Investment Rating - The report gives an "Overweight" rating for the intelligent driving Tier 1 industry [3][7][10]. Core Insights - The intelligent driving sector is experiencing rapid growth, driven by the expansion of domain controllers as the core decision-making component of intelligent driving systems. The market for intelligent driving domain controllers is expected to reach RMB 428.4 billion by 2029, with China accounting for nearly 40% of this market [3][7][10]. - Domestic automakers are pushing for "intelligent driving equality," which is leading to a significant increase in the penetration rate of intelligent driving domain controllers. The penetration rate reached 27.6% from January to October 2025 [10]. - The report highlights the potential for domestic Tier 1 suppliers to expand into international markets due to their technological advantages and cost efficiencies [3][10]. Summary by Sections Industry Overview - The automotive industry is undergoing a transformation driven by the evolution of supply chains and the integration of intelligent driving technologies. The shift from traditional supply chain structures to more integrated and collaborative models is evident [11][15][16]. Current Industry Status - The penetration rate of advanced driver-assistance systems (ADAS) in new energy vehicles has significantly increased, with L2 and above ADAS installation rates reaching 87% in the first ten months of 2025, up 19.5 percentage points year-on-year [44][50]. - The report notes that the market for high-level intelligent driving features is expanding, with a notable increase in the availability of models equipped with Navigate on Autopilot (NOA) capabilities [44][48]. Market Outlook - The report anticipates continued growth in the intelligent driving sector, with domestic brands expected to capture over half of the market share for intelligent driving domain controllers by the end of 2025 [10][33]. - The report emphasizes the importance of technological advancements and the integration of AI in driving automation, which is expected to create new growth opportunities in the robotics sector [10][34]. Competitive Landscape - The competitive landscape for intelligent driving Tier 1 suppliers is evolving, with domestic players gaining market share and establishing themselves as key players in the industry [3][10]. - The report covers three specific companies: Youjia Innovation (2431.HK), Desay SV (002920.CH), and Zhixing Technology (1274.HK), all of which are given a "Buy" rating [3][10][8].

Economic Growth - China's Q4 2025 real GDP growth slowed to 4.5%, in line with market expectations, down 0.3 percentage points year-on-year[2] - Nominal GDP growth slightly increased by 0.1 percentage points to 3.8% in Q4, after two consecutive quarters of decline[2] - Quarterly economic growth rose by 0.1 percentage points to 1.2%, slightly better than the market expectation of 1.1%[2] Domestic Demand and Consumption - December retail sales growth continued to decline for seven consecutive months, dropping from 1.3% in November to 0.9% in December, below the market expectation of 1.0%[3] - Fixed asset investment cumulative year-on-year growth fell by 1.2 percentage points to -3.8% in December, worse than the market expectation of -3.1%[4] - Cumulative per capita disposable income growth for urban residents decreased by 0.1 percentage points to 4.3%, a smaller decline than the real economic growth rate[2] Industrial Production and Exports - Industrial production value year-on-year growth rebounded by 0.4 percentage points to 5.2% in December, exceeding market expectations of 5.0%[5] - December export growth increased from 5.9% in November to 6.6%, significantly surpassing the market expectation of 3.1%[7] - Net exports contributed 1.4% to economic growth in Q4, up from 1.2% in Q3, while investment and consumption contributions declined[2] Employment and Inflation - The unemployment rate remained stable at 5.1% in December, better than the market expectation of 5.2%[5] - December CPI inflation rose by 0.1 percentage points to 0.8%, driven mainly by increases in food and gold prices[6] Policy Outlook - The focus of policy may need to continue on improving domestic demand, with expectations for additional stimulus measures post the National People's Congress[6] - The central bank is unlikely to implement rate cuts or reserve requirement ratio reductions before the Spring Festival, with such actions potentially delayed until after the National People's Congress[8]

1. Report Industry Investment Ratings Stock Market - US Stocks - Overweight [32] - European Stocks - Equal-weight [33] - Chinese A-shares - Equal-weight [35] - Hong Kong Stocks - Overweight [36] - Japanese Market - Overweight [40] - Indian Market - Equal-weight [41] Bond Market - US Bond Market - Overweight [57] - Chinese Bond Market - Overweight [59] - Japanese Bond Market - Underweight [60] - European Bond Market - Equal-weight [62] 2. Core Views of the Report - In 2025, global stock markets rose due to improved global liquidity under the Fed's interest rate cuts. Vietnamese stocks led in December, while US stocks were volatile at the end of the year, and the Hang Seng Index and Hang Seng Tech Index performed poorly in the last three months [30][31] - In December, the primary market of Chinese overseas bonds had different issuance situations for US dollar bonds and offshore RMB bonds. The secondary market of Chinese overseas bonds generally showed an upward trend [46][49][50] - In December, major global bond markets had mixed performances. The Fed's policy and market expectations affected the US bond market, while China's bond market rose due to policy support and economic data [53][59] - In December, the US dollar index declined, and the yen depreciated. The Fed's expected interest rate cuts in 2026 will weaken the US dollar, and the yen's interest rate attractiveness is insufficient [67] - In December, gold continued to rise but may have short - term corrections. Silver rose strongly but was highly volatile, and crude oil prices were weak and expected to remain under pressure [71] 3. Summary by Relevant Catalogs Stock Market - **12 - month Performance**: In December, most major global stock indices had different performances. The Vietnamese VN30 Index led with a 5.55% monthly increase, while the Hang Seng Tech Index had a significant decline of 1.48%. In 2025, all major global stock indices recorded gains [30][31] - **US Stocks**: The three major US stock indices had a differentiated trend in December. The Dow Jones Industrial Average hit a record high, while the Nasdaq Composite Index declined slightly. The reasons for maintaining an overweight rating include the Fed's positive economic outlook, clear support for market liquidity, and the continuous realization of AI business [32][34] - **European Stocks**: European major stock indices oscillated higher in December. The reasons for maintaining an equal - weight rating are the stronger - than - expected economic resilience in the eurozone and the lack of growth potential despite lower valuations [33][34] - **Chinese A - shares**: The A - share market had a mild upward trend in December. The reasons for maintaining an equal - weight rating are the shift of policies from scale expansion to quality and efficiency improvement, slow fundamental repair, and a good liquidity structure [35] - **Hong Kong Stocks**: The Hong Kong stock market was under pressure in December. The reasons for maintaining an overweight rating are the expected return of southbound funds and the still - low valuation [36][38] - **Japanese/Indian Markets**: The Japanese stock market maintained a high - level oscillation in December. The reasons for upgrading to an overweight rating are the slower - than - expected pace of monetary policy normalization and the government's large - scale fiscal stimulus. The Indian stock market was in a high - level oscillation in December, and the reasons for downgrading to an equal - weight rating are trade frictions and currency depreciation, although the economy still maintains high - speed growth [40][41] Bond Market - **12 - month Performance**: In December, major global bond markets had different performances. The Bloomberg US Treasury Bond Index declined by 0.51%, while the Bloomberg China Treasury and Policy Bank Bond Index rose by 1.22% [53][59] - **US Bond Market**: The US bond market declined in December. The reasons for an overweight rating are the expected Fed interest rate cuts in 2026 and its role in hedging market risks [57][59] - **Chinese Bond Market**: The Chinese bond market rose in December. The reasons for an overweight rating are the expectation of fiscal stimulus and the attractiveness of real yields [59] - **Japanese Bond Market**: The Japanese bond market declined significantly in December. The reasons for an underweight rating are the expected further interest rate hikes by the Bank of Japan and fiscal risks [60][62] - **European Bond Market**: The European bond market was under pressure in December. The reasons for an equal - weight rating are the reduced expectation of safe - haven demand for European bonds and increased fiscal policy uncertainty [62] Foreign Exchange Market - **12 - month Performance**: In December, the US dollar index showed a mild downward trend, and the yen still depreciated slightly. The long - term stability of the US dollar is a concern, and the yen's interest rate attractiveness is insufficient [67] Commodity Market - **12 - month Performance**: In December, gold continued to rise, silver had a strong but volatile upswing, and crude oil prices were weak. Gold may have short - term corrections, silver has a risk of retracement after excessive speculation, and crude oil prices are expected to remain under pressure [71] Fund Selection - **December Performance**: The selected funds in December had different returns. For example, the monthly increase of the Taikang Kaitai Hong Kong Dollar Money Fund A HKD was 0.24%, and the monthly increase of the Huaxia Selected Greater China Technology Fund A HKD Acc was 3.63% [75]

Inflation Data - December core CPI inflation rate in the U.S. recorded at 0.2%, below the market expectation of 0.3%[1] - Overall CPI inflation rate for December matched expectations at 0.3%[1] - Year-on-year overall CPI and core CPI remained unchanged from November at 2.7% and 2.6% respectively[1] Employment Data - Non-farm payrolls increased by 50,000 in December, lower than the revised 56,000 in November and market expectations of 70,000[1] - Unemployment rate decreased by 0.1 percentage points to 4.4% in December, marking the first decline since July[1] - Average hourly wage growth rebounded both year-on-year and month-on-month[1] Federal Reserve Outlook - The mixed employment data may lead the Federal Reserve to prioritize the declining unemployment rate, potentially delaying interest rate cuts until at least March[4] - The expectation remains for two rate cuts of 25 basis points each in 2026, despite the possibility of a delay in the next cut[4] - Concerns about the independence of the Federal Reserve due to ongoing investigations into Chairman Powell may not impact short-term rate decisions[4] Price Trends - Core goods prices saw a month-on-month growth rate drop to 0%, the lowest since June 2025[2] - Housing prices increased by 0.4% month-on-month, with lodging prices surging by 2.91% during the holiday season[2] - Super core service prices recorded a lower growth rate of 0.14% month-on-month, influenced by seasonal factors[2]

Inflation Data - The overall CPI inflation rate in the U.S. decreased from 3.0% in September to 2.7% in November, significantly below the market expectation of 3.1%[1] - The core CPI inflation rate also fell by 0.4 percentage points to 2.6%, lower than the expected 3.0%, marking the lowest level since April 2021[1] Core Services and Housing Impact - The decline in core services CPI, particularly housing prices, was the main driver behind the unexpected drop in core CPI, with core services CPI inflation decreasing from 3.5% in September to 3.0% in November[2] - Housing CPI inflation fell from 3.6% to 3.0%, with owner-equivalent rent CPI decreasing by 0.4 percentage points to 3.4% and lodging away from home CPI plummeting by 4 percentage points to -4.1%[2] Employment Data - Non-farm payrolls increased by 64,000 in November, surpassing the market expectation of 50,000, while October saw a decrease of 105,000 jobs, primarily due to government layoffs[3] - The unemployment rate rose from 4.4% in September to 4.6% in November, exceeding the expected 4.5%[3] Future Economic Outlook - The report suggests that tariffs will continue to be a key factor influencing core inflation rates, with potential short-term rebounds in core inflation expected[4] - The expectation is that core inflation rates will begin to decline in the second half of next year, assuming no new tariffs are implemented[5] Federal Reserve Policy Predictions - The forecast maintains the possibility of two 25 basis point rate cuts next year, driven by slowing economic momentum and a weakening labor market[5] - The Federal Reserve may delay rate cuts until early next year to assess the impact of upcoming employment and inflation data[5]

Group 1 - The core viewpoint of the report indicates that the sentiment index for the Hong Kong stock market is at 59.1, a significant drop from the previous high of 83 in November, but still above the pessimistic threshold of 40 [1][3] - The report highlights that the market sentiment has been volatile due to fluctuating expectations regarding the Federal Reserve's interest rate cuts and a pullback in the US AI sector, although the sentiment index has shown some recovery following the anticipated rate cuts [1][3] - The Hang Seng Index's forward P/E ratio is currently at 12.7, reflecting a 5% decline from its peak earlier in the year, suggesting a potential period of market consolidation without new catalysts [3][6] Group 2 - The report identifies that out of the 13 indicators constituting the sentiment index, only 2 have shown strong improvement, namely increased stock buybacks and a decrease in the put/call ratio, while 9 indicators have weakened [3][6] - The suggested short-term investment strategy is a "barbell strategy," focusing on both defensive sectors such as banks, insurance, and utilities, as well as technology stocks with strong AI attributes and reasonable valuations [3][6] - The report notes that the IPO fundraising amount has decreased significantly, with a total of 10.76 billion HKD raised in December, down 76% compared to the same period last year, indicating a challenging environment for new listings [6][11]

Economic Growth and Trends - In November, the growth rate of the real economy continued to slow, with demand weakening faster than supply[1] - The expected economic growth for this year remains around 5%, supported by better-than-expected import and export data[1][6] - The central economic work conference set a target for next year's economic growth at approximately 5% with moderate policy stimulus anticipated[1][6] Retail and Consumption - The total retail sales of consumer goods in November fell to a year-on-year growth rate of 1.3%, down from 2.9% in October, significantly below market expectations[2] - Retail sales of goods decreased by 1.8 percentage points to 1.0%, with notable declines in jewelry (-29.1 percentage points to 8.5%) and automotive sales (-1.7 percentage points to -8.3%)[2][10] Investment and Infrastructure - Fixed asset investment showed a cumulative year-on-year decline of 2.6%, which is lower than the market expectation of -2.3%[3] - Real estate development investment fell by 1.2 percentage points to -15.9%, and new construction area dropped by 0.7 percentage points to -20.5%[3] - Infrastructure investment (excluding power, heat, gas, and water supply) decreased by 1 percentage point to -1.1%[3] Inflation and Employment - The Consumer Price Index (CPI) rose by 0.5 percentage points to 0.7% in November, primarily due to a significant increase in vegetable prices[5] - The unemployment rate remained stable at 5.1% in November, aligning with market expectations[4][20]

Core Insights - The report emphasizes the importance of boosting domestic demand and economic growth, with a focus on moderate policy stimulus that is data-driven and efficiency-oriented [3] - The central economic work conference outlines three main investment themes for the upcoming year: expanding domestic demand, promoting technological and industrial innovation, and advancing the construction of a unified national market [3] Group 1: Expanding Domestic Demand - The conference highlights the need to implement special actions to boost consumption, develop urban and rural income plans, and optimize the supply of quality goods and services [3] - It suggests that improving consumer capacity, enhancing willingness to consume, and creating favorable consumption conditions are essential for driving future consumption growth in China [3] - Key sectors to focus on include new retail, dining, hospitality, cultural tourism, and modern services such as healthcare, elderly care, childcare, and finance [3] Group 2: Technological and Industrial Innovation - The report calls for a comprehensive plan to advance education and technology talent development, strengthen the role of enterprises in innovation, and implement high-quality development actions for key industrial chains [3] - It emphasizes the strategic direction of artificial intelligence (AI) development, advocating for the "AI+" initiative to enhance technological research and industrial upgrading [3] - Investment opportunities are identified in high-end manufacturing, renewable energy, and AI-related industries, with a particular focus on AI application implementation in the coming year [3] Group 3: Unified National Market Construction - The conference indicates the need to establish regulations for a unified national market and to address "involution" competition [3] - The "anti-involution" approach is expected to support inflation and improve supply-demand relationships in traditional cyclical industries, while also benefiting emerging industries by regulating competition [3] - Sectors likely to benefit include new energy vehicles, e-commerce, lithium batteries, and photovoltaics, as they may experience enhanced output efficiency [3] Short-term Market Judgments and Investment Strategies - The report notes that while the central economic work conference has released positive policy signals, the short-term market will still be influenced by liquidity factors and market sentiment [3] - It suggests a balanced investment strategy, combining defensive sectors like banking, insurance, telecommunications, and utilities with growth sectors in technology, particularly those with strong AI attributes and reasonable valuations [3] - The report recommends focusing on AI-leading companies in the Hong Kong stock market and opportunities in the A-share computing power industry chain and AI application layer [3]

Group 1: Federal Reserve Actions - The Federal Reserve lowered interest rates by 25 basis points in December, aligning with expectations, marking the third rate cut since September[2] - The Fed plans to purchase $40 billion in short-term bonds over the next 30 days to maintain adequate reserve supply[2] - The Fed's internal divisions regarding rate cuts have increased, with three voting members opposing the decision, the highest dissent since 2019[5] Group 2: Economic Forecasts - The Fed significantly raised its GDP forecast for 2026 by 0.5 percentage points to 2.3%[3] - Unemployment rate projections for 2026 and 2027 remain at 4.4% and 4.2%, respectively, with slight adjustments made to future years[6] - The PCE inflation rate forecast for 2026 was lowered by 0.2 percentage points to 2.4%[4] Group 3: Future Rate Expectations - The Fed maintains expectations for two additional 25 basis point rate cuts in the coming year, with a target federal funds rate of 3%-3.25% by year-end[1] - Future rate adjustments will depend on economic data and evolving risks, indicating a cautious approach[4] - The potential for rate hikes in the second half of next year is limited, as the economic conditions may not warrant such actions[1]

1. Report Industry Investment Ratings - US stocks - Overweight [34] - European stocks - Equal - weight [35] - Chinese A - shares - Equal - weight [36] - Hong Kong stocks - Overweight [39] - Japan - Equal - weight [40] - Indian market - Overweight [42] 2. Core Views of the Report - The global stock market in November was generally poor due to insufficient liquidity and the US AI bubble theory. Tech - heavy indices underperformed their respective blue - chip indices. Different regions' stock markets had their own influencing factors, and investment ratings were adjusted based on various factors such as liquidity, interest rate expectations, and corporate earnings [31][33][34] - In the bond market, different regions and types of bonds had different performances in November. The US bond market was mainly influenced by "interest - rate cut games," the Japanese bond yield rose due to economic stimulus plans and inflation expectations, and the Chinese bond market lacked a clear direction [55][59] - The foreign exchange market was affected by central bank policies and interest - rate expectations. The US dollar index was volatile, the yen was weak, and the RMB appreciated slightly against the US dollar [63][64] - In the commodity market, gold rose significantly, oil was weak, and copper was in a volatile state, each affected by supply - demand relationships, interest - rate expectations, and geopolitical factors [68] 3. Summary by Directory 3.1 Overseas Macroeconomics 3.1.1 US Macroeconomic Review - ADP employment in November decreased by 32,000 jobs, the largest decline since March 2023, indicating a potential 25bp interest - rate cut by the Fed in December [9] - In September, PCE and core PCE inflation data provided support for an interest - rate cut [11] - The November Michigan consumer confidence index was at a low level, which may affect economic recovery [16] - The November manufacturing PMI was in the expansion range but lower than expected, and future factory output expansion may slow down [17] 3.2 Domestic Macroeconomics 3.2.1 Chinese Macroeconomic Review - In October, consumption growth slowed down, affected by car and home - appliance sales [21] - Exports decreased in October, while imports increased. The overall import - export volume in the first 10 months increased [21] - From January to October, fixed - asset investment declined, especially in the manufacturing sector [21] - In October, credit was weak, especially on the household side [21] - Industrial production in October was affected by multiple factors, but equipment and high - tech manufacturing showed good growth [24] - In October, CPI and PPI showed certain trends, and core inflation continued to rise [24] - From January to October, real - estate investment and sales declined, and policy effects were limited [24] 3.3 Macroeconomic Analysis 3.3.1 November Global Central Bank Policy Review - The Bank of England maintained its benchmark interest rate, with divided views among committee members, related to the upcoming fiscal budget [27] - The Reserve Bank of Australia kept the cash rate unchanged due to rising inflation and uncertain economic prospects [27] - The Reserve Bank of New Zealand cut the official cash rate due to high unemployment [27] 3.4 November Major Stock Market Review and Outlook 3.4.1 Global Stock Market Performance - The global stock market in November was generally poor, affected by liquidity and the AI bubble theory. Tech - heavy indices underperformed [31][33] 3.4.2 Regional Stock Market Analysis - US stocks: Despite short - term challenges, they are maintained at an overweight rating due to expected liquidity improvement, interest - rate cut expectations, and new AI narratives [34] - European stocks: They are maintained at an equal - weight rating, affected by multiple factors such as central bank policies and geopolitical issues [35] - Chinese A - shares: Maintained at an equal - weight rating, with policy, capital, and structural opportunities as key points [36] - Hong Kong stocks: Upgraded to an overweight rating due to expected profit improvement, attractive valuations, and improved liquidity [39] - Japan: Maintained at an equal - weight rating, with interest - rate hike expectations and government stimulus policies as influencing factors [40] - Indian market: Upgraded to an overweight rating due to central bank support, potential trade agreements, and reasonable valuations [41] 3.5 November Chinese Offshore Debt Market Review and Outlook 3.5.1 Primary Market - In November, 70 bonds were issued in the primary market of Chinese offshore debt, including 23 US - dollar bonds worth $10.21 billion and 47 offshore RMB bonds worth 82.35 billion RMB. Issuance increased compared to the previous month but was lower than the same period last year for US - dollar bonds [47] 3.5.2 Secondary Market - As of November 30, the Markit iBoxx Chinese US - dollar investment - grade bond index rose, while the high - yield bond index fell. Different sectors such as real estate, urban investment, and finance also had different performance trends [50][52] 3.6 November Overseas Bond Market Performance Review and Outlook 3.6.1 November Major Bond Market Performance - Different bond indices in the US, Europe, Asia, etc., had different performance trends in November, with yields and returns varying [55] 3.6.2 Regional Bond Market Analysis - US: The bond market was affected by "interest - rate cut games," and yields showed a "first - up - then - down" trend [59] - Japan: Bond yields rose due to economic stimulus plans and inflation expectations [59] - China: The bond market lacked a clear direction, but future sentiment may improve [59] 3.7 November Foreign Exchange Market Performance Review and Outlook - The US dollar index was volatile, affected by Fed officials' views on interest - rate cuts. The yen was weak, and the RMB appreciated slightly against the US dollar [63][64] 3.8 November Commodity Market Performance Review and Outlook - Gold rose significantly, driven by interest - rate cut expectations and central bank gold purchases. Oil was weak due to oversupply concerns, and copper was volatile due to supply and demand factors [68] 3.9 This Month's Selected Funds - Various types of funds, including money - market funds, bond funds, and stock funds from different regions, are presented with their performance data [70]