Core Insights - The report highlights a selection of stocks for August, including companies such as SF Holding (顺丰控股) and Heng Rui Pharmaceutical (恒瑞医药) as key investment opportunities [1] - The macroeconomic analysis indicates that low inflation in China is primarily influenced by domestic demand, overseas input factors, and "involution competition," which affects industrial profitability and household income expectations [2][5] Market Indices - The Shanghai Composite Index closed at 3583.31, reflecting a 0.66% increase, while the Shenzhen Component Index rose by 0.46% to 11041.56 [3] - The CSI 300 Index increased by 0.39% to 4070.70, indicating a positive trend in the broader market [3] Industry Performance - The defense and military industry showed a strong performance with a 3.06% increase, while retail and oil sectors experienced declines of 0.46% and 0.36%, respectively [4] - The machinery and equipment sector also performed well with a 1.93% increase, indicating a positive outlook for these industries [4] Macroeconomic Analysis - In the first half of 2025, China's total retail sales of consumer goods grew by 5.0% year-on-year, maintaining the same growth rate as the previous months [5] - The report notes a significant correlation between the price trends of production materials and consumer prices, suggesting that weak production material prices are a key factor in the current lack of consumer price growth [5][6] Fixed Income Insights - The report discusses the potential for the Federal Reserve to adopt a more open stance on interest rate cuts due to lower-than-expected non-farm employment data and a slowdown in nominal consumption growth [8][10] - The analysis indicates that the U.S. economy is experiencing a cooling effect from restrictive policies, which may lead to an earlier-than-expected interest rate cut by the Federal Reserve [9][10]

Group 1: Economic Overview - China's retail sales of consumer goods in the first half of 2025 showed a cumulative year-on-year growth rate of 5.0%, consistent with the growth rate from January to May[18] - The average year-on-year growth rate of retail sales from June 2024 to June 2025 was 4.1%, indicating an overall upward trend[18] - The Consumer Price Index (CPI) year-on-year growth rate during the same period was only 0.1%, highlighting a divergence between the volume and price of consumer spending[18] Group 2: Low Inflation Factors - Low inflation is primarily influenced by weak domestic demand, external input factors, and "involutionary competition" in the market[1] - The correlation coefficient between the year-on-year growth rates of production materials and living materials, after shifting the production materials curve back by 10 months, is 0.7, indicating a strong relationship[22] - The year-on-year decline in profits for coal mining, oil and gas extraction, and black metal mining industries was 53.0%, 11.5%, and 36.2% respectively, contributing to a 5.5 percentage point drag on industrial profits in the first half of 2025[3] Group 3: Impact of Low Inflation - As of June 2025, the average yield on ten-year government bonds was 1.66%, down 44 basis points from September 2024, while the actual interest rate rose slightly to 2.84%, up 12 basis points[3] - The weak inflation level has interfered with the downward path of actual interest rates, limiting the reduction in financing costs for the real economy[46] - The correlation coefficient between urban residents' future income confidence index and the year-on-year growth rate of industrial profits from 2020 to 2024 is 0.5, indicating a positive correlation[3] Group 4: Risks and Challenges - Risks include persistent inflation in developed economies, complex geopolitical situations, and slow recovery of expectations in the real estate sector[4] - The significant decline in real estate investment has negatively impacted construction industry investment growth, further affecting demand in the building materials sector[37]

Core Viewpoint - The South African Reserve Bank has indicated an opportunity to lock in low inflation and pave the way for interest rate reductions [1] Group 1 - The central bank's statement suggests a favorable economic environment for controlling inflation [1] - The potential for lowering interest rates could stimulate economic growth and investment [1]

Group 1: Market Trends and Economic Indicators - The current commodity futures market is driven by a combination of "strong expectations," "weak realities," and "speculative demand," with PPI expectations for April 2026 turning positive[2] - As of June 2025, the CPI increased by only 0.1% year-on-year, significantly below the 2% inflation target, while PPI fell to a new low of -3.6%, marking 33 consecutive months of negative growth[2] - Recent commodity price movements include coking coal surpassing 1200 CNY/ton, lithium carbonate exceeding 80000 CNY/ton, rebar breaking 3300 CNY/ton, and live pig prices exceeding 15000 CNY[2] Group 2: Policy Implications and Market Dynamics - The "anti-involution" policy aims to establish a high-level market system and correct local government behaviors, rather than directly targeting price increases[4] - The current low inflation environment is influenced by supply-side factors, structural adjustments, and global industrial roles, validating China's manufacturing advantages[2] - The speculative demand has reignited due to the combination of strong expectations and weak realities, leading to increased price volatility in the commodity market[2] Group 3: Future Outlook and Risks - The commodity market currently reflects a positive price recovery expectation, with potential for PPI to turn positive by April 2026 if current price levels are maintained[4] - The report highlights risks including unexpected downturns in real estate, insufficient policy implementation, and underwhelming effects of new real estate policies[4] - The "anti-involution" policy is not necessarily synonymous with rising prices, as it focuses on optimizing supply-demand dynamics rather than broad monetary expansion[4]

Group 1 - The "anti-involution" policy has been initiated since July, leading to a significant rise in certain commodity prices and influencing market expectations [1] - The policy aims to regulate low-price disorderly competition among enterprises, improve product quality, and promote the orderly exit of backward production capacity [1][3] - The "anti-involution" policy is seen as both a supply-side and demand-side measure, essential for stabilizing price levels in the short term [1] Group 2 - Analysts suggest that the impact of the "anti-involution" policy on prices is more about alleviating the decline in the Producer Price Index (PPI) rather than driving a rapid increase in overall price levels [2][9] - The industrial goods sector is the main battleground for the "anti-involution" policy, with significant price increases observed in coal, steel, and other commodities [7] - The policy is expected to improve PPI by approximately 1.6 percentage points in the second half of the year, with an overall annual increase of about 0.5 percentage points [9] Group 3 - The National Development and Reform Commission and the State Administration for Market Regulation are drafting a revision to the Price Law, addressing issues of low-price disorderly competition [5] - The "anti-involution" policy is anticipated to have a sustained impact on price increases in related industries, with a focus on promoting supply-demand balance and eliminating backward production capacity [5][7] - The effectiveness of the "anti-involution" policy in driving domestic prices back to a moderate growth trajectory will depend on the success of consumption-boosting measures [9][10]

Economic Overview - In Q2, the actual GDP growth was 5.2% year-on-year, while nominal GDP growth fell to 3.9%, marking a decline of 0.2 and 0.7 percentage points from Q1 respectively[4] - The nominal GDP growth rate has dropped below 4%, the lowest in nearly three years, primarily due to strong supply and weak demand characteristics[23] Supply and Demand Balance - Q3 is expected to see a balance between supply and demand, driven by the implementation of "anti-involution" policies and improved confidence in the real sector[2] - The recovery in consumption is gradually being confirmed, with "anti-involution" policies likely being a key factor influencing Q3 economic performance[4] Investment Trends - Fixed asset investment in Q2 grew by only 1.8% year-on-year, a significant drop of 2.4 percentage points from Q1, with infrastructure and manufacturing investments experiencing widespread contraction[11] - In June, fixed asset investment saw a month-on-month decline of 0.1%, marking a historical low[11] Consumer Behavior - The nominal growth rate of social retail sales in Q2 was 4.5%, slightly down by 0.1 percentage points from Q1, indicating a moderate increase in consumer spending[19] - In June, social retail sales growth fell to 4.8%, a significant drop of 1.6 percentage points from the previous month, with most categories experiencing a broad decline[20] Inflation and Market Dynamics - The report suggests that moderate inflation positively impacts corporate operations and household balance sheets, with expectations of a gradual recovery in nominal GDP growth[2] - The bond market is currently benefiting from a low inflation environment and ample liquidity, although the upward potential for bond prices is limited in the short term[27] Geopolitical and Policy Risks - Risks include geopolitical tensions and the potential for policy changes that exceed expectations, which could impact economic stability[3]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - The current core combination of "weak fundamental recovery + low inflation" remains unchanged, and the loose capital situation continues to support the bond market, with limited adjustment space. It is recommended to observe the adjustment of treasury bond futures in the short term and make allocations after stabilization. [2] 3. Summary by Relevant Catalogs 3.1 Futures Market Data - **Futures Closing Prices and Volumes**: On July 21, 2025, the closing prices of TS, TF, T, and TL主力 contracts decreased by 0.01%, 0.05%, 0.05%, and 0.46% respectively; the trading volumes of T, TF, TS, and TL主力 contracts were 88,280, 72,060, 31,667, and 118,236 respectively, with increases of 3,602, 700, 91, and 6,587 respectively. [2] - **Futures Spreads**: Some spreads such as TL2512 - 2509, T2512 - 2509, and TF09 - T09 showed changes, with TL2512 - 2509 decreasing by 0.05, T2512 - 2509 decreasing by 0.03, and TF09 - T09 remaining unchanged. [2] - **Futures Positions**: The positions of T, TF, and TL主力 increased by 2,166, 3,892, and 962 respectively, while the position of TS主力 decreased by 1,247. [2] 3.2 CTD Bond Data - The net prices of some CTD bonds such as 220010.IB, 250007.IB, and 240020.IB decreased, with 220010.IB dropping by 0.1004, 250007.IB dropping by 0.0632, and 240020.IB dropping by 0.1193. [2] 3.3 Treasury Bond Active Bond Yields - The yields of 1 - 7Y treasury bonds increased by 0.25 - 1.60bp, while the yields of 10Y and 30Y treasury bonds increased by 1.05bp and 1.50bp respectively, reaching 1.67% and 1.89%. [2] 3.4 Short - term Interest Rates - The silver - pledged overnight rate decreased by 3.99bp to 1.3601%, and the Shibor overnight rate decreased by 9.60bp to 1.3660%. [2] 3.5 Industry News - The central bank is soliciting opinions on canceling the regulation of freezing the collateral for bond repurchase until August 17. [2] - In June, the total social electricity consumption was 867 billion kWh, a year - on - year increase of 5.4%. [2] - The LPR quotes in July remained stable, with the 1 - year LPR at 3.0% and the 5 - year LPR at 3.5%. [2] 3.6 Market Analysis - Domestic: In June, industrial added value and social retail sales slightly rebounded, fixed - asset investment remained stable, and the unemployment rate was flat. Social financing exceeded expectations, credit demand improved marginally, and deposit activation increased. Exports and imports rebounded significantly, but price levels were under pressure. [2] - Overseas: The US core CPI in June was continuously lower than expected, but inflation risks continued to rise. The Fed's internal differences on the impact of tariffs on the inflation path increased, and the possibility of a short - term interest rate cut decreased. [2] 3.7 Key Events to Watch - On July 21 at 22:00, the US June Conference Board Leading Index monthly rate will be released. - On July 23 at 17:15, the Bank of England Governor and other officials will speak at the UK Parliament's Treasury Committee. [3]

Group 1: Current Inflation Status - The CPI in June 2025 increased by only 0.1% year-on-year, significantly below the 2% inflation target[3] - The PPI in June 2025 dropped to -3.6%, marking the lowest level in the year and continuing a negative trend for 33 consecutive months[3][19] - Key factors contributing to low CPI include weak performance in food and energy prices, underestimating the impact of "de-real estate," and weak demand for durable goods and services[3][15][18] Group 2: Policy Implications and Future Outlook - The "anti-involution" policy is expected to have a weaker impact on inflation compared to "capacity reduction" policies, as it focuses on market mechanisms rather than administrative measures[3][26] - CPI recovery to above 2% is anticipated to be slow due to ample supply and underappreciated real estate factors[3][29] - PPI is projected to turn positive by Q2 2026, with a forecasted year-end PPI of -1.3% in 2025[3][29] Group 3: Risks and Market Dynamics - Risks include unexpected downturns in the real estate market and insufficient policy effectiveness[3][29] - The relationship between PPI and commodity prices is crucial, with coal, rebar, lithium carbonate, copper, pork, and crude oil being significant influencers[3][20][22] - Recent commodity price trends show a decline in coal and rebar prices, while copper has shown signs of recovery[3][22]

Core Viewpoint - The Federal Reserve's Logan expresses the need for sustained low inflation to build confidence in economic stability [1] Group 1 - Logan emphasizes the importance of low inflation lasting longer to ensure confidence in the economic outlook [1] - The statement reflects the Fed's ongoing focus on inflation management as a key component of monetary policy [1]

Core Viewpoint - President Trump reiterated that the Federal Reserve should lower interest rates immediately due to very low inflation, suggesting a reduction of 3 percentage points [1] Group 1 - The current inflation rate is described as very low, prompting the call for a significant interest rate cut [1]