Market Review - Commodity prices have surged, with COMEX silver up 9.4%, coking coal up 7.2%, and IPE Brent crude oil up 6.2%, but this does not change the macro and industrial trends [1][2] - The increase in commodity prices is attributed to several factors: improved demand due to economic recovery, supply constraints, and the financial attributes of commodities influenced by a weaker dollar [1][2][3] Industry Focus - The consensus is that real estate is no longer the leading industry, and investors should focus on manufacturing, particularly high-end manufacturing and the automotive sector, especially new energy vehicles [4] - The automotive industry is experiencing intense competition, characterized by price wars and excess capacity, driven by weak domestic demand [4] Capacity Analysis - The analysis of capacity across various industries is crucial for future industrial layout, with specific attention to operating and financial leverage [5][6] - Industries with high non-current asset ratios and debt ratios, such as non-metallic minerals and oil extraction, face significant risks due to capacity and leverage expansion [6][7] Inventory Analysis - The automotive and pharmaceutical industries are currently in a passive inventory replenishment phase, with price reductions being a common strategy to address inventory buildup [8] Macro-Level Industry Concerns - The focus on funding issues behind capacity is critical, with significant accounts receivable in industrial enterprises indicating potential risks in production stability [9] - The risk of "triangle debts" in manufacturing has not been adequately addressed in policy discussions, highlighting a potential area of concern for investors [9]

Market Performance - The recent five trading days saw the Sci-Tech 50 Index decline by 0.36%, the ChiNext Index by 1.40%, and the large-cap value index by 0.16%, while the large-cap growth index fell by 2.71%. The Shanghai 50 Index decreased by 1.22%, whereas the small-cap index represented by the CSI 2000 rose by 0.94%. Sectors such as environmental protection and biomedicine performed well, while automotive and electrical equipment lagged behind [1]. Risk Premium Analysis - The risk premium, defined as the inverse of the static PE of the CSI All Index (EP) minus the yield of ten-year government bonds, indicates that the implied returns of equity and bond assets are at historically significant levels. For instance, on April 26, 2022, the risk premium reached 4.17%, and on October 28, 2022, it was 4.08%. As of January 19, 2024, the indicator stood at 4.11%, marking the fifth occurrence since 2016 of exceeding 4%. As of May 30, 2025, the indicator was at 3.90%, with the two-standard deviation boundary set at 4.75% [1]. Valuation Levels - As of May 30, 2025, the CSI All Index's PETTM was at the 50th percentile, with the Shanghai 50 and CSI 300 at 61% and 48%, respectively. The ChiNext Index was close to 11%, while the CSI 500 and CSI 1000 were at 30% and 32%. The ChiNext Index's valuation style is relatively low compared to historical averages [2]. Long-term Market Trends - The technical analysis of the Deep 100 Index indicates a cyclical pattern of bear markets every three years, followed by bull markets. Historical declines ranged from 40% to 45%, with the current adjustment starting in the first quarter of 2021 showing sufficient time and space for a potential upward cycle [2]. Fund Flow and Trading Activity - In the last five trading days, ETF inflows totaled 8.5 billion yuan, with margin trading increasing by approximately 720 million yuan. The average daily trading volume across both markets was 10.687 billion yuan [4]. AI and Machine Learning Applications - The use of convolutional neural networks (CNN) for modeling price and volume data has been explored, with features mapped to industry themes. The latest focus is on sectors such as banking [3][10].

Core Viewpoint - The recent rise in U.S. Treasury yields is primarily attributed to the "Trump premium" rather than economic cycles or inflation pressures [1][2]. Group 1: Factors Influencing Treasury Yields - The long-end Treasury yield increase cannot be solely explained by fundamental factors, as the current rise is significantly higher than typical scenarios of "recession" or "soft landing" [1][2]. - The recent economic growth in the U.S. is marginally weakening under fiscal stimulus, with soft data declines and tariff impacts not favoring long-term economic growth [2]. - The "Trump premium" is influenced by several factors, including Moody's downgrade of U.S. sovereign credit rating, the passage of the "beautiful big law" leading to a projected $3.1 trillion deficit over the next decade, and uncertainties surrounding Trump's long-term reforms [3]. Group 2: Future Outlook on Treasury Yields - There is potential for further decline in Treasury yields, especially with the negative impacts of tariffs yet to fully materialize and the possibility of the Federal Reserve initiating rate cuts [4]. - The projected long-term deficit growth may not fully reflect the fiscal revenue from tariffs, suggesting that the actual deficit expansion might be less severe than anticipated [4]. - Long-term Treasury yields exceeding the nominal growth rate in the U.S. could lead to unsustainable interest payment pressures, indicating a need for a reduction in long-end rates [6]. Group 3: Long-term Debt Solutions - The U.S. may face several long-term debt resolution strategies, including painful deficit tightening, partial restructuring of interest payments, or yield curve control (YCC) [8]. - The likelihood of painful deficit tightening seems low under the current two-party electoral system, as reducing spending programs may not garner sufficient voter support [8].

Core Viewpoint - The article discusses the importance of understanding value investing and critiques common Wall Street theories, particularly focusing on the misleading nature of terms like EBITDA, EMH, and Beta, as emphasized by investment legends like Buffett, Graham, and Fisher [1][3][9]. Summary by Sections Investment Philosophy - The article begins by highlighting the insights of Yang Yuebin, a fund manager who recently attended the Berkshire Hathaway shareholder meeting, emphasizing the essence of value investing through the "duck-rabbit illusion" [1][6]. - It references Graham's warnings about the dangers of superficial knowledge in investing and the misleading theories that can arise from it [2][3]. Critique of Wall Street Theories - The author critiques the Efficient Market Hypothesis (EMH), Beta, and EBITDA, arguing that these concepts mislead investors and undermine the foundations of modern portfolio theory [3][4]. - Buffett's repeated criticisms of these theories are noted, suggesting they challenge the prevailing investment philosophies in both Western and emerging markets [4][7]. Risk and Return Analysis - The article stresses that investment decisions should be based solely on risk and return analysis, without unnecessary complications [4][5]. - It discusses the psychological aspect of investing, using the "duck-rabbit illusion" to illustrate how different perspectives can lead to varying interpretations of risk and return [5][6]. Misinterpretation of EBITDA - The article delves into the pitfalls of using EBITDA as a measure of profitability, arguing that it ignores essential costs like depreciation, which can lead to significant misjudgments about a company's financial health [11][12]. - Buffett's disdain for EBITDA is highlighted, with examples illustrating how it can mislead investors regarding a company's true earnings potential [11][12][19]. Conclusion and Future Outlook - The article concludes by emphasizing the need for investors to be wary of misleading financial jargon and to maintain a clear understanding of risk and return to avoid falling into the "duck-rabbit illusion" [23][24]. - It reflects on Buffett's legacy and the importance of his teachings in guiding future investors [26][27].

Core Viewpoint - The European Central Bank (ECB) warns that increasing investor concerns about U.S. assets, following Trump's tariffs, could lead to significant disruptions in the global financial system [1] Group 1: Investor Sentiment - Investors are experiencing heightened risk aversion towards U.S. assets, leading to a "unconventional shift" away from traditional safe havens like the dollar and U.S. Treasury bonds [1] - The unpredictability of U.S. policies is causing investors to demand higher risk premiums for U.S. assets, potentially undermining confidence in the dollar as a global reserve currency [1] Group 2: Market Dynamics - The ECB notes that asset valuations remain high, particularly after market rebounds triggered by policy adjustments from Trump [1] - Concentrated investments in U.S. tech stocks indicate that the market is still vulnerable to sudden volatility [1] Group 3: Risk Assessment - The ECB highlights that investors may be underestimating the likelihood and impact of adverse scenarios, especially as rising uncertainty makes tail risks more apparent [1]

Core Viewpoint - The article highlights the ongoing economic instability in Russia, emphasizing the lack of trust in the financial system and the adverse effects of political decisions on foreign investments and local businesses [3][5][7]. Group 1: Economic Instability - The simultaneous failure of ATMs in Moscow and the plummeting value of the ruble illustrate the immediate financial distress faced by investors and analysts [1]. - Historical context shows that Russia has experienced significant economic upheavals, such as the currency reset in the late 1990s and the impact of sanctions following the Crimea incident in 2014, leading to a drastic decline in foreign investment [3][5]. - In 2022, over 1,200 foreign companies announced their exit from Russia, resulting in a net foreign direct investment inflow of less than $4 billion, the lowest in 20 years [3]. Group 2: Trust and Investment Climate - The article discusses the erosion of trust in the Russian market, where contracts are often disregarded, and arbitration is viewed as ineffective, making investments seem risky and uncertain [7][9]. - Domestic capital is also fleeing, with wealthy individuals investing abroad and local talent seeking opportunities outside Russia, indicating a lack of confidence in the local economy [5][7]. - The article suggests that without a stable and predictable regulatory environment, even abundant resources cannot foster economic growth, as investors require assurance that the rules will remain consistent [9][10].

Market Performance - The Sci-Tech 50 Index decreased by 1.10% over the last five trading days, while the ChiNext Index increased by 1.38%. The large-cap value and growth indices rose by 1.45% and 1.60%, respectively. The Shanghai 50 Index rose by 1.22%, and the small-cap index represented by the CSI 2000 increased by 0.16%. The beauty and personal care sector, along with non-bank financials, performed well, while the computer and defense industries lagged behind [1]. Risk Premium Analysis - The static PE of the CSI All Index minus the yield of 10-year government bonds indicates a risk premium. Historical extreme bottoms have shown this data at two standard deviations above the mean, with notable instances in 2012, 2018, and 2020. As of April 26, 2022, the risk premium reached 4.17%, and on October 28, 2022, it was 4.08%. The latest reading on January 19, 2024, was 4.11%, marking the fifth instance since 2016 exceeding 4%. As of May 16, 2025, the indicator was at 3.86%, with the two standard deviation boundary at 4.76% [1]. Valuation Levels - As of May 16, 2025, the CSI All Index's PETTM percentile is at 52%. The Shanghai 50 and CSI 300 indices are at 62% and 50%, respectively, while the ChiNext Index is close to 11%. The CSI 500 and CSI 1000 indices are at 31% and 33%, indicating that the ChiNext Index's valuation is relatively low compared to historical levels [2]. Long-term Market Trends - The technical analysis of the Deep 100 Index shows a pattern of bear markets occurring every three years, followed by bull markets. The last bear market began in Q1 2021, with previous declines ranging from 40% to 45%. The current adjustment appears to have sufficient time and space, suggesting a potential upward cycle from the bottom [2]. Fund Flow and Trading Activity - In the last five trading days, ETF funds experienced an outflow of 34.1 billion yuan, while margin financing decreased by approximately 600 million yuan. The average daily trading volume across the two markets was 1.2317 trillion yuan [3]. AI and Machine Learning Applications - The report discusses the use of convolutional neural networks (CNN) to model price and volume data, aiming to predict future prices. The learned features are mapped to industry themes, with a current focus on banking [6].

Group 1 - The core viewpoint of the articles indicates a shift towards a more optimistic market outlook following breakthroughs in US-China trade negotiations, leading analysts to revise their annual forecasts positively [1][3] - Analysts from Goldman Sachs, Barclays, and JPMorgan are observing a rapid increase in risk assets, which has driven up corporate bond valuations and attracted a significant influx of borrowers into the market [1][3] - Barclays strategists believe that the recent easing of trade tensions represents a significant and lasting change in the economic backdrop, predicting a further narrowing of spreads in the short term [1][3] Group 2 - Investment-grade bond spreads are projected to narrow to a lower limit of 95 basis points by year-end, a reduction of 25 basis points from March forecasts [3] - For high-yield bonds, Barclays anticipates spreads will narrow to 325 basis points by the end of 2025, a decrease of 75 basis points from previous estimates [3] - Goldman Sachs expects the risk premium for US investment-grade bonds to narrow by about 20 basis points by year-end, while high-yield bonds are expected to narrow by approximately 100 basis points, with both figures remaining relatively stable compared to current levels [3] Group 3 - Recent trading days have seen investment-grade bond spreads narrow by 8 basis points, marking the largest two-day decline since March 2023; junk bond spreads also experienced significant declines, the largest since November 2020 [4]

Group 1: Trade Negotiation Outcomes - The US will retain 10% of the 20% tariff on fentanyl and suspend 90% of the remaining 24% tariffs for 90 days, while canceling all tariffs imposed on April 8 and 9[1] - China will suspend the implementation of the 24% tariffs on US goods for the initial 90 days, retaining 10% on these products and canceling other subsequent tariffs[1] - The tariff reductions exceed previous investor expectations, potentially raising the volatility center of the domestic equity market[1] Group 2: Market Reactions and Predictions - A-shares opened higher and closed up, with significant gains in sectors like power equipment, machinery, and electronics, confirming the positive outlook[2] - The market's risk appetite is expected to increase further due to the positive signals from the US-China negotiations, with potential recovery in the export chain[2] - The current A-share risk premium is influenced by domestic credit cycles and the US dollar cycle, with a reasonable P/E ratio estimated at 21x compared to the current 19x[4] Group 3: Investment Strategies - Short-term recommendations include increasing allocations to technology and export sectors, while maintaining a cautious stance on industries with high US exposure[5] - Mid-term strategies should focus on sectors benefiting from internal certainty, such as public funds and industries with improved earnings forecasts[5] - The Hong Kong market is expected to show relative returns, with recommendations to increase allocations in technology and consumer sectors[6]

1. Report Information - Report Title: Big Asset Morning Report - Research Team: Macroeconomic Team of the Research Center - Report Date: May 12, 2025 [2] 2. Global Asset Market Performance 2.1 10 - Year Treasury Yields of Major Economies - On May 9, 2025, the 10 - year Treasury yields of the US, UK, France, etc. were 4.380, 4.566, 3.264 respectively. The latest changes, weekly changes, monthly changes, and annual changes varied across different economies. For example, the US had a 0.000 latest change, 0.206 weekly change, 0.085 monthly change, and - 0.285 annual change [3]. 2.2 2 - Year Treasury Yields of Major Economies - On May 9, 2025, the 2 - year Treasury yields of the US, UK, Germany, etc. were 3.780, 3.902, 1.781 respectively. The latest, weekly, monthly, and annual changes also differed. For instance, the US had a 0.000 latest change, 0.040 weekly change, and - 1.110 annual change [3]. 2.3 Dollar - to - Major Emerging Economies Currency Exchange Rates - On May 9, 2025, the exchange rates of the dollar against the Brazilian real, Russian ruble, South African rand, etc. were presented. The latest, weekly, monthly, and annual changes were provided. For example, the dollar - to - Brazilian real exchange rate had a - 0.16% latest change, 0.59% weekly change, - 5.95% monthly change, and 10.51% annual change [3]. 2.4 Stock Indexes of Major Economies - On May 9, 2025, the closing prices of major stock indexes such as the S&P 500, Dow Jones Industrial Average, and NASDAQ were 5659.910, 41249.380, 17928.920 respectively. The latest, weekly, monthly, and annual changes were different. For example, the S&P 500 had a - 0.07% latest change, 1.78% weekly change, 13.59% monthly change, and 10.98% annual change [3]. 2.5 Credit Bond Indexes - The latest, weekly, monthly, and annual changes of credit bond indexes including US investment - grade, euro - zone investment - grade, and emerging - economies investment - grade were given. For example, the US investment - grade credit bond index had a 0.06% latest change, - 1.02% weekly change, 1.09% monthly change, and 6.74% annual change [3][4] 3. Stock Index Futures Trading Data 3.1 Index Performance - The closing prices of A - shares, CSI 300, SSE 50, ChiNext, and CSI 500 were 3342.00, 3846.16, 2684.01, 2011.77, 5721.72 respectively, with corresponding percentage changes of - 0.30%, - 0.17%, 0.17%, - 0.87%, - 0.90% [5]. 3.2 Valuation - The PE (TTM) of CSI 300, SSE 50, CSI 500, S&P 500, and German DAX were 12.44, 10.84, 28.80, 24.21, 18.87 respectively, with corresponding环比 changes of - 0.01, 0.03, - 0.24, - 0.02, 0.12 [5]. 3.3 Risk Premium - The risk premium (1/PE - 10 - year interest rate) of S&P 500 and German DAX were - 0.25 and 2.74 respectively, with环比 changes of 0.00 and - 0.06 [5]. 3.4 Fund Flows - The latest values and 5 - day average values of fund flows for A - shares, main board, small - and - medium - sized enterprise board, ChiNext, and CSI 300 were presented. For example, the latest fund flow of A - shares was - 1156.52, and the 5 - day average was - 265.74 [5]. 3.5 Trading Volume - The latest trading volumes and环比 changes of the Shanghai and Shenzhen stock markets, CSI 300, SSE 50, small - and - medium - sized board, and ChiNext were given. For example, the latest trading volume of the Shanghai and Shenzhen stock markets was 11920.10, with a环比 change of - 1013.67 [5]. 3.6 Main Contract Premium or Discount - The basis and percentage changes of IF, IH, and IC were - 37.56 (- 0.98%), - 17.81 (- 0.66%), - 116.92 (- 2.04%) respectively [5] 4. Treasury Futures Trading Data - The closing prices and percentage changes of Treasury futures T00, TF00, T01, TF01 were 109.060 (0.19%), 106.095 (0.17%), 109.215 (0.18%), 106.435 (0.16%) respectively. The money market rates R001, R007, SHIBOR - 3M were 1.5221%, 1.5805%, 1.6960% respectively, with daily changes of - 13.00BP, - 7.00BP, - 2.00BP [6]