Core Viewpoint - The Hainan Free Trade Port will officially start its full island closure operation on December 18, 2025, marking a significant milestone in China's highest level of openness in free trade zone construction [1] Group 1: Historical Context and Economic Development - Hainan was established as a province in 1988, separating from Guangdong, and has struggled to surpass the national average GDP per capita, with figures at 75.38% of the national average in 2019 and 79.31% in 2023 [1] - The strategic decision to build a free trade port was made in 2018, coinciding with the 30th anniversary of Hainan's establishment as a province, giving it a new mission [1] Group 2: Strategic Advantages - Hainan's geographical advantages include proximity to Guangdong and Hong Kong, as well as access to ASEAN markets, covering a consumer base of 2.1 billion people [2] - The island's unique geographical characteristics facilitate the implementation of bonded policies and customs supervision, making it an ideal location for a free trade port [2] Group 3: Economic Transformation - Hainan has diversified its economy beyond tourism and agriculture, developing four pillar industries: tourism, modern services, high-tech industries, and tropical agriculture, which now contribute 67% of the province's GDP [4][5] - The province has seen significant growth in specific sectors, such as the marine industry growing at an annual rate of 13.9% and the offshore duty-free shopping market capturing 8% of the global market share [5] Group 4: Foreign Investment and Talent Attraction - Over the past five years, Hainan has attracted $9.78 billion in foreign investment, with an annual growth rate of 97%, and established 8,098 new foreign enterprises [6] - The province's population has increased by 530,000 over the past five years, aided by improved ecological conditions and tax incentives, leading to a significant rise in high-level talent [6] Group 5: Regional Cooperation - Hainan's development will not undermine the advantages of cities like Hong Kong and Shanghai but will create synergistic effects, with a focus on complementary strengths and mutual benefits [7] - The "Golden Triangle" cooperation framework among Hainan, Guangdong, and Hong Kong aims to leverage Hainan's policies, Guangdong's industry, and Hong Kong's services for regional development [7] Group 6: Future Outlook - Hainan is positioned as a leader in China's high-level opening-up strategy, expected to drive deep reforms and optimize the business environment [9] - The free trade port is seen as a testing ground for various market entities, providing a platform for shared reform dividends and high-quality development [9]

Market Performance - The Free Trade Port concept declined by 1.52%, ranking among the top declines in concept sectors as of July 28 [1] - Within the Free Trade Port sector, notable declines were seen in companies such as Jinjiang Online, Hainan Rui Ze, and Jiaoyun Co., with respective declines of 9.76%, 5.62%, and 4.73% [2][3] - Conversely, companies like Panda Dairy, Shanghai Lingang, and COSCO Shipping Technology experienced gains of 3.59%, 2.83%, and 1.91% respectively [1] Capital Flow - The Free Trade Port sector saw a net outflow of 678 million yuan, with 24 stocks experiencing net outflows [2] - China Duty Free Group led the outflow with a net withdrawal of 207 million yuan, followed by Jinjiang Online and HNA Holding with outflows of 141 million yuan and 132 million yuan respectively [2][3] - In contrast, stocks such as Haixia Co., Shanghai Port Group, and Panda Dairy saw net inflows of 57.59 million yuan, 27.27 million yuan, and 25.48 million yuan respectively [2][3]

Core Viewpoint - The innovative practices and explorations of Hainan Free Trade Port serve as a demonstration and reference for China's future reform and opening-up, particularly as China steadily expands institutional opening-up to drive comprehensive reform deepening [1][4]. Summary by Sections Hainan Free Trade Port Development - The official launch of Hainan's full island closure operation is set for December 18, 2025, marking a new phase of open development for Hainan Free Trade Port [2]. - Since the release of the overall plan for Hainan Free Trade Port in June 2020, the region has faced challenges such as the COVID-19 pandemic and global economic headwinds, making the current development stage particularly significant [2]. Policy Measures and Economic Impact - The core policy framework post-closure will focus on "one line open, two lines controlled, and free within the island," with the range of "zero tariff" goods expanding to approximately 6,600 tax items, representing 74% of all goods, an increase of nearly 53 percentage points compared to pre-closure [2]. - Goods entering the mainland from Hainan Free Trade Port will benefit from efficient inspection and release processes, with a 30% value-added processing threshold allowing for tax-free sales to the mainland [2]. Industrial Competitiveness and Innovation - The implementation of these policies, combined with the gradual establishment of "zero tariff, low tax rate, and simplified tax system," will significantly reduce overall operational costs for local enterprises, encouraging increased investment in research and innovation [3]. - Hainan is gradually transforming into a high-value-added industrial hub, enhancing its industrial competitiveness and attracting more investment opportunities [3]. Broader Implications for Reform and Opening-Up - Hainan's innovative practices in trade and investment liberalization, cross-border capital flow, and financial openness are expected to serve as a model for China's broader reform and opening-up efforts [4]. - The full closure operation of Hainan Free Trade Port is seen as a commitment from China to the world, positioning Hainan as a new engine for economic globalization and a significant window for China's new era of reform [4].

Group 1 - The establishment of Hainan Free Trade Port (FTP) is set to begin customs closure by the end of this year, marking a significant milestone in China's trade policy [2][31]. - The FTP aims to attract more container traffic by offering tax exemptions on a majority of goods, similar to previous models in Singapore and Hong Kong [6][10]. - The policy framework includes a "one line open, two lines controlled" approach, allowing for zero tariffs on a significant portion of goods while maintaining regulatory oversight [10][12]. Group 2 - The zero tariff policy will expand from covering 21% of goods to 74%, with approximately 6,600 tax items included, enhancing Hainan's appeal to international trade [12][19]. - Hainan's economic development is expected to undergo a qualitative leap due to favorable tax policies, including a 15% corporate tax rate and personal income tax reductions for high-end talent [17][21]. - Despite being ranked low in GDP among provinces, Hainan's economic structure is anticipated to diversify beyond tourism, incorporating high-tech industries and modern services [18][19]. Group 3 - The FTP is not only a trade hub but also aims to become an international internet data exchange pilot, indicating a broader vision for Hainan's role in global trade [22][28]. - Comparisons with Hong Kong highlight the challenges Hainan faces in becoming a comprehensive financial and trade center, as Hong Kong has established advantages in finance and legal services [24][26]. - The establishment of Hainan FTP is seen as a dual opportunity and challenge, contributing to both national economic recovery and global economic stability [28][39].

Group 1 - The horse racing concept sector declined by 2.40%, ranking among the top declines in concept sectors, with *ST Zhengping hitting the limit down, and companies like Luoniushan, Hainan Rubber, and Zhujiang Piano also experiencing significant declines [1] - Among the horse racing concept stocks, only two saw price increases, with Zhongmu Co. rising by 0.25% and Xinhua Dou by 0.15% [1] - The horse racing concept sector experienced a net outflow of 138 million yuan from main funds today, with Luoniushan leading the outflow at 94.32 million yuan [2] Group 2 - The top gainers in concept sectors included Sora concept (2.98%), lithography machines (2.79%), and multimodal AI (2.30%), while the Hainan Free Trade Zone and horse racing concept were among the largest decliners [2] - The main fund outflow rankings for the horse racing concept included Luoniushan (-5.54%), *ST Zhengping (-4.88%), and Hainan Rubber (-5.45%) [2] - The trading turnover rate for Luoniushan was 10.64%, while *ST Zhengping had a turnover rate of 4.64% [2]

Core Viewpoint - The free trade port concept has shown a significant increase, with a rise of 3.41% as of July 24, ranking sixth among concept sectors [1] Group 1: Market Performance - The free trade port concept sector saw 35 stocks increase, with notable performers including HNA Holding, Haima Automobile, and Dongfang Jiasheng reaching their daily limit up [1] - The top gainers in the free trade port sector included China Duty Free Group with a net inflow of 8.16 billion yuan, followed by HNA Holding, Hainan Ruize, and Haima Automobile with net inflows of 2.76 billion yuan, 2.15 billion yuan, and 1.63 billion yuan respectively [2][3] Group 2: Capital Flow - The free trade port concept sector experienced a net capital inflow of 20.31 billion yuan, with 24 stocks receiving net inflows, and 9 stocks exceeding 1 billion yuan in net inflow [2] - The stocks with the highest net inflow ratios included Dongfang Jiasheng at 35.59%, Haima Automobile at 30.47%, and Hainan Mining at 24.65% [3][4]

Core Viewpoint - Lansheng Co., Ltd. experienced a limit-up closing on July 22, with a closing price of 15.29 yuan, driven by strong performance expectations and favorable policies [1]. Group 1: Performance Expectations - The company is expected to achieve double-digit growth in both revenue and net profit for 2024, with a projected 30.98% year-on-year increase in core business revenue for the first quarter of 2025 [1]. - The market anticipates a continuation of growth trends in the upcoming mid-year report [1]. Group 2: Policy and Market Drivers - The company benefits from favorable policies related to the Free Trade Zone, with its controlling shareholder, Donghao Lansheng International Trade Group, participating in a project that aligns with the digital upgrade trends of the Free Trade Zone [1]. - The Free Trade Port concept saw a 1.48% increase on the same day, indicating a positive market sentiment towards related stocks [4]. Group 3: Technological Innovations - The subsidiary, Yuan Shu Technology, launched the AI intelligent agent "FuturX Future Module," which integrates artificial intelligence with the exhibition business, creating new growth opportunities [1]. Group 4: Market Activity and Fund Flow - On July 22, the stock saw a net outflow of 19.63 million yuan from main funds, accounting for 0.98% of the total trading volume, while retail investors contributed a net inflow of 31.40 million yuan, representing 1.57% of the total trading volume [2]. - The stock's trading activity was influenced by the recent introduction of the "historical high" concept on July 19, which significantly increased market attention and trading volume [1].

Quantitative Models and Construction Methods - **Model Name**: Broad-based Index Rotation Strategy **Model Construction Idea**: The strategy is based on the weekly change rate of the "total heat" indicator for broad-based indices. It selects the index with the highest heat change rate for investment, while staying out of the market if the "Other" group has the highest rate[7][13][16] **Model Construction Process**: 1. Calculate the weekly heat change rate for each broad-based index (CSI 300, CSI 500, CSI 1000, CSI 2000, and "Other"). 2. Smooth the weekly change rate using a 2-period moving average (MA2). 3. On the last trading day of each week, invest in the index with the highest MA2 heat change rate. If the "Other" group has the highest rate, remain in cash. **Model Evaluation**: The strategy demonstrates a clear logic of capturing short-term market sentiment shifts based on heat changes[13][16] - **Model Name**: Concept Heat TOP and BOTTOM Portfolios **Model Construction Idea**: This model identifies the hottest concepts each week and constructs two portfolios based on the highest and lowest heat stocks within these concepts[30][32][34] **Model Construction Process**: 1. Select the top 5 concepts with the largest weekly heat change rates. 2. Exclude the bottom 20% of stocks in terms of market capitalization within the selected concepts. 3. Construct the "TOP" portfolio by equally weighting the top 10 stocks with the highest total heat within each concept. 4. Construct the "BOTTOM" portfolio by equally weighting the bottom 10 stocks with the lowest total heat within each concept. **Model Evaluation**: The model effectively captures behavioral biases in concept-driven markets, where low-heat stocks in hot concepts tend to generate excess returns over time[30][32][34] --- Model Backtesting Results - **Broad-based Index Rotation Strategy**: - Annualized Return: 8.74% - Maximum Drawdown: 23.5% - 2025 YTD Return: 14.7%[16] - **Concept Heat BOTTOM Portfolio**: - Annualized Return: 15.71% - Maximum Drawdown: 28.89% - 2025 YTD Return: 25.5%[34] --- Quantitative Factors and Construction Methods - **Factor Name**: Total Heat Indicator **Factor Construction Idea**: The factor aggregates the browsing, watchlist, and click counts of individual stocks, normalized as a percentage of the total market, and scaled by 10,000[7] **Factor Construction Process**: 1. Aggregate the browsing, watchlist, and click counts for each stock. 2. Normalize the aggregated value as a percentage of the total market. 3. Multiply the normalized value by 10,000 to obtain the total heat score. The range of the indicator is [0, 10,000][7] **Factor Evaluation**: The factor serves as a proxy for market sentiment and attention, effectively capturing behavioral patterns such as overpricing or underreaction at the stock level[7] --- Factor Backtesting Results - **Total Heat Indicator**: - No specific backtesting results provided for this factor in isolation

Group 1 - The overseas investment projects of enterprises in Hainan Province have seen a significant increase, with a year-on-year growth of 103.66% in the number of projects and 108.48% in investment amount during the first half of the year [1] - Companies are actively seeking guidance and support from government departments to navigate challenges in the overseas direct investment (ODI) registration process, aiming to streamline approval times for their investment plans [1][2] - The establishment of a one-stop service platform, "Haiyidui," aims to deliver policy benefits directly to enterprises, enhancing the investment environment in Hainan [3] Group 2 - Hainan's free trade port policies are facilitating internationalization for local companies, with examples of successful overseas investments, such as the establishment of a subsidiary in Vietnam by a local company [1][2] - The provincial government has implemented reforms to ease market access, optimizing administrative procedures and reducing costs for businesses, thereby creating a more favorable investment climate [3] - The ongoing support from various government departments is crucial for companies like Yixin Tang and Mixue Group as they expand their operations globally [2]

Core Insights - The implementation of the Hainan Free Trade Port in 2025 signifies a new phase in its development, leading to significant impacts on trade, taxation, resource attraction, international status, and personnel mobility [2][3][4][5][6]. Trade Liberalization and Facilitation - After the closure, Hainan will allow free movement of goods, capital, and personnel with a regulatory model of "one line open, one line controlled, and free within the island," enhancing trade efficiency [2]. Tax Policy Advantages - Hainan will operate as a "domestic outside" area, where most goods entering the island will be exempt from import duties, significantly reducing operational costs for businesses and shopping costs for consumers [3]. Attraction of Global Resources - The new operational model will create a more open and efficient international trade and investment environment, attracting global capital, technology, and talent, leading to job creation and economic diversification [4]. Enhancement of Hainan's International Status - Hainan will gain significant influence as a free trade port, increasing its participation in global economic cooperation and enhancing China's position in the world economic landscape [5]. Improved Personnel Mobility - The closure will facilitate easier travel for visitors, with many countries allowing visa-free entry to Hainan, and local residents will find it easier to travel abroad for business and tourism [6]. Company Registration Changes - Companies can still be registered post-closure, but with changes in requirements, including industry restrictions and the need for real business addresses [7][8]. Housing Policy Adjustments - Post-closure, external individuals can still purchase property, with significant changes in purchasing qualifications and reduced restrictions based on social security contributions [11][12][13][14]. Comparison with Hong Kong - While both Hainan and Hong Kong implement free port policies, they differ in regulatory nature, economic policies, industry focus, personnel movement, and legal frameworks [16][17]. Tax Incentives - Hainan will offer various tax incentives, including a reduced corporate income tax rate of 15% for qualifying businesses and a simplified tax structure to attract investment [23][24][25][26][27].