Quantitative Models and Construction Methods Model Name: Black Swan Index - **Construction Idea**: Measure the extremity of market transactions based on the deviation of style factor returns[24][25] - **Construction Process**: 1. Calculate the daily return deviation of style factors: $$ \sigma_{s,t}=\frac{\bar{r}_{s,t}-\bar{r}_{s}}{\sigma_{s}} $$ where $\bar{r}_{s,t}$ is the daily return of style factor $s$ on day $t$, $\bar{r}_{s}$ is the average daily return of style factor $s$ over the entire sample period, and $\sigma_{s}$ is the standard deviation of daily returns of style factor $s$ over the entire sample period[25] 2. Calculate the Black Swan Index: $$ BlackSwan_{t}=\frac{1}{N}\times\sum_{s\in S}\left|\sigma_{s,t}\right| $$ where $BlackSwan_{t}$ is the Black Swan Index on day $t$, $S$ is the set of all style factors, and $N$ is the number of style factors[25] - **Evaluation**: The Black Swan Index effectively captures the extremity of market transactions, indicating higher probabilities of extreme tail risks[24][25] Model Name: Heuristic Style Classification for Cognitive Risk Control - **Construction Idea**: Address the discrepancy between individual and collective cognition in style classification to control cognitive risk[80][81] - **Construction Process**: 1. Calculate the value and growth factors for each stock based on predefined metrics[85] 2. Construct value and growth portfolios by selecting the top 10% and bottom 10% stocks based on factor scores[82] 3. Perform time-series regression to classify stocks into value, growth, or balanced styles: $$ r_{t,t}\sim\beta_{\mathit{Value}}\cdot r_{\mathit{Value},t}+\beta_{\mathit{Growth}}\cdot r_{\mathit{Growth},t}+\varepsilon_{t} $$ subject to $0\leq\beta_{\mathit{Value}}\leq1$, $0\leq\beta_{\mathit{Growth}}\leq1$, and $\beta_{\mathit{Value}}+\beta_{\mathit{Growth}}=1$[97] 4. Use weighted least squares (WLS) to estimate regression coefficients based on the most differentiated trading days[98] - **Evaluation**: The heuristic style classification method captures market consensus more accurately than traditional factor scoring methods, reducing cognitive risk[80][81] Model Name: Louvain Community Detection for Hidden Risk Control - **Construction Idea**: Cluster stocks based on excess return correlations to identify hidden risks[116][117] - **Construction Process**: 1. Calculate weighted correlation of excess returns between stocks: $$ Corr_{w}(X,Y)=\frac{Cov_{w}(X,Y)}{\sigma_{w,X}\cdot\sigma_{w,Y}}=\frac{\sum_{i=1}^{n}w_{i}(x_{i}-\overline{X_{w}})(y_{i}-\overline{Y_{w}})}{\sqrt{\sum_{i=1}^{n}w_{i}(x_{i}-\overline{X_{w}})^{2}}\cdot\sqrt{\sum_{i=1}^{n}w_{i}(y_{i}-\overline{Y_{w}})^{2}}} $$ where $w_{i}$ is the weight for day $i$, reflecting market volatility[118] 2. Use Louvain algorithm to cluster stocks based on weighted correlation matrix[117] 3. Ensure clusters have at least 20 stocks and remove clusters with fewer stocks[121] - **Evaluation**: The Louvain community detection method effectively identifies hidden risks by clustering stocks with similar return patterns, which traditional risk models may overlook[116][117] Model Name: Dynamic Style Factor Control - **Construction Idea**: Control style factors dynamically based on their volatility clustering effect[128][129] - **Construction Process**: 1. Identify style factors with high volatility or significant volatility increase: $$ \text{High volatility: Rolling 3-month volatility in top 3} $$ $$ \text{Volatility increase: Rolling 3-month volatility > historical mean + 1 standard deviation} $$ 2. Set the exposure of these style factors to zero in the portfolio[136] - **Evaluation**: Dynamic style factor control captures major market risks without significantly affecting portfolio returns, leveraging the predictability of volatility clustering[128][129] Model Name: Adaptive Stock Deviation Control under Target Tracking Error - **Construction Idea**: Adjust stock deviation based on tracking error to control portfolio risk[146][147] - **Construction Process**: 1. Calculate rolling 3-month tracking error for different stock deviation levels[153] 2. Set the maximum stock deviation that keeps tracking error within the target range[153] - **Evaluation**: Adaptive stock deviation control effectively reduces tracking error during high market volatility, maintaining portfolio stability[146][147] Model Backtest Results Traditional CSI 500 Enhanced Index - **Annualized Excess Return**: 18.77%[5][162] - **Maximum Drawdown**: 9.68%[5][162] - **Information Ratio (IR)**: 3.56[5][162] - **Return-to-Drawdown Ratio**: 1.94[5][162] - **Annualized Tracking Error**: 4.88%[5][162] CSI 500 Enhanced Index with Full-Process Risk Control - **Annualized Excess Return**: 16.51%[5][169] - **Maximum Drawdown**: 4.90%[5][169] - **Information Ratio (IR)**: 3.94[5][169] - **Return-to-Drawdown Ratio**: 3.37[5][169] - **Annualized Tracking Error**: 3.98%[5][169]

- The report does not contain any quantitative models or factors for analysis[1][2][3]

Quantitative Models and Factor Analysis Quantitative Models and Construction - **Model Name**: Brinson Attribution Model **Model Construction Idea**: The model is used to decompose the excess return of a portfolio relative to its benchmark into contributions from sector allocation and stock selection [59] **Model Construction Process**: The Brinson model decomposes the excess return ($R_p - R_b$) into two components: $$ R_p - R_b = \sum_{i=1}^{N} (w_{pi} - w_{bi})R_{bi} + \sum_{i=1}^{N} w_{pi}(R_{pi} - R_{bi}) $$ - $w_{pi}$: Portfolio weight in sector $i$ - $w_{bi}$: Benchmark weight in sector $i$ - $R_{pi}$: Portfolio return in sector $i$ - $R_{bi}$: Benchmark return in sector $i$ The first term represents the sector allocation effect, and the second term represents the stock selection effect [59] **Model Evaluation**: The model effectively identifies the primary source of excess returns, highlighting the significant contribution of stock selection in the analyzed ETF [59] Quantitative Factors and Construction - **Factor Name**: Sampling Replication Factor **Factor Construction Idea**: This factor aims to balance tracking error and liquidity by selecting representative stocks from the index components [51][54] **Factor Construction Process**: - **Layered Sampling Method**: - Divide stocks into groups based on characteristics such as market capitalization and valuation - Select representative stocks from each group to form the portfolio [51] - **Optimization Sampling Method**: - Minimize tracking error by controlling the portfolio's risk exposure to match the benchmark index - Use optimization techniques to ensure the portfolio aligns with the index's style factors (e.g., size, valuation, momentum) [54] **Factor Evaluation**: The factor ensures efficient tracking of the benchmark index while maintaining liquidity, making it suitable for indices with a large number of components [51][54] Backtesting Results of Models and Factors - **Brinson Attribution Model**: - Excess Return Attribution (2023-12-31): Total Excess Return: 3.09%, Sector Allocation: -0.04%, Stock Selection: 3.13% [60] - Excess Return Attribution (2024-06-30): Total Excess Return: 0.50%, Sector Allocation: -0.15%, Stock Selection: 0.65% [60] - Excess Return Attribution (2024-12-31): Total Excess Return: 3.10%, Sector Allocation: 0.10%, Stock Selection: 3.00% [60] - **Sampling Replication Factor**: - Tracking Error Metrics: - Average Deviation from Benchmark: 0.16%-0.44% - Maximum Deviation from Benchmark: 0.43%-1.35% [60] - Stock Coverage: - Number of Holdings (2023 Year-End): 824 stocks (812 from the index) - Number of Holdings (2024 Mid-Year): 844 stocks (837 from the index) - Number of Holdings (2024 Year-End): 914 stocks (901 from the index) [54] - **ETF Performance Metrics**: - Annualized Excess Return: 15.14% - Annualized Information Ratio (IR): 3.14 [56][58] - Cumulative Excess Return Since Inception: 30.46% [56] - IPO Allocation Returns: 2024: 1.80%, 2025 H1: 0.99% [62]

Investment Rating - The report maintains an "Outperform" rating for the transportation industry [4][6][7]. Core Views - The "anti-involution" policy in the express delivery sector is expected to ease competition, with Shentong Express planning to acquire Dan Niao Logistics [3][54]. - The shipping industry is anticipated to see a bottoming out of oil transportation rates during the summer, with potential upward pressure on rates due to supply constraints and demand changes [1][22][23]. - The aviation sector is experiencing a decline in flight volumes, but the domestic passenger market is expected to continue optimizing supply and demand dynamics through 2025 [2][37][46]. Summary by Sections Shipping Sector - In July, crude oil entered the off-season, leading to a softening of oil freight rates, with expectations for a bottoming out during the summer [1]. - The current supply situation is relatively tight, and marginal changes in demand could significantly impact freight rates [1][22]. - Recommendations include China Merchants Energy and China Merchants Shipping, with a focus on China Merchants South Oil [1]. Aviation Sector - The overall and domestic passenger flight volumes have decreased by 1.5% and 1.4% respectively compared to the previous week, but remain above 2019 levels [2][37]. - The average ticket price for domestic routes has dropped by 8.0% year-on-year, while passenger load factors have improved slightly [2][37]. - Investment recommendations include closely monitoring ticket price performance during the peak summer season, with a focus on China National Aviation, Eastern Airlines, Southern Airlines, and Spring Airlines [2][46]. Express Delivery Sector - The "anti-involution" policy has been implemented to combat excessive competition, with price increases already observed in regions like Yiwu [3][53]. - The introduction of unmanned logistics vehicles is expected to reduce costs significantly for leading companies like SF Express and Zhongtong Express [3][61]. - Investment suggestions include SF Express, Zhongtong Express, YTO Express, and Shentong Express, with a focus on the impact of the "anti-involution" policy [3][63]. Key Company Earnings Forecasts and Investment Ratings - China Merchants Energy, China Merchants Shipping, SF Express, Zhongtong Express, and YTO Express are all rated as "Outperform" [7]. - SF Express is expected to maintain a growth rate of 15-20% over the next two years, with a PE ratio of approximately 20 times in 2025 [3][63]. - China Merchants Shipping reported a 20.1% year-on-year increase in revenue for Q1 2025, indicating strong performance [27].

Investment Rating - The investment rating for the company is "Outperform the Market" [6][4][19] Core Views - The company achieved a revenue of 10.74 billion yuan in the first half of 2025, representing a year-on-year growth of 36.4%, with a net profit of 2.37 billion yuan, up 37.2% year-on-year [1][9] - The company plans to distribute a cash dividend of 25 yuan per 10 shares (including tax), with a dividend payout ratio of 55% [1][9] - The company is expected to continue benefiting from scale effects and has slightly raised its profit forecasts for the next three years [4][19] Revenue and Profitability - In the first half of 2025, the company reported revenues of 8.36 billion yuan from specialty drinks, 1.49 billion yuan from electrolyte water, and 0.88 billion yuan from other beverages, with year-on-year growth rates of 22.0%, 213.6%, and 65.2% respectively [2][10] - The company's gross margin and net margin for Q2 2025 were 45.7% and 23.7%, respectively, showing a slight decline compared to the previous year due to increased investment in new products and marketing [3][11] - The company expects to achieve total revenues of 21.22 billion yuan, 26.38 billion yuan, and 31.41 billion yuan for the years 2025, 2026, and 2027, with year-on-year growth rates of 34.0%, 24.3%, and 19.1% respectively [4][19] Market Performance - The company is considered a rare growth stock in the food and beverage sector, with ongoing efforts to expand its product categories and national presence [4][19] - The current stock price corresponds to a price-to-earnings (PE) ratio of 32, 25, and 20 for the years 2025, 2026, and 2027 respectively [4][21]

Investment Rating - The report maintains an "Outperform the Market" rating for the brokerage sector [1][5]. Core Viewpoints - The performance drivers of the securities industry are continuously improving, supported by increased market trading volume and the expansion of margin financing, alongside cost reduction measures that enhance cash flow and long-term investor returns [2][3]. - The current market environment is favorable, with major indices reaching new highs, leading to a significant upward trend in brokerage stock prices [3]. - The report highlights that the return on equity (ROE) for securities firms is on an upward trajectory due to improvements in revenue, cost management, and profit margins [8][12]. Summary by Sections Industry Performance - The securities industry has seen a median net profit growth rate of 44.9% among three firms that released mid-year performance reports for 2025, with forecasts indicating a lower bound of 80.1% and an upper bound of 98.0% for 29 firms [13][14]. - The brokerage sector's price-to-book (PB) ratio as of July 28 is 1.58, slightly above the five-year average, indicating room for valuation improvement [3][24]. Cost Management and Profitability - Securities firms have implemented cost-cutting measures, leading to a decline in management expense ratios, which directly benefits free cash flow [8][12]. - The leverage ratio of securities firms has increased, contributing to the improvement in ROE [8]. Market Trends and Recommendations - The report suggests that the ongoing market activity and the expansion of margin financing will drive both valuation and profitability for brokerages [24]. - Key recommendations include focusing on undervalued leading brokerages like Huatai Securities and CITIC Securities, as well as high elasticity stocks such as Industrial Securities and Oriental Fortune [24].

Macro and Strategy - The report highlights the focus on ESG (Environmental, Social, and Governance) trends, particularly the launch of the Yajiang Hydropower project, which is expected to drive clean energy initiatives [3][8] - The report discusses the "anti-involution" market trend, indicating a significant reduction in stocks with a price-to-book (PB) ratio of 1-2 times, suggesting a shift in market dynamics [11][12] Industry and Company - The social services sector is expected to benefit from the Hainan Free Trade Port's upcoming full island closure operation, which will enhance international attractiveness and stimulate related industries such as hotels and logistics [15][16] - The media and internet sector is witnessing a recovery in summer box office performance, with the 2025 World Artificial Intelligence Conference showcasing significant participation and innovation [19][20] - The automotive industry is advancing in smart vehicle technology, with new operational licenses for autonomous vehicles being issued in Shanghai, indicating accelerated commercialization of Robotaxi services [22][23] - The chemical industry is undergoing a "rectification" initiative aimed at addressing illegal production and competition issues, which may lead to improved profitability for compliant companies [26][27] - The food and beverage sector is experiencing a decline in the proportion of over-allocated positions in the liquor segment, reflecting weaker expectations for fundamentals [29][30] - The public utilities and environmental protection sector is seeing advancements in nuclear energy with the completion of the preliminary design for China's first fourth-generation commercial fast reactor, which is a significant step in nuclear development [33][34] - The home appliance industry is facing a decline in air conditioner production as it enters the off-season, but government subsidies are expected to support demand recovery [36][38]

Investment Rating - The report maintains an "Outperform" rating for the electronic industry, indicating expected performance above the market index by more than 10% [10]. Core Viewpoints - The semiconductor sector is experiencing a comprehensive rebound, driven by a triple-cycle resonance that is expected to lead to valuation expansion. The report highlights a 4.65% increase in the semiconductor sub-industry, with a general electronic industry increase of 2.85% over the past week [1][11]. - The report emphasizes the strong demand for AI-related innovations, particularly in the context of North America's rising computing power and the positive trends in US-China trade negotiations. This has led to a rebound in consumer electronics, particularly benefiting large-cap stocks like Industrial Fulian and Pengding Holdings [1]. - TSMC has raised its revenue growth forecast from approximately 25% to 30% due to sustained strong AI demand and a mild recovery in non-AI demand [1]. - The report suggests that the electronic sector will see a "valuation expansion" trend in 2025, driven by macroeconomic policy cycles, inventory cycles, and AI innovation cycles [1]. Summary by Relevant Sections Semiconductor Sector - The semiconductor industry is highlighted as a key area of growth, with companies such as SMIC, Huahong Semiconductor, and Aojie Technology recommended for investment due to their strong performance and growth potential [1][10]. - The report notes that TI's Q2 2025 revenue reached $4.448 billion, a year-on-year increase of 16.4%, indicating a robust cyclical recovery across all downstream sectors except for automotive [3]. AI and Cloud Computing - Google's parent company, Alphabet, reported a Q2 2025 revenue of $96.428 billion, with cloud revenue growing by 31.67% year-on-year, reflecting strong demand for AI infrastructure and services [4]. - The report suggests that AI remains a high-growth investment theme, with recommendations for companies like Industrial Fulian and Longxin Zhongke [4]. Consumer Electronics - The report notes a decline in LCD TV panel prices, particularly for 65-inch panels, while other sizes remained stable. It anticipates increased procurement as the year-end sales season approaches [8]. - Companies such as BOE Technology Group are recommended due to their competitive positioning in the LCD market [8]. Key Investment Recommendations - The report lists a range of companies across different sectors, including: - Semiconductor: SMIC, Aojie Technology, Huahong Semiconductor, and others [10]. - Consumer Electronics: Industrial Fulian, Xiaomi Group, and others [9]. - AI Computing: Shengyi Technology, Industrial Fulian, and others [7].

Group 1 - The report highlights a significant reduction in the proportion of stocks with a price-to-book (PB) ratio of 1-2x, dropping from approximately 45% in early April to below 30% by late July, indicating a market trend towards eliminating low PB stocks [1][11][12] - Historical analysis shows that the complete elimination of 1-2x PB stocks occurred only during specific periods, such as 2014-2015, driven primarily by active leverage in the market [14][17][22] - The report identifies necessary but insufficient conditions for the systematic elimination of 1-2x PB stocks, including the continuous expansion of profit effects, influx of incremental funds, and alignment of fundamental expectations across various styles [2][26] Group 2 - The "anti-involution" phenomenon is characterized by a two-phase excess return path in heavy asset industries, transitioning from "ROA→, PB↑" to "ROA↑, PB→" [3][36] - The report references the previous supply-side structural reforms in 2016, where industries like coal and steel experienced significant price and volume reversals, driven by policy changes that addressed overcapacity [29][32] - Current core industries under the "anti-involution" theme include photovoltaic materials, cement, and basic chemicals, with a focus on selecting companies that maintain cash flow despite profit losses [39][43]

Investment Rating - The report maintains an "Outperform the Market" rating for the food and beverage sector [5][6][79]. Core Views - The second quarter saw a decrease in the allocation ratio for the liquor sector, reflecting weak fundamental expectations. The white liquor index rose by 1.0%, but the allocation ratio for actively managed equity funds fell by 2.07 percentage points to 4.50% [2][14]. - The beverage sector is entering a peak season, with strong performance expected from leading companies in basic condiments. The report recommends focusing on companies that are accelerating nationalization and platformization, such as Dongpeng Beverage [3][20]. Summary by Sections 1. Liquor Sector - The allocation ratio for the liquor sector has decreased, indicating weak expectations for fundamentals. The white liquor price index remained stable at 100.00, with a slight increase in the index [2][12]. - Major liquor companies are focusing on market health, with strategies aimed at destocking and promoting sales in the short term, while emphasizing consumer engagement and internationalization in the long term [2][14]. - Recommended stocks include leading companies with proven risk resilience like Kweichow Moutai, Shanxi Fenjiu, and Wuliangye, as well as those with improving digital strategies like Luzhou Laojiao [2][14]. 2. Consumer Goods - The beer sector is entering a peak season, with a slight decrease in fund allocation ratios. Yanjing Beer is prioritized for recommendation due to ongoing internal reforms [3][15]. - The snack sector has seen an increase in fund allocation, with a focus on companies like Salted Fish and Wanchen Group. The report highlights the importance of product differentiation and channel penetration [3][16]. - In the condiment sector, leading companies are expected to perform steadily, with a focus on the upcoming mid-year performance reports. Recommended stocks include Haitian Flavoring and Yihai International [3][17]. 3. Frozen Foods and Dairy - The frozen food sector is stable, with companies actively developing new products to cater to both B-end and C-end markets. Recommendations include stable operators like Anjijia and Qianwei Central Kitchen [3][18]. - The dairy sector is expected to recover gradually, with potential policy catalysts and improved supply-demand dynamics anticipated in 2025. The report recommends focusing on leading dairy companies with a safety margin in valuations [3][19]. 4. Beverage Sector - The beverage industry is expected to maintain its growth momentum, particularly in the no-sugar tea and energy drink segments. Dongpeng Beverage is highlighted for its strong performance, with a reported revenue increase of 36% year-on-year [3][20].