well, with gains of +1.5% for white liquor and +1.4% for other liquors, while dairy and snacks lagged with declines of -2.1% and -5.6% respectively [3][6] - As of March 7, the valuation (PE-TTM) for the white liquor sector was 19.8X, and for the food and beverage sector, it was 20.8X [15] Key Insights - National policies are increasing support for consumption, with expectations for improved domestic demand. The government report calls for a comprehensive expansion of domestic demand and emphasizes consumer spending to stimulate economic circulation [3] - The food and beverage sector's valuation is expected to recover as the industry fundamentals gradually improve. Fund holdings in the sector have decreased, indicating a low allocation status [3] - Different sub-sectors are approaching cyclical turning points, with strong brands in the liquor sector recommended for attention, such as Shanxi Fenjiu and Moutai [3] Industry Data Tracking Liquor - Recent prices for liquor show stability, with the price of Feitian Moutai ranging from 2,272 to 2,310 yuan per box [26] Dairy - As of February 28, the price of fresh milk was 3.09 yuan per kilogram, down 13.7% year-on-year [36] Meat - As of March 7, the national pig price was 7.36 yuan per jin, reflecting a year-on-year increase of 2.5% [39] Important Announcements and Industry News - Dongpeng Beverage reported a revenue of 15.84 billion yuan for 2024, a year-on-year increase of 40.63%, with a net profit of 3.33 billion yuan, up 63.1% [46] - Changes in management at various companies, including the resignation of the chairman of Liangpinpuzi, were noted [46] Recent Research Report Review - A report on Zhongju High-Tech indicated a projected net profit reduction for 2024, with ongoing internal reforms expected to enhance future performance [49]

Investment Rating - The industry investment rating is "Outperform the Market" [1][34]. Core Insights - The government work report promotes low-carbon energy transition, with market-oriented reforms in photovoltaic pricing expected to drive demand growth in the solar industry. Price increases are observed across the photovoltaic supply chain, with a focus on the optimization of the silicon material and battery segment in 2025 [1]. - Wind power demand is anticipated to improve, driven by steady domestic and overseas project developments. The report suggests prioritizing investments in segments likely to see profit recovery, such as complete machines and casting components [1]. - The report highlights the growth potential in the new energy vehicle sector, with government support for smart connected vehicles expected to sustain high sales growth throughout the year, positively impacting battery and material demand [1]. - The report emphasizes the ongoing push for power system reforms in China, which is expected to accelerate the construction of ultra-high voltage and main grid infrastructure, maintaining high demand for related equipment [1]. - Hydrogen energy policies are expected to continue promoting industrial development, with a focus on companies with cost and technological advantages in electrolyzer production and hydrogen infrastructure [1]. Summary by Sections Market Overview - The electric equipment and new energy sector saw a weekly increase of 0.64%, with automation and new energy vehicle indices performing particularly well, rising by 5.58% and 5.34% respectively [2][5]. - Major companies in the photovoltaic sector have raised prices, with cumulative increases of approximately 0.04-0.08 yuan/W since the beginning of the year [2][20]. Industry Dynamics - The report notes significant developments in the new energy vehicle market, including a 164% year-on-year increase in BYD's February sales, and a total retail volume of 720,000 units, reflecting an 85% increase year-on-year [20]. - The report also mentions the discovery of Asia's largest lithium mine in Sichuan, with a resource volume exceeding 1.12 million tons, which could impact the supply chain positively [20]. Company Developments - Notable company activities include a supply agreement between Dangsheng Technology and SK On for 17,000 tons of lithium battery materials from 2025 to 2027, and strategic cooperation between Shida Shenghua and CATL for electrolyte procurement [24]. - Tongwei's new high-efficiency heterojunction module has achieved a power output of 783.2W, with a conversion efficiency exceeding 25.21% [24].