Summary of Key Points from the Conference Call Industry Overview - **Industry**: Chinese Economy and Policy Outlook - **Company**: Morgan Stanley Asia Limited Core Insights and Arguments - **GDP Target**: The GDP growth target is expected to remain around 5%, which has been largely confirmed by the Central Economic Work Conference (CEWC) [3] - **Fiscal Policy**: Initial fiscal package is flat, with a potential mid-year top-up of 0.5% of GDP confirmed [3] - **Monetary Policy**: Anticipated interest rate cuts of 10-20 basis points and reserve requirement ratio (RRR) cuts of 25-50 basis points, but with a dovish tone indicating limited room for further cuts [3] - **Infrastructure Investment**: A front-loaded infrastructure push is confirmed for Q1, focusing on urban renewal, AI+, and green transition [3] - **Housing Policy**: Vague language around housing guardrails, with potential for inventory buybacks and adjustments to provident-fund financing to support mortgage interest subsidies [3] - **Service Consumption**: Selective tweaks in service consumption are expected in the second half of 2026, but specifics are pending [3] - **Anti-involution Strategy**: A gradual, market-oriented approach is being adopted, though execution challenges remain [3] Trade-in Scheme Updates - **Equipment Upgrade**: Coverage expanded to include elevator installations, elderly care institutions, and fire rescue facilities, with less subsidy per vehicle on average [4] - **Consumer Goods Trade-in**: Coverage narrowed from 12 categories in 2025 to 6 in 2026, with reduced subsidies for home appliances and consumer electronics [4] Currency Insights - **USDCNY Strength**: The recent strengthening of the USDCNY is attributed to a weaker dollar, while the RMB basket remains stable [5][6] - **Seasonal Trends**: USDCNY typically strengthens at year-end due to foreign exchange conversions by exporters [11] Inflation and Economic Indicators - **CPI Trends**: Weak underlying demand indicated by food CPI; a more sustained increase in core CPI may not occur until 2H26-2027 [16] - **GDP Deflator**: Expected to remain negative with nominal growth likely staying below 4% in 2026, with a potential mild positive shift from 2027 due to welfare upgrades [18] - **PMI Insights**: December PMI strength attributed to quarter-end production pushes, robust exports, and infrastructure pass-through [20] Additional Important Points - **PPI Expectations**: Month-over-month PPI is likely to soften in December, although year-over-year may rebound from a favorable base [22] - **Market Sentiment**: The overall economic sentiment reflects cautious optimism, with a focus on gradual policy adjustments and infrastructure investments to stimulate growth [3][20]

1. Report Industry Investment Rating - Not mentioned in the provided content 2. Core View of the Report - From December 29, 2025, to January 2, 2026, global geopolitical risks increased due to the US military strike on Venezuela. Globally, the stock market was divided, the bond market and commodities declined, and in terms of dollar - denominated assets, bonds > stocks > commodities. In China, the stock market was divided, the bond market oscillated, commodities declined, and stocks > bonds > commodities. Short - term attention should be paid to changes in geopolitical risk factors [3] 3. Summary by Relevant Catalogs 3.1 Global Major Asset Overall Performance: Stock Market Divided, Bond Market and Commodities Declined - **Global Stock Market Overview**: Global major stock markets showed mixed performance. The US stock market performed poorly, and emerging markets outperformed developed markets. The VIX index stabilized at a low level weekly. For example, the MSCI Emerging Markets Index rose 2.30%, while the MSCI Developed Markets Index fell 0.63% [8][12] - **Global Bond Market Overview**: The 10 - year US Treasury yield increased by 5BP to 4.19%. The bond market declined weekly, and globally, high - yield bonds > government bonds > credit bonds [12] - **Global Foreign Exchange Market Overview**: The US dollar index rose 0.43% weekly. Major non - US currencies generally depreciated against the US dollar, while the RMB exchange rate was oscillating strongly [14] - **Global Commodity Market Overview**: Geopolitical factors did not significantly support international oil prices, which oscillated weekly. International gold and silver prices dropped significantly due to increased margin requirements. Most agricultural product prices fell, while non - ferrous metal prices rose [14] 3.2 Domestic Major Asset Performance: Stock Market Divided, Bond Market Oscillating, Commodities Declined - **Domestic Stock Market Overview**: A - share major broad - based indices mostly declined, but the trading volume increased. Large - cap blue - chip stocks were relatively resistant to decline. The petroleum and petrochemical, and military industries led the gains, while public utilities and food and beverage sectors performed poorly. The Shanghai Composite Index rose 0.13% [18][20] - **Domestic Bond Market Overview**: The central bank's net injection in the open - market operations was 117.1 billion yuan, and the money market was relatively stable. The bond market oscillated weakly weekly, with corporate bonds > credit bonds > government bonds [21] - **Domestic Commodity Market Overview**: The domestic commodity market declined overall, with precious metals performing poorly [21] 3.3 Major Asset Price Outlook - Geopolitical risk factors have increased in the short term, and attention should be paid to their impact on major asset prices [23]

1. Report Industry Investment Rating No information provided. 2. Core View of the Report - The main contract of Shanghai copper fluctuates strongly, with increasing positions, spot discount, and weakening basis. The raw material side has a tight copper concentrate supply, and the cost - support logic for copper prices is solid. Supply may gradually shrink due to tight raw materials and approaching holidays, and the growth rate of domestic refined copper supply is slowing. Demand is affected by high copper prices, and downstream buyers are cautious. Overall, the fundamentals are in a stage of slightly shrinking supply and cautious demand, with an increase in social inventory. In the options market, the sentiment is bullish, and the implied volatility slightly decreases. Technically, the 60 - minute MACD shows a bullish signal. The suggestion is to conduct short - term long - position trading at low prices with light positions, paying attention to rhythm and risks [2]. 3. Summary by Relevant Catalogs 3.1 Futures Market - The closing price of the main Shanghai copper futures contract is 101,350 yuan/ton, up 3110 yuan; the LME 3 - month copper price is 12,833 dollars/ton, up 363.5 dollars. The main contract's inter - month spread is - 120 yuan/ton, up 20 yuan. The main contract's open interest of Shanghai copper is 216,315 lots, up 8069 lots. The net position of the top 20 futures holders of Shanghai copper is - 45,864 lots, down 3287 lots. The LME copper inventory is 145,325 tons, down 2100 tons. The SHFE cathode copper inventory is 145,342 tons, up 33,639 tons. The SHFE cathode copper warrant is 90,282 tons, down 2856 tons [2]. 3.2现货市场 - The SMM 1 copper spot price is 100,575 yuan/ton, up 1755 yuan; the Yangtze River Non - ferrous Market 1 copper spot price is 100,660 yuan/ton, up 1325 yuan. The Shanghai electrolytic copper CIF (bill of lading) price is 50 dollars/ton, unchanged; the Yangshan copper average premium is 41.5 dollars/ton, down 7.5 dollars. The basis of the CU main contract is - 775 yuan/ton, down 1355 yuan; the LME copper cash - to - 3 - month spread is 38.6 dollars/ton, up 8.21 dollars [2]. 3.3 Upstream Situation - The import volume of copper ore and concentrates is 252.62 million tons, up 7.47 million tons. The copper concentrate price in Jiangxi is 89,620 yuan/metal ton, up 1610 yuan; in Yunnan, it is 90,320 yuan/metal ton, up 1610 yuan. The southern processing fee for blister copper is 2000 yuan/ton, up 500 yuan; the northern processing fee is 1200 yuan/ton, up 100 yuan. The monthly output of refined copper is 123.6 million tons, up 3.2 million tons. The import volume of unwrought copper and copper products is 430,000 tons, down 10,000 tons [2]. 3.4 Industry Situation - The social inventory of copper is 41.82 million tons, up 0.43 million tons. The price of 1 bright copper wire in Shanghai is 67,970 yuan/ton, up 1100 yuan; the price of 2 copper (94 - 96%) in Shanghai is 82,050 yuan/ton, up 900 yuan. The ex - factory price of 98% sulfuric acid of Jiangxi Copper is 1030 yuan/ton, unchanged [2]. 3.5 Downstream and Application - The monthly output of copper products is 222.6 million tons, up 22.2 million tons. The cumulative grid infrastructure investment is 560.39 billion yuan, up 77.956 billion yuan. The cumulative real estate development investment is 7859.09 billion yuan, up 502.82 billion yuan. The monthly output of integrated circuits is 4,392 million pieces, up 215 million pieces [2]. 3.6 Option Situation - The 20 - day historical volatility of Shanghai copper is 21.82%, up 1.47 percentage points; the 40 - day historical volatility is 17.69%, up 1.40 percentage points. The implied volatility of the current - month at - the - money option is 27.33%, down 0.0101 percentage points. The call - to - put ratio of at - the - money options is 1.49, up 0.0406 [2]. 3.7 Industry News - In December 2025, China's manufacturing PMI, non - manufacturing PMI, and composite PMI were 50.1%, 50.2%, and 50.7% respectively, up 0.9, 0.7, and 1.0 percentage points month - on - month, all rising to the expansion range. In 2025, the sales of trade - in related goods exceeded 2.6 trillion yuan, benefiting over 3.6 billion people. The eurozone's December 2025 manufacturing PMI was 48.8, lower than expected. Fed's Paulson said that if inflation cools, the Fed may further cut interest rates but will not take immediate additional measures. In December 2025, BYD's new - energy vehicle sales were 420,398, down 18.2% year - on - year, with an annual cumulative sales of 4.602436 million, up 7.73% year - on - year, and overseas sales exceeded 1 million for the first time, up 145%. Geely's December 2025 sales were 236,817, up 13% year - on - year, and the annual sales were 3.024567 million, up 39% year - on - year. Many new - energy vehicle brands had record - high December sales, and Leapmotor ranked first with nearly 600,000 annual sales [2].

Group 1: Consumer Trends - During the New Year's holiday, inter-regional mobility increased by 19.62% year-on-year, with a total domestic travel expenditure of CNY 847.89 billion, up 6.35% from 2024, reflecting a compound annual growth rate of 3.12%[1][12] - The average ticket price for domestic flights reached CNY 684.6, a 9.8% increase compared to 2025, indicating a strong recovery in travel demand[16] - Dining consumption showed robust growth, with key provinces reporting increases of 18% in Zhejiang and 36.5% in Nanjing, while overall dining consumption in Guangxi rose by 5.8%[17] Group 2: Economic Indicators - The manufacturing PMI returned to the expansion zone at 50.1%, reflecting a 0.9 percentage point increase, indicating improved economic conditions[2][18] - The construction sector's PMI rose to 52.8%, a 3.2 percentage point increase, benefiting from favorable weather and ongoing policy support[23] - The service sector's PMI was at 49.7%, showing a slight recovery but still below the expansion threshold, indicating mixed performance across industries[24] Group 3: Policy and Market Outlook - The "Two New" policies are expected to provide support for stable consumption, despite a potential mild contraction in funding scale for 2026[26] - International commodity prices are rising, which may pressure corporate profits and indirectly affect employment, potentially limiting demand recovery[26] - The government has initiated a CNY 295 billion investment plan for key projects, including the Guangzhou New Airport, to stabilize investment growth[26]

Report Industry Investment Rating - Not provided in the content Core Viewpoints of the Report - The market's main line rotates rapidly, and stock index futures may fluctuate. Attention should be paid to the risk of correction. The follow - up trend needs to closely monitor the change in trading volume. If the trading volume remains at the current relatively high level, the index is still expected to continue to expand upward after fully digesting floating chips; otherwise, if the volume significantly shrinks, short - term correction risk should be vigilant. The bond market sentiment has been frustrated, and the future sustainability of the rebound in the manufacturing PMI in December remains to be observed. In 2026, as the starting year of the 14th Five - Year Plan, the pressure and necessity for stable growth are still relatively large, and it is highly likely that policies will be implemented at the beginning of the year to support the economy [9][11] Summary by Relevant Catalogs Financial Futures Strategy Recommendations Stock Index Strategy Recommendations - Stock index trend review: The Shanghai Composite Index rose 0.09% to close at 3968.84 points. For the whole year, the Shanghai Composite Index increased by 18.41% [9] - Core view: The manufacturing PMI in December rebounded to 50.1%, returning above the boom - bust line after 8 months and significantly higher than the consensus expectations of Bloomberg and Reuters. The rebound in the manufacturing PMI in December has strong certainty at the structural level but faces uncertainty at the aggregate level. The market's main line rotates rapidly, and stock index futures may fluctuate. Attention should be paid to the risk of correction [9] - Technical analysis: The MACD indicator shows that the broader market index may fluctuate [9] - Strategy outlook: Range - bound fluctuations [9] Treasury Bond Strategy Recommendations - Treasury bond trend review: The 30 - year main contract fell 0.35%, the 10 - year main contract fell 0.07%, the 5 - year main contract fell 0.04%, and the 2 - year main contract fell 0.03% [11] - Core view: The composite PMI, manufacturing PMI, and non - manufacturing PMI are all above the boom - bust line of 50, and the bond market sentiment has been frustrated. The rebound in the manufacturing PMI in December exceeded expectations, and its future sustainability remains to be observed. In 2026, as the starting year of the 14th Five - Year Plan, the pressure and necessity for stable growth are still relatively large. Whether it is the remaining fiscal resources at the end of the year or the room for monetary easing, it indicates that it is highly likely that policies will be implemented at the beginning of the year to support the economy. Attention should be paid to the stock - bond seesaw, whether the central bank's scale of treasury bond trading will further expand, and the implementation rhythm of monetary policies after the new year [11] - Technical analysis: The MACD indicator shows that the T main contract may fluctuate [11] - Strategy outlook: Fluctuating operation [11] Key Data Tracking PMI - In December, the manufacturing PMI rebounded to 50.1%, returning above the boom - bust line after 8 months [18] - It was significantly stronger than the seasonal trend. In previous Decembers, the manufacturing PMI decreased by an average of 0.3 pct compared with November, while it increased by 0.9 pct this month [18] - The PMI of high - tech manufacturing industries rebounded significantly by 2.4 pct to 52.5%, indicating a good growth trend in the industry [18] - Large and medium - sized enterprises led the improvement. Although the PMI of small enterprises declined, large and medium - sized enterprises' PMIs both rebounded significantly [18] CPI - In November, the year - on - year increase in CPI strengthened, and the month - on - month PPI remained positive, which was the result of the combined effects of seasonal factors, low - base effects, and "anti - involution" [21] - It is worth noting that the year - on - year CPI has fluctuated below 1% for 33 consecutive months, and the year - on - year PPI has been negative for 38 consecutive months, indicating that domestic demand is still relatively weak [21] - At the end of the year and during the Spring Festival, driven by seasonal effects and rising gold prices, the year - on - year CPI is expected to continue to fluctuate upward [21] - Since November 2024, the year - on - year base of PPI has entered a downward range again. Affected by low - base effects and the orderly progress of "anti - involution", the year - on - year PPI is also expected to rebound [21] Import and Export - In November, China's exports were $330.35 billion, imports were $218.67 billion, and the trade surplus was $111.68 billion [23] - In terms of representative export commodities, labor - intensive products, mechanical and electrical products, and high - tech products drove the overall export in November by - 1.33%, 5.81%, and 2.01% respectively, with the driving rates increasing by 1.03 pp, 5.06 pp, and 1.55 pp respectively compared with the previous month [23] - The strengthening of exports to the EU, Africa, and Latin America drove the year - on - year increase in exports this month, showing a relatively strong performance. Since November 9th, the year - on - year growth rates of global and US imports and China's container bookings to the US have continued to decline week by week, indicating a high probability of pressure on exports in December [24] Industrial Added Value - In November, the year - on - year growth rate of industrial added value dropped to 4.8%, and the service industry production index dropped to 4.2%. The production - end data has declined for two consecutive months [25] - There are two reasons for the weakening of industrial added value. First, "anti - involution" has begun to suppress the output of key industries. In November, the year - on - year growth rate of industrial added value in the automobile industry dropped by 4.9 pct to 11.9%, the year - on - year growth rate of industrial added value in the steel industry dropped by 0.5 pct to 0.9%, and the chemical industry dropped by 0.4 pct to 6.7%. In terms of microscopic output, the year - on - year output of automobiles, ethylene, and steel also weakened. Second, after the policy took effect on September 24th last year, the production increase established a relatively high base. From the perspective of the two - year compound growth rate, the year - on - year growth rate of industrial added value in November was basically the same as that in October [28] Fixed - Asset Investment - From January to November, the year - on - year growth rate of fixed - asset investment dropped by 2.6%. It is estimated that the year - on - year growth rate of fixed - asset investment in November was - 11.1%, a slight increase compared with October [31] - By type, the year - on - year growth rate of private investment rebounded to - 12.9%, and the year - on - year growth rate of public investment continued to drop to - 8.9% [31] - By expenditure direction, it is estimated that the year - on - year growth rates of construction and installation projects/equipment and tool purchases in November dropped to - 16.1% and 6.3% respectively, and the year - on - year growth rate of other expenses rebounded slightly to - 13.8% [31] - By the three major categories, the year - on - year growth rates of infrastructure and real estate investment are still declining at a low level, but manufacturing investment has a slight rebound [31] Social Retail - In November, the year - on - year growth rate of social retail sales dropped to 1.3%, lower than market expectations and the weakest since 2023 [34] - There are three factors for the weakening of social retail sales in November. First, after the weakening of national subsidy funds, the weakening of durable - goods consumption is the main drag. In November, the year - on - year growth rate of optional consumption dropped to - 10%, and among them, automobiles and home appliances cumulatively dragged down the year - on - year growth rate of social retail sales in that month by 1.2 pct. Second, the overall weak performance of the "Double Eleven" sales also dragged down the social retail sales for the whole month. In November, the online retail sales of physical goods dropped by 3.3 pct to 1.5%, and the two - year compound year - on - year growth rate turned negative for the first time this year. Third, the consumption in the post - real - estate cycle continued to be weak. Restricted by the long - term weak real - estate sales, the year - on - year growth rates of social retail sales of building materials and furniture both dropped and turned negative [34] Social Financing - In November, the new social financing was 2.5 trillion yuan, a year - on - year increase of 0.2 trillion yuan. Corporate bonds and non - standard financing were the main supports, while government bonds and credit were the main drags [37] - Bills continued to boost the volume, and the year - on - year increase in medium - and long - term loans for residents and enterprises continued to be less than the previous year [37] - In November, the year - on - year growth rate of social financing remained flat at 8.5%, and the growth rate of credit in the social financing caliber remained flat at 6.3% [37] - The growth rates of M1 and M2 declined. Attention should be paid to the process of deposit currentization in the future [37]

期货研究报告|宏观数据 2026-01-05 12 月制造业景气回升 ——宏观景气度系列十二 研究院 徐闻宇 xuwenyu@htfc.com 从业资格号：F0299877 投资咨询号：Z0011454 投资咨询业务资格： 证监许可【2011】1289 号 宏观事件 12 月中国制造业 PMI 为 50.1（+0.9pct MoM）；非制造业 PMI 为 50.2（+0.7pct MoM）。 核心观点 ■ 制造业 PMI 供给：小幅改善。12 月生产指数为 51.7，较上月变化 1.7 。供应商配送时间指数为 50.2， 较上月变化 0.1 。 需求：外需降幅收窄。12 月新订单指数为 50.8，较上月变化 1.6 。新出口订单指数为 49，较上月变化 1.4 。在手订单指数为 46，较上月变化 0.5 。 供求平衡：仍待改善。12 月供需指数（需求-供给）为-0.9 ，较上月变化-0.1 ，较去年 同期变化 0.2 ，较过去三年均值变化 0.2 。 价格：盈利收缩。12月原材料价格指数为 53.1，较上月变化-0.5 。出厂价格指数为 48.9， 较上月变化 0.7 。出厂价格-原材料价格差值为-4.2 ， ...

Group 1: Report Industry Investment Rating - No relevant content provided Group 2: Core Viewpoints of the Report - In December 2025, both manufacturing and non - manufacturing PMI rebounded above the boom - bust line. The new kinetic energy is supporting the manufacturing industry, but related industries may be more vulnerable to external demand fluctuations. The pace of new - old kinetic energy conversion is an important window to observe the economic recovery [2]. - The report expects long - term interest rates to fluctuate widely, with the 10 - year Treasury yield expected to oscillate between 1.8% - 1.9% and the 30 - year Treasury yield between 2.2% - 2.4% [2][7]. Group 3: Summary by Related Catalogs Event Description - In December 2025, the manufacturing PMI rose 0.9pct to 50.1%, with the month - on - month increase expanding by 0.7pct. The non - manufacturing business activity index rebounded 0.7pct to 50.2%. The construction business activity index soared 3.2pct to 52.8%, and the service business activity index rebounded 0.2pct to 49.7% [5]. Event Comment Non - manufacturing Sector - The non - manufacturing sector's return above the boom - bust line is in line with seasonal trends, led by construction. The improvement in new orders, inventory, and employment is driven by domestic demand, while new export orders declined. The profit margin may be compressed, and the sustainability of the improvement needs further observation. In construction, seasonal factors and high - growth financial activities may support the improvement. In services, the transmission of upstream manufacturing prosperity to downstream consumption remains to be seen [7]. Manufacturing Sector - New kinetic energy supports the manufacturing industry, but related industries are more susceptible to external demand. The high - frequency indicators have weakened, but the manufacturing industry improved due to the high - level prosperity of new kinetic energy industries. The 10 - year and 30 - year Treasury yields are expected to fluctuate in specific ranges [7]. Other Aspects of Manufacturing - Manufacturing PMI continued to rise, with production, demand, and inventory all improving. External demand contributed to new orders, and the profit repair pressure may be reduced. Large and medium - sized enterprises and high - tech manufacturing showed better performance [9].

04 流动性 基金销售费率新规落地 国债月报 2025/01/04 蒋文斌（宏观金融组） 0755-23375128 jiangwb@wkqh.cn 从业资格号：F3048844 交易咨询号：Z0017196 程靖茹（联系人） chengjr@wkqh.cn 从业资格号：F03133937 CONTENTS 目录 01 月度评估及策略推荐 02 期现市场 05 利率及汇率 03 主要经济数据 01 月度评估及策略推荐 月度评估及策略推荐 ◆ 经济及政策：12月PMI数据显示，供需两端均有所回暖，制造业重回扩张区间。分项上，需求端释放以及政策预期向好带动制造业企业生产 活动较好扩张，内外需均有回升，但内需修复持续性有赖居民收入，需求端仍需政策支持。出口方面，11月出口数据强于预期，对美出口回 落而非美地区出口增速维持韧性。中央经济工作会议强调继续实施适度宽松的货币政策，明年降准降息预期仍存。海外方面，12月美联储降 息落地且开始购买短债，流动性紧张现象有望缓解。 1、中国12月官方制造业PMI为50.1，预期49.2，前值49.2，9个月以来首次重返荣枯线上方；非制造业PMI为50.2，预期49.6，前值49. ...

Report Industry Investment Rating - The report does not mention the industry investment rating. Core Viewpoints of the Report - In December 2025, the weakening of the US dollar and the improvement of risk appetite led to a steeper curve overseas, while in China, loose funds drove the yield curve to steepen. The bond market remained volatile due to the supply - demand contradiction at the long end [2]. - In 2026, the PPI is facing three positive factors: the tail - lifting factor, imported inflation, and the continued effectiveness of the "anti - involution" policy. Under the neutral scenario, the PPI is expected to turn positive in the second quarter of 2026 and reach around 1.2% by the end of the year. The mild re - inflation needs to resonate with other factors to significantly affect the bond market [3][55]. - Currently, the bond market is in a wait - and - see state. It is expected to remain volatile in the short term, lacking the motivation and space for trend trading. There are some structural opportunities, such as the follow - up rise opportunity of 5 - 7Y China Development Bank bonds and the compression opportunity of credit spreads [4]. Summary by Directory PART1: December 2025 - Curve Steepening Driven by Overseas and Domestic Factors Overseas - In December 2025, the Fed announced reserve management - style purchases (RMP) and continued to cut interest rates. The US dollar index weakened, liquidity improved, the US stock market rose, and risk appetite recovered. The US bond yield curve steepened due to factors like Fed's short - term bond purchase, market concerns about Fed independence, and rising commodity prices. Precious and industrial metals performed well, with copper benefiting from AI demand and gold and silver supported by geopolitical events [10][16]. Domestic - In November 2025, the domestic economic fundamentals showed a divergence between quantity and price, and in December, both supply and demand declined. The capital market was generally loose, and the overnight interest rate hit a new low for the year. The bond market remained volatile due to the long - end supply - demand contradiction, and the yield curve steepened [17][23]. - In terms of institutional behavior, large banks and insurance companies, as allocation players, increased their bond - buying in the secondary market in December. Large banks added some policy - related financial bonds and focused on 5 - 7 - year varieties. Insurance companies mainly added long - term treasury bonds. Trading players became conservative. Rural commercial banks mainly invested in certificates of deposit, funds reduced duration and mainly sold long - term treasury bonds, and wealth management products seasonally reduced bond allocation and slightly increased credit bond allocation [26][35][47]. PART2: How the 2026 Re - inflation Narrative May Affect the Bond Market 2026 PPI's Three Positive Factors - The tail - lifting factor can support the PPI to turn positive in the second half of 2026 even without new price - increasing factors [55]. - Imported inflation may occur as overseas capital expenditure and manufacturing investment are likely to rise in 2026. The US deficit rate may expand, and the Fed's new round of easing may release emerging market countries' capital expenditure demand [57]. - The "anti - involution" policy has shown a supporting effect on the PPI. Since August 2025, the month - on - month PPI of the mining industry has turned positive, driving the overall PPI to turn positive since October [60]. PPI Forecast under Different Scenarios - Under the pessimistic scenario, the PPI is expected to turn positive in the second half of 2026 with an average monthly PPI growth rate of 0%. Under the neutral scenario, with a monthly average PPI growth rate of 0.1%, the PPI is expected to turn positive in the second quarter of 2026 and reach around 1.2% by the end of the year. Under the optimistic scenario, with a monthly average PPI growth rate of 0.2%, the PPI is expected to turn positive in April 2026 and exceed 2% in the second half of the year [67]. PPI's Impact on the Bond Market - Historically, during the four PPI upward cycles since 2009, three typical upward periods were driven by the resonance of domestic and overseas demand or supply - demand. The PPI and the bond market generally move in the same direction, but there were several periods of divergence, mainly due to strong economic recovery expectations or PPI being mainly affected by the supply side while the domestic demand did not improve significantly and the monetary policy remained loose [69][71]. - In 2026, the mild re - inflation needs to resonate with other factors such as total demand, central bank's capital management, financial institutions' liability - side stability, and the flow of activated household deposits to significantly affect the bond market. The trading of typical total assets based on re - inflation may have limited odds [78]. PART3: Bond Market Strategy for January 2026 - In January 2026, the bond market may still be in a wait - and - see period. Potential risks include government bond supply pressure, the spring rally in the equity market, and the first - quarter credit boom. Potential positive factors include the possible relaxation of large banks' bond - allocation pressure and the relatively loose capital market, with a higher probability of a reserve - requirement ratio cut than an interest - rate cut in January [81]. - The bond market is expected to remain volatile in the short term, lacking the motivation and space for trend trading. Structurally, there are opportunities such as the follow - up rise of 5 - 7Y China Development Bank bonds and the compression of credit spreads in credit bonds [4][83].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **Chinese economy** and its performance indicators, particularly focusing on the **Purchasing Managers' Index (PMI)** for both manufacturing and non-manufacturing sectors in December 2025. Core Insights and Arguments - **PMI Performance**: - The official manufacturing PMI rose to **50.1**, an increase of **0.9 percentage points (pp)** from November, surpassing market expectations (Citi/market: **49.3/49.2**) [4][8] - This marks the first expansion after **eight consecutive months of contraction** [4] - The non-manufacturing PMI also returned to expansion, climbing **0.7pp** to **50.2**, exceeding the consensus of **49.6** [5] - **GDP Forecast**: - The improving PMI data supports a **5% GDP growth target** for 2025, which has been maintained since June [6] - Incremental fiscal funds of approximately **RMB1 trillion** are anticipated as a likely ceiling for the year [6] - **Policy Support**: - Policymakers have pledged measured support for 2026, with a focus on the pace of policy deployment leading up to the National People's Congress (NPC) [6] - Recent government actions include renewing the trade-in program for durable goods and introducing new tax incentives for home purchases [6] - **Sector Performance**: - **Manufacturing Output**: The production index increased by **1.7pp** to **51.7**, driven partly by a low base from November [7] - **Demand Indicators**: New orders rose **1.6pp** to **50.8**, marking a return to expansion for the first time in six months [7] - **Export Orders**: New export orders gained **1.4pp** to **49.0**, the highest in nine months, indicating potential positive year-over-year export growth in December [7] - **Construction Sector**: Construction PMI jumped **3.2pp** to **52.8**, reflecting unseasonably warm temperatures and earlier policy measures [7] - **Price Indices**: - The purchasing price index eased by **0.5pp** to **53.1**, while the producer price index firmed **0.7pp** to **48.9**, which may alleviate some pressure on industrial profitability [7] - **Inventory Levels**: - Finished goods inventories increased **0.9pp** to **48.2**, indicating improving activity but still below the neutral mark of 50 [7] - **Services Sector**: - The services PMI edged up to **49.7**, remaining in contraction for a second consecutive month, reflecting ongoing weakness in domestic consumption [7] Additional Important Insights - The **uneven recovery** is highlighted by the performance disparity between large/medium-sized enterprises and small firms, with the latter showing signs of weakness [4] - The **January-February period** is identified as a critical window for potential rate or reserve requirement ratio (RRR) cuts [6] This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and outlook of the Chinese economy as reflected in the PMI data and government policy responses.