Macro and Strategy - The macroeconomic review indicates that Shenzhen's GDP is expected to grow by 5.5% in 2025, achieving the anticipated growth target, with foreign trade increasing by 1.4% despite a decline in exports due to a high base in 2024 [7] - The strategy report highlights that A-share earnings are stabilizing, driven by cost reductions and the new economy outpacing the old economy, with a projected 10% growth in A-share earnings for 2026 under neutral assumptions [8][10] Industry and Company - The North Exchange's January 2026 report shows a significant increase in market activity, with a total of 292 listed companies and a total market value of 936.3 billion yuan, reflecting a 7.7% increase in total market value [11] - In the electric power equipment sector, domestic demand is expected to remain strong, with a focus on high-voltage direct current (HVDC) and smart meters, as the State Grid's fixed asset investment is projected to reach 4 trillion yuan, a 40% increase from the previous five-year plan [14][15][17] - Yum China reported a 22% year-on-year increase in net profit for Q4 2025, with total revenue reaching $2.823 billion, driven by a 34% increase in delivery sales [18][19][21]

Group 1 - The report highlights the increasing importance of Hong Kong strategy and style indices as refined tools for asset allocation, risk management, and style expression amid a backdrop of deepening capital market openness and rising demand for diversified investment tools [2] - Different indices serve distinct purposes: the defensive strategy represented by the CSI Hong Kong 300 Stable Index focuses on fundamentally strong leading companies, showcasing excellent drawdown control and risk-adjusted returns, while the offensive tools like the CSI Hong Kong 200 Momentum Index excel in capturing trends in small and mid-cap stocks [2][2] - The evolution of strategy and style indices from supplementary tools to core components is driven by the need for risk separation and enhanced returns in a market characterized by structural trends and accelerated sector rotation [2] Group 2 - The report outlines the historical performance of various indices, indicating that during the risk-on phase from early 2020 to mid-2021, the defensive strategy indices lagged behind growth indices, reflecting their characteristic of sacrificing return elasticity for risk reduction [28] - In the subsequent market downturn starting mid-2021, the relative advantages of defensive indices became apparent, as they exhibited significantly lower drawdowns compared to growth indices, thus providing effective downside protection [28] - The report notes that in the weak market environment of 2022-2023, defensive indices maintained stronger stability, with their cumulative return curves showing significantly less volatility than growth indices, indicating their effectiveness in achieving relative returns during turbulent periods [28] Group 3 - The report discusses the performance of offensive indices, stating that the CSI Hong Kong 300 Dynamic Index outperformed others during the strong risk appetite phase from early 2020 to mid-2021, benefiting from the growth and offensive style-driven bull market [31] - However, as the market transitioned to a downtrend, both the CSI Hong Kong 300 Dynamic and High Beta indices experienced significant drawdowns, with the Dynamic Index showing better resilience due to its composition and risk control mechanisms [31] - The report concludes that the CSI Hong Kong 300 Dynamic Index possesses both elasticity and recovery capability, while the High Beta Index is more sensitive to market fluctuations, leading to greater pressure during downturns [31] Group 4 - The report highlights the performance of the CSI Hong Kong 200 Momentum Index, which excelled during the bullish phase from early 2020 to mid-2021, capturing strong trends and significantly outperforming the Hong Kong 200 parent index [35] - In contrast, during the subsequent market downturn, the Momentum Index faced substantial drawdowns, reflecting the inherent risks of momentum strategies in reversing trends [35] - The report indicates that while the Momentum Index has the potential for excess returns in clear bull markets, it also carries higher drawdown risks in bearish and volatile market conditions [35] Group 5 - The report emphasizes the performance of the CSI Hong Kong 100 Momentum Index, which showed significant outperformance during the bullish phase from early 2020 to mid-2021, capturing strong trends effectively [38] - However, as the market entered a downtrend, the Momentum Index experienced considerable drawdowns, indicating its sensitivity to market reversals [38] - The report concludes that the Momentum strategy's excess returns are primarily concentrated in bull markets, while the equal-weighted and risk-contribution indices serve more as risk diversification tools without consistently outperforming the parent index [38]

Macro and Strategy - The macroeconomic review indicates that Shenzhen's GDP is expected to grow by 5.5% in 2025, with foreign trade increasing by 1.4% despite a decline in exports due to a high base in 2024 [7] - The A-share market is projected to see a 10% profit growth in 2026, driven by cost reductions and the rise of new economy sectors outpacing traditional sectors [8][10] Industry and Company - The North Exchange saw a significant increase in trading activity in January 2026, with a total of 292 listed companies and a market capitalization of 936.3 billion yuan, reflecting a 7.7% increase [11] - The electric power equipment industry is expected to benefit from strong domestic demand and overseas expansion opportunities, particularly in high-voltage direct current (HVDC) technology [14][15] - Yum China reported a 22% year-on-year increase in net profit for Q4 2025, with total revenue reaching $2.823 billion, driven by a 34% increase in delivery sales [19][21] Investment Recommendations - Focus on high-voltage direct current and smart meter sectors, recommending companies like Pinggao Electric and XJ Electric for their growth potential [17] - Anticipate continued overseas expansion for Chinese companies in the electric power sector, suggesting attention to companies like Sifang Co. and Mingyang Smart Energy [17]

Investment Rating - The report maintains an "Outperform" rating for the non-bank financial sector [5][4]. Core Insights - The report emphasizes that the intervention of stabilization funds has become a normalized and institutionalized mechanism in capital markets, which requires institutional investors to adapt their asset allocation strategies to include policy variables for long-term considerations [2][11]. - The shift from direct intervention in individual stocks to a focus on broad-based ETFs represents a strategic evolution aimed at maintaining market stability while minimizing distortions in price signals [3][52]. - The report highlights that the actions of the "national team" in stabilizing the market have led to a gradual formation of a "slow bull" market, improving the operating environment for non-bank financial sectors and enhancing long-term valuations for brokerages and insurance companies [3][12]. Summary by Sections Overseas Perspective - Stabilization funds are viewed as essential stabilizing forces in capital markets, with examples from Japan and the U.S. demonstrating their long-term operational roles rather than short-term emergency measures [2][11]. - Japan's central bank has become a major player in market interventions, with its ETF holdings reaching approximately 37 trillion yen by the end of 2025, indicating a shift to a normalized intervention strategy [14][20]. Domestic Practice - Since 2023, the central financial institutions in China have optimized their strategies by focusing on increasing holdings in broad-based ETFs like the CSI 300 and SSE 50, which has effectively reduced irrational market volatility and guided investors towards core market assets [3][12]. - The report notes that this transition from precise stock interventions to macro-guided asset combinations has laid a solid foundation for a long-term value return in the market [3][12]. Key Company Earnings Forecasts - The report provides earnings per share (EPS) and price-to-earnings (PE) ratios for several companies, all rated as "Outperform": - China Ping An: EPS 7.87 (2025E), PE 8.56 (2025E) [4] - China Life: EPS 6.07 (2025E), PE 8.02 (2025E) [4] - China Pacific Insurance: EPS 5.40 (2025E), PE 8.28 (2025E) [4] - CITIC Securities: EPS 2.21 (2025E), PE 12.83 (2025E) [4] - Guotai Junan: EPS 1.53 (2025E), PE 13.08 (2025E) [4] - Industrial Securities: EPS 0.39 (2025E), PE 17.69 (2025E) [4] - Dongfang Securities: EPS 0.69 (2025E), PE 14.84 (2025E) [4]

Investment Rating - The report maintains an "Outperform" rating for the public utility and environmental protection industry [1][4][7]. Core Views - The report highlights that coal and electricity prices are declining simultaneously, which is expected to maintain reasonable profitability for thermal power. It recommends large national thermal power companies such as Huadian International and Shanghai Electric, where regional electricity prices are relatively firm [3][29]. - Continuous government policies supporting renewable energy development are anticipated to lead to gradually stable profitability in renewable power generation. Recommended companies include national renewable energy leaders Longyuan Power and Three Gorges Energy, as well as regional offshore wind power companies like Guangxi Energy and Funiu Co., Ltd. [3][29]. - The growth in installed capacity and power generation is expected to offset the downward pressure on electricity prices, with nuclear power companies likely to maintain stable profitability. Recommended companies include China National Nuclear Power and China General Nuclear Power [3][29]. - High-dividend hydropower stocks are highlighted for their defensive attributes in a global interest rate decline environment, with a recommendation for the hydropower leader Yangtze Power [3][29]. - The report suggests focusing on gas companies with capabilities in marine gas trading and special gas businesses, particularly Jiufeng Energy, which is anchored in commercial aerospace [3][29]. - In the environmental sector, the water and waste incineration industries are entering a mature phase, with significant improvements in free cash flow. The report recommends companies like China Everbright Environment and Shanghai Industrial Holdings, which present "utility-like investment opportunities" [3][30]. Summary by Sections Market Review - In January, the CSI 300 index rose by 1.65%, the public utility index increased by 3.19%, and the environmental index grew by 5.94%, with relative returns of 1.54% and 4.29% respectively [1][13]. - Among the sub-sectors, thermal power increased by 2.60%, while hydropower decreased by 1.65%. Renewable energy generation rose by 7.23%, water utilities increased by 3.96%, and gas utilities grew by 7.48% [1][34]. Important Events - The National Development and Reform Commission and the National Energy Administration issued a notice on January 30, 2026, to improve the capacity pricing mechanism for power generation, which will enhance the compensation for reliable capacity based on peak capacity [1][14]. Fund Holdings Analysis - In Q4 2025, the active fund allocation ratio for the public utility sector was 0.28%, a decrease of 0.04% from the previous quarter, with a negative overweight ratio of -2.15% [2][16]. - The top ten stocks by market value in the public utility sector included Yangtze Power, Huaneng International, and Longyuan Power [2][20]. - The active fund allocation ratio for the environmental sector was 0.26%, an increase of 0.02%, with the top ten stocks including Weiming Environmental and Hanlan Environment [2][21][28].

Investment Rating - The investment rating for Yum China (09987.HK) is "Outperform the Market" [6][4][21] Core Views - The company has shown resilience in same-store sales, achieving positive growth for three consecutive quarters, with a projected same-store sales growth of 0-2% for 2026 [2][10][21] - The company plans to accelerate store expansion, expecting to add over 1,900 new stores in 2026, with a total store count projected to exceed 20,000 by the end of 2026 [3][20][21] - The company is focusing on enhancing its delivery services and product innovation, which are expected to drive continued improvement in same-store performance [4][21] Financial Performance - In Q4 2025, the company reported a revenue of $2.823 billion, a year-on-year increase of 8.8%, and a net profit of $140 million, up 21.7% [9][4] - The operating profit for Q4 2025 was $187 million, reflecting a 23.8% increase year-on-year, with an EPS of $0.40 [9][4] - The KFC division generated $2.125 billion in revenue, up 8.75%, while the Pizza Hut division reported $540 million, a 5.9% increase [9][4] Store Expansion and Franchise Growth - The company added 587 new stores in Q4 2025, with a total of 18,101 stores by the end of the year, including 12,997 KFC and 4,168 Pizza Hut locations [11][20] - The franchise ratio for KFC and Pizza Hut reached 15% and 8% respectively by the end of 2025, indicating a continued shift towards franchising [11][20] Cost Structure and Profitability - In Q4 2025, labor costs accounted for approximately 29.3% of total expenses, reflecting a year-on-year increase of 1.1 percentage points, primarily due to rising delivery costs [3][18] - The restaurant profit margin improved to 13.0%, up 0.7 percentage points year-on-year, driven by revenue leverage [3][18] - The company expects to return approximately $1.5 billion to shareholders in 2026, with annual returns projected to be between $900 million and over $1 billion from 2027 to 2028 [20][21]

Investment Rating - The investment rating for Yum China (09987.HK) is "Outperform the Market" [6][21]. Core Views - The company has maintained positive same-store sales growth for three consecutive quarters, with a projected increase in store expansion in 2026 [4][21]. - For Q4 2025, the company reported a revenue of $2.823 billion, a year-on-year increase of 8.8%, and a net profit of $140 million, up 21.7% [9][10]. - The company is expected to continue its robust growth trajectory, driven by innovations in delivery and product offerings, with a forecasted net increase of over 1,900 stores in 2026 [3][20]. Financial Performance - In Q4 2025, the operating profit was $187 million, reflecting a 23.8% increase year-on-year, with an EPS of $0.40 [9][10]. - The KFC division generated $2.125 billion in revenue, up 8.75%, while the Pizza Hut division saw revenue of $540 million, a 5.9% increase [9][10]. - The overall same-store sales growth was 3%, with KFC and Pizza Hut achieving 3% and 1% growth respectively [10][11]. Store Expansion - The company added 587 new stores in Q4 2025, bringing the total to 18,101 stores by the end of the year, with KFC and Pizza Hut having 12,997 and 4,168 stores respectively [11][20]. - The proportion of franchised stores is increasing, with KFC and Pizza Hut's franchise store ratios reaching 15% and 8% by the end of 2025 [11][20]. Cost and Profitability - In Q4 2025, the restaurant profit margin improved to 13.0%, a year-on-year increase of 0.7 percentage points, driven by revenue leverage [3][18]. - Labor costs accounted for approximately 29.3% of total costs, reflecting a 1.1 percentage point increase year-on-year, primarily due to rising delivery costs [3][18]. Future Outlook - The company expects to achieve a net profit of $1.019 billion in 2026, with projections for 2027 and 2028 at $1.106 billion and $1.170 billion respectively [5][21]. - The anticipated shareholder return for 2026 is approximately $1.5 billion, with expected annual returns of $900 million to over $1 billion for 2027-2028 [3][20].

Investment Rating - The report maintains an "Outperform" rating for the industry [5] Core Insights - The North Exchange's stock market activity has significantly increased, with new stock market funds exceeding 1 trillion [1] - The North Exchange added 5 new listed companies this month, bringing the total to 292, with a total market value of 936.30 billion and a circulating market value of 580.36 billion, reflecting increases of 7.7% and 10.3% respectively [1][13] - The North Exchange's trading volume and amount for the month were 24.52 billion shares and 607.72 billion, with a month-on-month increase of 26.8% in volume and 38.6% in amount [1][16] - The North Exchange 50 Index had a price-to-earnings ratio (PE-TTM) of 45.96, ranking in the 60.46th percentile over the past two years, and a price-to-book ratio (PB-MRQ) of 9.50, ranking in the 91.10th percentile [2][25] - The North Exchange's various sectors, except for the automotive sector, experienced a general increase in returns this month, with significant gains in media, non-ferrous metals, telecommunications, public utilities, and agriculture [32][37] Summary by Sections Market Overview - The North Exchange's trading activity has shown a notable increase, with a monthly trading volume of 24.52 billion shares and a trading amount of 607.72 billion, marking a month-on-month increase of 26.8% and 38.6% respectively [1][16] - The North Exchange's total market value reached 936.30 billion, with a circulating market value of 580.36 billion, reflecting increases of 7.7% and 10.3% respectively [1][13] Valuation - As of January 30, the North Exchange 50 Index's PE-TTM was 45.96, and its PB-MRQ was 9.50, indicating high valuation levels compared to historical data [2][25] - The dividend yield was recorded at 0.72, placing it in the 18.09th percentile over the past two years [2][25] Industry Performance - The North Exchange 50 Index experienced a monthly increase of 6.33%, while the specialized index rose by 6.06% [32] - Most sectors saw positive returns, with notable increases in media, non-ferrous metals, telecommunications, public utilities, and agriculture [37] - The top-performing stocks this month included Kema Materials, Medela, Aishalon, and Guoliang New Materials [42]

Economic Growth - Shenzhen's GDP is projected to grow by 5.5% in 2025, reaching 38,731.80 billion yuan, meeting the growth target[4] - The primary industry value added is expected to decline by 4.5%, while the secondary and tertiary industries will grow by 4.1% and 6.3%, respectively[4] - Shenzhen's GDP growth rate exceeds Guangdong's by 1.6 percentage points, with Guangdong's GDP growing by 3.9%[4] Foreign Trade - Total import and export volume in Shenzhen is expected to reach 45,533.89 billion yuan, with a year-on-year growth of 1.4%[5] - Exports are projected to decline by 2.6% to 27,387.81 billion yuan, while imports will increase by 8.0% to 18,146.08 billion yuan[5] - High-tech product exports are expected to grow by 10.1%[5] Industrial Production - Industrial added value in Shenzhen is projected to grow by 5.4%, with manufacturing increasing by 5.9%[10] - Key sectors such as general equipment manufacturing and computer, communication, and other electronic equipment manufacturing are expected to grow by 13.9% and 6.2%, respectively[10] - Shenzhen's industrial growth rate is 2.4 percentage points higher than Guangdong's, which is expected to grow by 3.0%[11] Investment Trends - Fixed asset investment in Shenzhen is projected to decline by 21.7%, primarily due to a 31.0% drop in real estate development investment[15] - Investment in key industries like industrial technology transformation is expected to grow by 19.2%[15] - Shenzhen's investment growth rate is 4.4 percentage points lower than Guangdong's, which is expected to decline by 17.3%[16] Consumer Market - Retail sales in Shenzhen are expected to grow by 2.3%, reaching 10,259.93 billion yuan[19] - The share of Shenzhen's retail sales in Guangdong is projected to decrease from 22.22% in 2024 to 20.85% in 2025[20] - Online retail sales through limited units are expected to grow by 10.5%[19] Financial Sector - By the end of 2025, the balance of deposits in Shenzhen's financial institutions is expected to reach 146,346.95 billion yuan, growing by 7.8%[23] - The balance of loans is projected to reach 99,658.76 billion yuan, with a growth of 5.1%[23] - Shenzhen's deposit and loan balances will maintain a stable share of around 35%-37% of Guangdong's total[23] Price Trends - The Consumer Price Index (CPI) in Shenzhen is expected to rise by 0.2%, with food and beverage prices increasing by 0.2%[27] - Shenzhen's CPI growth is projected to be 0.4 percentage points higher than Guangdong's, which is expected to decline by 0.2%[27]

Economic Growth - Shenzhen's GDP is projected to grow by 5.5% in 2025, reaching 38,731.80 billion CNY, meeting the growth target[3] - The primary industry value added is expected to decline by 4.5%, while the secondary and tertiary industries will grow by 4.1% and 6.3%, respectively[4] - Shenzhen's GDP growth rate exceeds Guangdong's by 1.6 percentage points, with Guangdong's GDP growing by 3.9%[4] Foreign Trade - Total import and export volume in Shenzhen is expected to reach 45,533.89 billion CNY, a year-on-year increase of 1.4%[5] - Exports are projected to decline by 2.6% to 27,387.81 billion CNY, while imports will increase by 8.0% to 18,146.08 billion CNY[5] - High-tech product exports are expected to grow by 10.1%[5] Industrial Production - Industrial added value in Shenzhen is projected to grow by 5.4%, with manufacturing increasing by 5.9%[10] - Key sectors such as general equipment manufacturing and computer/electronic equipment manufacturing are expected to grow by 13.9% and 6.2%, respectively[10] - Shenzhen's industrial growth rate is 2.4 percentage points higher than Guangdong's, which is expected to grow by 3.0%[11] Investment Trends - Fixed asset investment in Shenzhen is projected to decline by 21.7%, primarily due to a 31.0% drop in real estate development investment[15] - Investment in key industries like industrial technology transformation is expected to grow by 19.2%[15] - Shenzhen's investment growth rate is 4.4 percentage points lower than Guangdong's, which is expected to decline by 17.3%[16] Consumer Market - Retail sales in Shenzhen are expected to grow by 2.3%, reaching 10,259.93 billion CNY[19] - The share of Shenzhen's retail sales in Guangdong is projected to decrease from 22.22% in 2024 to 20.85% in 2025[20] - Online retail sales through limited units are expected to grow by 10.5%[19] Financial Sector - By the end of 2025, the balance of deposits in Shenzhen's financial institutions is expected to reach 146,346.95 billion CNY, growing by 7.8%[23] - The balance of loans is projected to reach 99,658.76 billion CNY, with a growth rate of 5.1%[23] - Shenzhen's deposit and loan balances account for approximately 35.84% and 33.31% of Guangdong's totals, respectively[23] Price Trends - The Consumer Price Index (CPI) in Shenzhen is expected to rise by 0.2%, with food and beverage prices increasing by 0.2%[27] - Shenzhen's CPI growth rate is 0.4 percentage points higher than Guangdong's, which is projected to decline by 0.2%[27]