Investment Rating - The report suggests a selective participation strategy in sectors with attractive risk-reward profiles, specifically highlighting solar, chemicals, and lithium as top picks [1][6]. Core Insights - The anti-involution campaign is broadening into various sectors, including healthcare and financial services, with mixed feedback from analysts regarding its potential impact [1][2]. - Despite skepticism in the market about the effectiveness of the anti-involution initiatives, the motivations behind these initiatives are considered valid, leading to an upside skew in share price risks [3]. - The report emphasizes that the relevant sectors have not significantly outperformed the broader market, and investor expectations are generally low, indicating potential for positive surprises in future policies [3]. Sector Summaries Solar - The solar sector is characterized by very low profitability compared to other sectors, with significant long-term growth potential and external pressures to reduce excess capacity [6][8]. Chemicals - The chemicals sector faces low profitability and is close to historical troughs in valuation, with potential for cutting outdated capacities [6][8]. Lithium - The lithium sector is noted for its strong long-term growth potential and asymmetric risk-return profile, making it an attractive investment opportunity [6][8]. Auto - The auto sector is under pressure from fierce price competition and global excess capacity, with regulatory scrutiny aimed at promoting rational competition [2][8]. Healthcare - In healthcare, the focus is shifting towards non-price conditions in procurement, which may impact pricing strategies in the sector [2][8]. Food Delivery - The food delivery sector is experiencing regulatory pressure to rectify aggressive promotional practices, which may affect demand sensitivity [2][8]. Coal - The coal sector is facing production limits in certain provinces, which could lead to slight price increases [2][8]. Hog - The hog sector is under scrutiny for production capacity controls, with recent upward revisions in price forecasts [2][8].

Core Viewpoint - UBS analysts express mixed feedback on the anti-involution measures, indicating that the market remains skeptical about their potential impact on stock prices [1][4]. Industry Analysis - **Cement**: Price decline mainly due to weak demand, with output prices remaining above cost levels. The sector is mostly priced in, with CNBM (3323 HK) as a top pick [2]. - **Coal**: Limited outdated capacity and energy security concerns lead to a slight price increase, with moderate demand impact. The sector is partly priced in [2]. - **Lithium**: Long-term demand remains strong, with potential price increases for lithium carbonate contracts. The sector is slightly priced in, with Qinghai Salt Lake (000792 CH) as a top pick [2]. - **Chemicals**: Certain subsectors face poor profitability, with potential for capacity reform. The sector is not priced in, with Hualu-Hengsheng (600426 CH) and Hengli (600346 CH) as top picks [2]. - **Auto**: Strong price cuts and global pressure on excess capacity lead to slightly higher consumption. The sector is not priced in, with BYD (1211 HK), Li Auto (LI US), and GWM (2333 HK) as top picks [2]. - **Insurance**: Financial stability is important, with limited demand impact. The sector is partly priced in, with Ping An Insurance-H (2318 HK) and CPIC-H (2601 HK) as top picks [2]. - **Solar Supply Chain**: Low profit margins and global pressure to cut excess capacity lead to higher prices. The sector is slightly priced in, with GCL Tech (3800 HK), Tongwei (600438 CH), and Longi (601012 CH) as top picks [2]. - **Hog**: Hog prices are a key component of CPI, with limited demand impact. The sector is partly priced in, with Muyuan (002714 CH) and Wens (300498 CH) as top picks [2]. - **Healthcare**: Healthcare costs need to be kept low, with limited demand impact. The sector is mostly priced in, with 3S Bio (1530 HK) and Weigao (1066 HK) as top picks [2]. - **Food Delivery**: Companies face loss-making conditions, with high demand sensitivity. The sector is slightly priced in, with Alibaba (BABA US) as a top pick [2]. - **Steel**: Steel gross margins remain decent, with limited demand impact. The sector is overly priced in [2]. Investment Opportunities - UBS identifies solar, chemicals, and lithium industries as the most attractive for selective investment based on their low profitability, growth potential, and valuation risks [4][12].