Group 1: Fiscal Policy Outlook - The fiscal policy in 2025 has shown significant expansion without improving fixed asset investment growth, which declined by 1.7% from January to October due to resources being allocated to debt repayment and other non-immediate projects [2] - For 2026, a more proactive fiscal policy is anticipated, with a projected fiscal deficit rate of around 4% and an increase in special bond issuance to approximately 5 trillion [2] Group 2: Aerospace and Defense Industry - The military's "14th Five-Year Plan" aims for modernization and includes a new structure of "4 military branches + 4 combat arms," focusing on mechanization, information technology, and intelligence [4] - In 2024, the revenue of 119 listed defense companies reached 419.43 billion, a 25.24% increase from 2020, with a compound annual growth rate of 5.79% [4] - By Q3 2025, these companies reported a total revenue of 280.18 billion, reflecting a year-on-year growth of 3.23% [4] Group 3: Internet Industry - NetEase - NetEase's game "Yanyun" launched overseas on November 15 and quickly reached the top 4 on Steam's bestseller list, with expected revenue contributions of 2 to 3 billion in 2026 [5] - The game "Dream of Fantasy" is projected to generate an additional 4 to 6 billion in revenue in 2025, indicating strong market performance [5] - Current valuations for NetEase remain low, with expectations for revenue and profit growth in the second half of the year [5] Group 4: Financial Services - Lexin - Lexin reported a net profit of 510 million in Q3 2025, a year-on-year increase of 68% [6] - The net profit take rate improved to 2.0%, attributed to reduced marketing expenses following a decrease in loan issuance [6] - The company is facing potential challenges in Q4 2025 due to tightening liquidity in the lending market, which may impact loan quality and profitability [6][7]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of $6.00 [7]. Core Insights - The company's Q3 2025 performance showed steady results with a net profit of 510 million RMB, reflecting a year-on-year increase of 68% and a quarter-on-quarter increase of 2%. However, challenges are anticipated in Q4 2025 due to tightening loan supply and rising risks [1][4]. - The net profit take rate (NTR) increased to 2.0% in Q3 2025, primarily driven by reduced marketing expenses following a decrease in loan disbursements [1][4]. - The company is actively repurchasing shares, having utilized $25 million of its $50 million buyback plan [1]. Performance Summary Financial Performance - Q3 2025 net profit reached 510 million RMB, with a year-on-year growth of 68% and a quarter-on-quarter growth of 2% [1]. - The NTR improved to 2.0% from 1.92% in Q2 2025, attributed to lower marketing expenses [1][4]. - The company anticipates a significant decline in Q4 2025 profits to approximately 340 million RMB, a decrease of 34% from Q3 2025, due to reduced loan volumes and increased credit costs [4]. Risk Assessment - The first-day overdue rate increased slightly by 0.05% quarter-on-quarter, indicating a minor uptick in risk [2]. - The company has been cautious in provisioning, with credit costs rising by 3.9% quarter-on-quarter, now accounting for 4.15% of loan balances [2]. Loan Disbursement Trends - New loan disbursements in Q3 2025 decreased by 3.8% quarter-on-quarter to 50.9 billion RMB, primarily due to a reduction in the company's ICP business [3]. - The report forecasts a further decline in loan disbursements by approximately 10% in Q4 2025, driven by regulatory changes and increased risk aversion [3]. Valuation Adjustments - The net profit forecasts for 2025, 2026, and 2027 have been revised down to 1.81 billion RMB, 1.66 billion RMB, and 2.48 billion RMB, respectively, reflecting significant adjustments of -17.1%, -48.3%, and -31.2% [5][12]. - The target price has been adjusted down to $6.00 from $12.00, based on a revised expected price-to-book (PB) ratio of 0.53x for 2026 [5][14].

Group 1 - The "14th Five-Year Plan" marks a significant advancement in military construction, establishing a new military structure of "4 services + 4 branches" and achieving a leap in weaponry development, with military industrial companies' revenue reaching 419.43 billion yuan in 2024, a 25.24% increase from 2020 [1][19] - The military industrial sector's revenue growth is supported by the delivery of new generation weapons, with 119 listed military companies reporting a total revenue of 280.18 billion yuan in the first three quarters of 2025, a year-on-year increase of 3.23% [1][19] - The fixed assets of 119 military industrial companies reached 167.15 billion yuan by the end of Q3 2025, a 53.45% increase from the end of 2020, indicating enhanced research and production capabilities [1][19] Group 2 - The "15th Five-Year Plan" is expected to shift the focus from quantity to quality in military modernization, emphasizing high-quality development and structural opportunities in new domains such as unmanned intelligence and advanced weaponry [2][34] - The military's equipment demand is anticipated to grow steadily, with significant opportunities in new domains and qualities, including low-cost equipment and advanced weaponry, as outlined in the "15th Five-Year Plan" [2][36] - The military industrial sector is advised to focus on new generation traditional equipment and new domain capabilities, with recommendations for companies involved in unmanned systems, ground robots, and military AI [3][4] Group 3 - The military trade market is expected to grow rapidly, with China's military trade market share at only 5.87% compared to the US's 42.64%, indicating significant room for growth [4] - The application of military technology in strategic emerging industries presents vast market opportunities, with recommendations to focus on commercial aerospace, low-altitude economy, deep-sea technology, and nuclear energy [4] - Key companies to watch in the military trade market include AVIC Shenyang Aircraft Corporation, Guorui Technology, and Aerospace Rainbow, while companies in military technology applications include Zhenlei Technology and Aerospace Electronics [4]

Group 1: Market Overview - The overall market experienced a pullback last week, but funding pressure is expected to improve marginally due to a rebound in private equity registrations and public fund launches, with private fund registrations rising to 337, exceeding 300 for two consecutive weeks [2][3] - The peak of A-share unlock market value has passed, and the net reduction in industrial capital has shown a marginal decline, indicating a reduction in funding supply pressure [2] Group 2: Fixed Income Analysis - In the construction industry, the supply and demand remain weak, with new home transactions showing a decline while second-hand home transactions have slightly increased [2] - The industrial sector shows strong freight volume performance, but production rates are mixed, with some sectors like coking and independent refineries seeing an increase, while the chemical and automotive sectors remain weak [2] Group 3: Energy Sector Insights - In the global gas turbine market, new orders increased by 95% year-on-year to 24GW in Q3 2025, driven by various factors including energy policy shifts and AI power demand [5] - The high demand for gas turbines is expected to boost exports for domestic component manufacturers, with companies like Yingliu and Haomai Technology positioned to benefit [5] Group 4: Fiscal Policy Outlook - The fiscal policy in 2026 is expected to be more proactive, with a projected fiscal deficit rate of around 4% and an increase in special bond quotas to approximately 5 trillion yuan to support debt resolution and other initiatives [6][7] - The upcoming Central Economic Work Conference will serve as a key observation point for policy reserves and future deployments [6] Group 5: Company-Specific Analysis - Kangnuo Ya-B (2162 HK) is highlighted for its potential in the global autoimmune pipeline, with a market cap increase of over 75% recently, and promising early clinical data for its CM512 product [9] - Black Sesame Intelligence (2533 HK) is recognized for its advancements in the robotics sector with the launch of the SesameX multi-dimensional intelligent computing platform, indicating strong growth potential [10]

Investment Rating - The industry investment rating is "Overweight" [7] Core Views - Global gas turbine orders increased by 95% year-on-year in Q3 2025, reaching a historical high of 24GW, driven by various factors including energy policy shifts and AI power demand [1] - The report is optimistic about the overseas gas turbine market, recommending companies such as Siemens Energy, Harbin Electric, and Dongfang Electric, while also highlighting export opportunities for domestic component manufacturers [1][4] - The supply-demand situation for gas turbines remains tight, with global new orders expected to exceed 85GW in 2025, while existing overseas capacity is only about 50GW [4] Summary by Sections Global Market Overview - North America contributed over 50% of new orders in Q3 2025, with 12.7GW of new orders, a 14% increase quarter-on-quarter [2] - In the >10MW gas turbine market, market shares for GEV, MHI, and Siemens Energy are estimated at 31%, 30%, and 21% respectively, with MHI recovering market share due to a rebound in the Asian market [2] Order Trends - Orders for light gas turbines saw a significant decline in Q3 2025, attributed to the signing rhythm and potential supply chain pressures [3] - The report suggests that if supply chain pressures ease, orders for small gas turbines may rebound [3] Domestic Opportunities - The report emphasizes the historical opportunity for domestic gas turbine manufacturers to expand overseas, similar to previous trends in power grid equipment exports [5] - Companies like Dongfang Electric have made strides in developing independent gas turbine models and have begun exporting to markets like Kazakhstan [5] Company Recommendations - Key recommended stocks include: - Harbin Electric (1133 HK) with a target price of 21.00, rated "Buy" [9] - Dongfang Electric (600875 CH) with a target price of 30.79, rated "Buy" [9] - Siemens Energy (ENR GR) with a target price of 134.40, rated "Overweight" [9]

Investment Rating - The report maintains a "Buy" rating for several key companies in the telecommunications and AI computing chain, including ZTE Corporation, NewEase, Ruijie Networks, Zhongji Xuchuang, China Telecom, Haige Communication, China Mobile, and Shanghai Hantong [9][41]. Core Insights - The report highlights the ongoing concerns regarding the sustainability of the AI "bubble" and the effectiveness of Scaling Law, while expressing optimism about the performance of Gemini 3 and Banana Pro, which have exceeded initial expectations [2][3]. - The AI computing chain is expected to continue its upward trend, with a focus on Google's core components such as optical modules and liquid cooling systems [2][3]. - The report emphasizes the generational leap in capabilities of Gemini 3, which has achieved significant benchmarks in reasoning and multimodal tasks, thereby shortening the time from investment to revenue [20][14]. Summary by Sections Market Overview - The telecommunications index fell by 2.51% last week, while the Shanghai Composite Index and Shenzhen Component Index dropped by 3.90% and 5.13%, respectively [2][13]. - Concerns about the overseas AI "bubble" are prevalent, particularly regarding the effectiveness of Scaling Law and the sustainability of ROI [2][3]. Key Companies and Dynamics - The report recommends several companies within the AI computing chain, including: - ZTE Corporation (Buy, target price: 64.34) [41] - NewEase (Buy, target price: 476.71) [41] - Ruijie Networks (Buy, target price: 102.51) [41] - Zhongji Xuchuang (Buy, target price: 626.68) [41] - China Telecom (Buy, target price: 9.11) [41] - Haige Communication (Buy, target price: 13.70) [41] - China Mobile (Buy, target price: 126.20) [41] - Shanghai Hantong (Buy, target price: 28.28) [41] - China Unicom (Hold, target price: 7.56) [41] AI Computing Chain Insights - The report notes that the performance of Gemini 3 and Nano Banana Pro has significantly advanced the capabilities in reasoning and multimodal tasks, indicating a strong integration into the AI ecosystem [20][14]. - The demand for AI computing resources is expected to grow, driven by the increasing need for reasoning capabilities and the expansion of cloud token scales [20][14]. Financial Performance - ZTE Corporation reported a revenue of 100.52 billion yuan for the first nine months of 2025, a year-on-year increase of 12%, but a net profit decline of 33% [42]. - NewEase's revenue for the first three quarters of 2025 reached 16.5 billion yuan, a year-on-year increase of 222%, with a net profit increase of 284% [44]. - Ruijie Networks reported a revenue of 10.68 billion yuan for the first nine months of 2025, a year-on-year increase of 28%, with a net profit increase of 65% [46].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 29.23 HKD, based on a 12.0x PS for 2026E, reflecting a 10% premium over comparable companies [4][6]. Core Insights - The company is making significant strides in the robotics industry with the launch of the SesameX multi-dimensional intelligent computing platform, which emphasizes safety and intelligence, facilitating rapid product deployment in real-world scenarios [1][2]. - Strategic partnerships with companies like Zhongji Xuchuang and Junsheng Electronics are expected to enhance the integration of chips and optical modules, providing new technological solutions for the smart automotive and robotics sectors [1][3]. - The company is actively building an ecosystem in the robotics field, collaborating with industry partners to promote the application of its technology in smart warehousing, transportation, and industrial automation, with commercialization expected to accelerate [2]. Revenue Forecast and Valuation - The company is projected to achieve revenues of 8.4 billion, 14.2 billion, and 20.4 billion RMB for the years 2025, 2026, and 2027, respectively, representing year-on-year growth rates of 76.8%, 69.3%, and 44.0% [4][19]. - The report anticipates a comprehensive layout for edge AI, ranging from low-power to high-performance chips, supporting the company's optimistic outlook in the robotics and optical communication sectors [4][19].

Macro Insights - Japan's government has introduced a supplementary budget of 21.3 trillion yen, nearly 3% of GDP, as a significant economic policy under the new administration, aiming to boost economic growth in the short term [2] - However, the lack of monetary policy normalization support for this fiscal stimulus may increase the risk of inflation detachment and raise the risk premium in the bond market [2] Market Strategy - The Hong Kong stock market is entering a favorable positioning phase, with recent adjustments providing value opportunities, particularly in consumer services, construction, textiles, and home appliances [3][5] - The report suggests focusing on sectors that have been undervalued or "wrongly killed," such as electronics, pharmaceuticals, and automotive, as they may present greater recovery potential [3] - The technology sector in Hong Kong has seen significant corrections, but there remains potential for revaluation as liquidity conditions improve [3] Fixed Income Analysis - The fixed income market is currently experiencing a "pressure test," with global assets showing risk-off characteristics, and A-shares under pressure [8] - The report indicates that the bond market is in a "timely counterattack" window, but the upside may be limited, suggesting a cautious approach to trading opportunities [8] - Investors are advised to focus on low-priced bonds and quality new issues while reducing exposure to high-priced, overvalued securities [8] Oil and Gas Sector - OPEC+ has raised its production targets for December, but the overall supply-demand balance remains loose, with WTI and Brent crude prices declining by 3.2% and 2.6% respectively since the end of October [9] - The report anticipates that oil prices may remain in a downward range due to the supply-demand imbalance, projecting average Brent prices of $68 and $62 for 2025 and 2026 respectively [9] Utilities and Environmental Sector - The expansion of the carbon market is expected to enhance carbon reduction value, with the new plan covering an additional 30 billion tons of emissions, increasing the coverage to approximately 60% [10] - The report highlights the potential benefits for green electricity and environmental sectors due to the rigid demand for carbon reduction, recommending companies involved in carbon-related services [10] Company-Specific Insights - Miniso's Q3 revenue increased by 28.2% to 5.8 billion yuan, driven by effective large store strategies and improved operational efficiency, with a net profit of 770 million yuan [13] - Google is positioned to regain AI leadership with advancements in its AI ecosystem, including the development of competitive AI chips and applications in various sectors [14] - The report notes that the pharmaceutical company Stone Pharmaceutical has returned to revenue growth in Q3, with a focus on new product launches and collaborations enhancing its market position [15]

Core Insights - Recent market adjustments are influenced by debates surrounding AI narratives, tightening liquidity, and geopolitical disturbances, suggesting that the current market correction has begun to establish a sense of space [2][3] - The market valuation is approaching a "reasonable" central level, and if there is an overshoot, it may present opportunities to increase positions, focusing on mid-term themes and emphasizing safety margins [2][4] Market Adjustment Factors - The market correction is attributed to multiple factors: skepticism about sustained capital expenditure in AI, tightening liquidity expectations, and increased geopolitical tensions leading to a risk-off sentiment [3] - Historical data indicates that corrections caused by liquidity shocks often have a high probability of short-term rebounds [3] A-Share Market Valuation - Based on macro variables, the model predicts that the "reasonable" forward PE TTM central level for the Shanghai Composite Index is approximately 13.6x, indicating that the current correction has established a sense of space [4] Liquidity Improvement Signals - Positive signals for domestic liquidity include a potential reduction in leverage in financing funds, a rebound in private equity fund registration data, and a decrease in investor sentiment indicators [5] - The expectation for a rate cut by the Federal Reserve has risen to over 70%, which may improve overseas liquidity conditions [5] Investment Focus Areas - Emphasis on safety margins in investment strategies, focusing on sectors with low valuation and improving fundamentals, such as domestic consumption, domestic computing power, and innovative pharmaceuticals [6] - High-dividend assets are highlighted as having investment value in a low-risk appetite environment, with recommendations to focus on cyclical dividends and potential dividends in sectors like coal, chemicals, and food processing [6]

Quantitative Models and Construction A-Share Market Timing Model - **Model Name**: A-Share Multi-Dimensional Timing Model [10] - **Construction Idea**: The model integrates valuation, sentiment, capital, and technical dimensions to assess the directional outlook of the A-share market [10][12][16] - **Construction Process**: - Signals are generated daily for each dimension, with values of 0, ±1 representing neutral, bullish, and bearish views respectively [10] - **Valuation Dimension**: Uses equity risk premium (ERP) to capture mean-reversion characteristics [12][16] - **Sentiment Dimension**: Includes option put-call ratio, implied volatility, and futures member position ratio to reflect market sentiment [12][16] - **Capital Dimension**: Tracks financing purchase amounts to identify market trends [12][16] - **Technical Dimension**: Employs Bollinger Bands and individual stock turnover ratio differences to capture trend continuation [12][16] - The final market view is determined by the sum of scores across all dimensions [10] - **Evaluation**: The model effectively combines mean-reversion and trend-following strategies, balancing risk avoidance and opportunity capture [10] Style Timing Model - **Model Name**: Dividend Style Timing Model [18] - **Construction Idea**: Targets the relative performance of the CSI Dividend Index against the CSI All Index using trend-based indicators [18][22] - **Construction Process**: - Three indicators are used to generate daily signals (0, ±1 for neutral, bullish, bearish views) [18] - **Relative Momentum**: Positive indicator for dividend style [22] - **10Y-1Y Term Spread**: Negative indicator for dividend style, as wider spreads favor growth assets [22] - **Interbank Repo Volume**: Positive indicator for dividend style, reflecting asset scarcity [22] - Signals are aggregated to determine the overall view on dividend style [18] - **Evaluation**: The model captures dividend style trends effectively, leveraging macroeconomic and liquidity factors [18] - **Model Name**: Large-Cap vs Small-Cap Style Timing Model [23] - **Construction Idea**: Differentiates between macro-driven trends in low congestion and fund-driven reversals in high congestion [23][25] - **Construction Process**: - **Momentum Difference**: Calculates the difference in momentum between the Wind Micro-Cap Index and CSI 300 Index across multiple windows, averaging the top/bottom results for small/large-cap scores [27] - **Turnover Ratio**: Similar calculation for turnover ratio differences across windows, averaged for small/large-cap scores [27] - **Congestion Score**: Combines momentum and turnover scores to determine congestion levels (high congestion >90% for small-cap, <10% for large-cap) [27] - **Trend Model**: Uses small/large parameter double moving average models based on congestion levels [25] - **Evaluation**: The model adapts to market conditions, balancing long-term trends and short-term reversals [23][25] Sector Rotation Model - **Model Name**: Genetic Programming Sector Rotation Model [30] - **Construction Idea**: Directly mines factors from sector index data using genetic programming without relying on predefined scoring rules [30][33] - **Construction Process**: - **Factor Mining**: Utilizes NSGA-II algorithm to optimize for monotonicity and top-group performance simultaneously [33][34] - **Factor Combination**: Combines factors with weak collinearity using greedy strategy and variance inflation coefficient [34] - **Weekly Rebalancing**: Selects top five sectors based on multi-factor scores for equal-weight allocation [30] - **Example Factor**: Calculates covariance between standardized weekly low prices and monthly open prices over 25 days, adjusted by standardized weekly high prices over 15 days [38] - **Evaluation**: The model enhances factor diversity and reduces overfitting risks, achieving robust sector rotation performance [33][34] All-Weather Enhanced Portfolio - **Model Name**: China All-Weather Enhanced Portfolio [39] - **Construction Idea**: Implements macro factor risk parity to diversify risks across underlying macro drivers rather than assets [39][42] - **Construction Process**: - **Macro Quadrant Division**: Divides growth and inflation dimensions into four quadrants based on whether they exceed or fall short of expectations [42] - **Quadrant Portfolio Construction**: Constructs sub-portfolios within each quadrant, focusing on downside risk [42] - **Risk Budgeting**: Adjusts quadrant weights monthly based on macro momentum indicators combining buy-side and sell-side expectations [42] - **Evaluation**: The strategy demonstrates strong defensive attributes during market downturns while maintaining consistent returns [40][43] --- Backtesting Results A-Share Market Timing Model - **Annualized Return**: 24.94% [15] - **Maximum Drawdown**: -28.46% [15] - **Sharpe Ratio**: 1.16 [15] - **Calmar Ratio**: 0.88 [15] - **YTD Return**: 43.84% [15] - **Weekly Return**: 5.28% [15] Dividend Style Timing Model - **Annualized Return**: 15.67% [21] - **Maximum Drawdown**: -25.52% [21] - **Sharpe Ratio**: -0.26 [21] - **Calmar Ratio**: 0.85 [21] - **YTD Return**: 20.86% [21] - **Weekly Return**: -3.63% [21] Large-Cap vs Small-Cap Style Timing Model - **Annualized Return**: 27.04% [28] - **Maximum Drawdown**: -32.05% [28] - **Sharpe Ratio**: 1.13 [28] - **Calmar Ratio**: 0.84 [28] - **YTD Return**: 71.14% [28] - **Weekly Return**: -7.80% [28] Sector Rotation Model - **Annualized Return**: 30.83% [33] - **Annualized Volatility**: 17.74% [33] - **Sharpe Ratio**: 1.74 [33] - **Maximum Drawdown**: -19.63% [33] - **Calmar Ratio**: 1.57 [33] - **YTD Return**: 35.44% [33] - **Weekly Return**: -4.39% [33] All-Weather Enhanced Portfolio - **Annualized Return**: 11.51% [43] - **Annualized Volatility**: 6.18% [43] - **Sharpe Ratio**: 1.86 [43] - **Maximum Drawdown**: -6.30% [43] - **Calmar Ratio**: 1.83 [43] - **YTD Return**: 10.75% [43] - **Weekly Return**: -1.53% [43]