Core Viewpoint - The core logic for global asset allocation in 2026 is to "follow the direction of credit expansion" [1] Group 1: Market Dynamics - The hidden mainline of the market is that the direction of credit expansion determines the strength of assets and the flow of funds [3] - The past couple of years in the Chinese market have been characterized by "excess liquidity" chasing "scarce return assets," with the recognized scarce assets changing over time [3] - Key factors for future market judgment include whether the liquidity environment has been damaged and whether scarce assets can expand to a broader range [3] Group 2: Credit Expansion and Investment Strategy - The investment strategy for 2026 is framed around the "credit cycle," focusing on three main subjects of credit expansion [4] - In the Chinese market, the credit cycle is expected to experience a slowdown, with structural prosperity still present despite challenges [6] - The U.S. market is seeing a gradual recovery in the credit cycle, supported by fiscal and monetary easing, with no significant signs of bubble formation in AI investments [7] Group 3: Structural Opportunities in China - The overall credit cycle in China is expected to face challenges starting from Q4, but structural prosperity remains effective [9] - The correlation between market performance and economic expectations has increased, indicating a need to focus on structural trends for excess returns [9] - Three structural directions for prosperity include AI-driven trends, capacity cycle reversals, and external demand mapping [9] Group 4: Hong Kong Market Outlook - The outlook for the Hong Kong market in 2026 suggests limited index space, with potential growth coming from structural changes or unexpected pullbacks rather than pure valuation expansion [11] - The Hang Seng Index's dynamic valuation is currently at 11.4 times, indicating a position above the historical average, suggesting that the market is not "cheap" [11] Group 5: Recommended Investment Directions - It is advisable to maintain a moderate allocation to dividend assets to counter the weakening of the overall credit cycle [13] - Key sectors to focus on include AI software and hardware, electric new energy, chemicals, home furnishings, and innovative pharmaceuticals, with careful consideration of valuation and crowding [13] - A potential rise in China's PPI towards the end of this year could provide an opportunity for market shifts towards cyclical and certain consumer sectors [14]

Report Industry Investment Rating No relevant content provided. Core View of the Report - The bond market is expected to oscillate in the short term. The overall weakness of macro - financial and economic indicators in October, the downward trend of the overseas labor market, and the central bank's attitude of protecting liquidity are all favorable to the bond market. However, the low probability of monetary policy intensification due to weak financial data, the "buy the dip" behavior in the stock market, and the potential impact of the pending new regulations on public bond fund redemption fees make the short - term unilateral trend of the bond market still tangled [5]. - For arbitrage, with a neutral - bullish view and the 30Y - 7Y term spread at a relatively high historical level in the past three years, it is recommended to continue to hold an appropriate amount of (TL - 3T) positions. As the delivery month approaches and the valuation of the current - quarter contract becomes reasonable, short - sellers accelerating the roll - over may drive the spread to strengthen. It is advisable to try to go long on the current - quarter to next - quarter spread of the T contract when the opportunity arises [5]. Summary by Directory First Part: Weekly Core Points Analysis and Strategy Recommendation Macroeconomic Indicators - In October, major domestic macro - economic indicators generally declined on a high - base effect, with contractions in both production and demand [7]. - The continuous weakening of some domestic demand indicators recently implies that the multiplier effect of previous policies is not obvious, and the self - repair momentum of the domestic economy is not strong [10]. Credit Expansion - Credit expansion continued to slow down in October. New RMB loans were 220 billion yuan, a year - on - year decrease of about 280 billion yuan. Social financing scale was 815 billion yuan, a year - on - year decrease of 597 billion yuan. However, corporate direct financing performed well, with corporate bond financing and non - financial corporate stock financing increasing by 189.4 billion yuan compared to the same period last year [14][17]. M1 and Deposits - M2 growth rate in October was 8.2% year - on - year, a 0.2 - percentage - point decline from the previous month. M1 growth rate was 6.2% year - on - year, a 1.0 - percentage - point decline from the previous month, showing an initial inflection point. After the quarter, household and non - financial corporate deposits declined seasonally, while non - bank financial institution deposits increased significantly [25]. - In October, new fiscal deposits were 72 billion yuan, a year - on - year increase of 12.48 billion yuan. The slowdown in fiscal expenditure may be one of the reasons for the decline in M1 growth rate. In the future, the seasonal increase in government expenditure at the end of the year is expected to support the cash flow of enterprises and households [26]. Market Liquidity - This week, the market liquidity tightened as expected due to the large net payment scale of government bonds. Next week, the net financing of government bonds is still relatively high, and the tax payment period from the 17th to the 19th is expected to bring some short - term disturbances to the liquidity. However, considering the central bank's attitude of protecting liquidity, the actual pressure on market funds is expected to be controllable [37]. Central Bank's Monetary Policy Report - The central bank's third - quarter monetary policy implementation report continues the loose tone, being more positive than the second - quarter report. However, it continues to downplay the importance of aggregate financial indicators. There are also concerns about the marginal decline in the efficiency of monetary policy [42]. Treasury Bond Futures Valuation and Roll - over - The valuation of Treasury bond futures contracts is still differentiated. The IRR of the next - quarter contracts of TS, TF, T, and TL is generally higher than that of the current - quarter contracts and the market funds price [48]. - The roll - over progress of the main contracts this week accelerated but was still slower than the historical average. The slow roll - over may be the reason why the inter - delivery spread did not generally strengthen this week. It is recommended to try to go long on the current - quarter to next - quarter spread of the T contract when the opportunity arises [54]. Second Part: Relevant Data Tracking - This part tracks various data related to Treasury bond futures, including trading volume, open interest, inter - contract spreads, net positions, Treasury bond spot yields, and related international financial data such as the US 10 - year Treasury bond yield, Sino - US 10 - year Treasury bond spread, US dollar index, and US dollar - RMB offshore exchange rate [58][61][65].

Core Viewpoint - The article discusses the slowdown in credit expansion in October 2025, highlighting insufficient demand and the impact of seasonal factors on loan growth, with a focus on the performance of various loan categories and monetary aggregates [3][4][9]. Group 1: Credit Expansion and Loan Data - In October, new RMB loans amounted to 220 billion, a year-on-year decrease of 280 billion, aligning with the lower end of predictions and below the consensus forecast of 460 billion [3][7]. - Cumulative new RMB loans since the beginning of the year reached 15 trillion, a year-on-year decrease of 1.6 trillion, indicating a weak credit environment in the second half of the year [4]. - The corporate loan segment saw new loans of 350 billion in October, a year-on-year increase of 220 billion, with significant contributions from bill financing [5]. Group 2: Monetary Aggregates - M2 growth was recorded at 8.2%, a decrease of 0.2 percentage points from the end of September, while M1 growth was at 6.2%, down 1 percentage point [10]. - The total social financing in October was 815 billion, a year-on-year decrease of 597 billion, with a growth rate of 8.5%, continuing a downward trend since August [9]. Group 3: Residential Loan Trends - Residential loans showed a seasonal decline, with a net decrease of 360 billion in October, a year-on-year drop of 520 billion, reflecting weak consumer demand and economic conditions [8]. - The share of residential loans in total new credit was 4.9%, significantly lower than the previous year's 12.7%, indicating a strong deleveraging trend among households [8].

Economic Performance - In October, industrial added value increased by 4.9% year-on-year, the lowest since September of the previous year, down from 6.5% in the previous month[1] - Retail sales grew by 2.9% year-on-year in October, a slight decrease of 0.1 percentage points from the previous month, marking a new low for the year[2] - Fixed asset investment decreased by 1.7% year-on-year from January to October, with the decline expanding by 1.2 percentage points compared to the previous month[3] Sector Analysis - Infrastructure investment fell to -0.1%, marking the first negative growth since September 2020, while manufacturing investment slowed to 2.7%[3] - Real estate sales in October saw a year-on-year decline of 24.3% in sales value and 18.8% in sales area, with declines widening by 12.5 and 8.2 percentage points respectively compared to the previous month[4] - The industrial and service sector production index showed a weighted year-on-year growth of 4.7%, while demand-side indicators only grew by -3.5%, marking the largest gap since March 2020[5] Future Outlook - For November and December, industrial added value and service production indices need to reach approximately 5.2% year-on-year to offset the slowdown observed in October, aiming to achieve the annual growth target of 5%[6] - The impact of the holiday misalignment on industrial production is expected to diminish in November, although the additional boost to retail will also fade[6] - The upcoming PMI data in November will be crucial for assessing whether counter-cyclical policies need to be intensified, with potential for monetary easing measures[7]

Summary of Conference Call on the US AI Debt Cycle Industry Overview - The conference call discusses the **US AI industry** and its current debt cycle characteristics, drawing parallels with the real estate sector's dynamics [1][2][6]. Key Points and Arguments 1. **Debt Cycle Characteristics**: The US AI industry exhibits significant debt cycle traits, characterized by rapid demand expansion and rising prices, which ultimately lead to declining investment returns. This mirrors the real estate cycle in China [2][6]. 2. **Capital Expenditure Growth**: There is an acceleration in capital expenditures within the US AI sector, with companies noticeably increasing leverage. However, this rapid expansion poses high risks and may likely lead to a future collapse [2][6]. 3. **Supply and Demand Dynamics**: On the supply side, US companies are reluctant to expand supply significantly to maintain monopoly profits, similar to the real estate sector's avoidance of investing in essential materials. This results in soaring resource prices and declining investment returns [3][5]. 4. **Impact of Debt Expansion**: The US's debt expansion has led to a capital return shift towards countries like China, particularly benefiting its manufacturing sector due to strong production capabilities. This shift results in a decline in domestic investment returns in the US [5][7]. 5. **Sustainability of Current Development Model**: The reliance on corporate leverage for AI development is fragile, with limited government leverage available. This could lead to valuation declines, and the current model is unlikely to be sustainable in the long term, risking bubble formation [6][10]. 6. **Global Energy Market Trends**: Investment trends in the global energy market are diversifying, with increased demand for AI and AIGC leading companies to invest in traditional energy sources (oil, coal) and new energy sectors. Prices for resources like oil, coal, and lithium carbonate are rising [8][9]. 7. **China's Economic Role**: China is leveraging technological innovation and traditional manufacturing to drive economic growth while reducing debt reliance. This strategy allows China to benefit from the demand released by US debt expansion without increasing supply, enhancing capital returns and stock market performance [9][10]. 8. **Investment Strategy Recommendations**: In the current macro environment, investment strategies should align with the US debt cycle. An aggressive strategy focusing on Chinese assets and commodities is recommended during US debt expansion, while a defensive strategy should be adopted if the US halts debt expansion [11][12]. Other Important Insights - The ongoing US debt cycle is seen as favorable for China, as it can produce nearly all major manufacturing products and is expected to benefit from the demand generated by US debt expansion [7][10]. - The relationship between asset volatility and the debt cycle is crucial, as sustained debt expansion typically leads to significant asset price fluctuations, creating trading opportunities for savvy investors [12].

Core Viewpoint - The article emphasizes that the direction of credit expansion is a key determinant of asset performance in global markets, with assets in credit expansion areas performing better than those in credit contraction areas [2][16]. Group 1: Global Market Trends - By early 2025, the rise of China's DeepSeek initiated a revaluation of core technology assets, impacting both Chinese and U.S. AI industries, leading to concerns about over-investment [3][72]. - In February, expectations of fiscal and military expansion in Europe contrasted with U.S. spending cuts, resulting in a significant rise in European assets [3][16]. - By April, tariff negotiations raised doubts about the sustainability of U.S. debt and dollar credit expansion, leading to a decline in U.S. stocks, bonds, and the dollar [3][16]. Group 2: U.S. Credit Cycle - The U.S. credit cycle is expected to gradually recover and may even reach "overheating" conditions, driven by strong AI investments and fiscal expansion [5][27]. - The "Big Beautiful" Act is projected to increase annual spending by approximately $340 billion, raising the deficit rate from 5.9% to 6.4% [6][45]. - Traditional demand is anticipated to improve slightly as high financing costs ease, with potential for a recovery in real estate and manufacturing sectors [50][66]. Group 3: China’s Credit Cycle - China's credit cycle, after a year of recovery, faces challenges due to high bases, slowing policy support, and structural issues, potentially leading to stagnation or decline [8][72]. - AI investments are expected to continue, but traditional demand in sectors like real estate and consumption may weaken due to declining income expectations [9][72]. - The fiscal response is limited, with a need for significant new debt to maintain credit cycle growth, which may not be feasible [9][72]. Group 4: Investment Recommendations - Investment strategies should align with credit expansion directions, favoring U.S. assets over Japan and Europe, while focusing on structural opportunities in China [11][12]. - The S&P 500 index is projected to have a potential upside of 13-16%, reaching levels between 7600 and 7800 points [7][12]. - In the Chinese market, a focus on sectors with structural growth, such as AI and technology, is recommended, while traditional sectors may face headwinds [10][12].

Macro Strategy - The Federal Reserve's interest rate decisions are influenced by historical missions, evolving from a stabilizer to a highly independent central bank focused on maximizing employment and price stability [1] - The Taylor rule suggests only one rate cut in 2026, while traders are pricing in 2.7 cuts, with expectations of at least three cuts in 2026, potentially lowering the policy rate to 2.75-3.0% [1] - A more accommodative monetary policy could lead the U.S. economy from a soft landing to expansion, impacting market dynamics such as lower short-term Treasury yields and higher long-term yield premiums [1] Tourism Investment - The emotional need for happiness drives mainland Chinese tourists to seek cultural experiences abroad, with 39.8% prioritizing happiness through travel, 13.6 percentage points higher than the global average [2] - High cultural value is essential for tourism activities favored by Chinese tourists, with significant demand for pop culture events and related merchandise [2] - Classic cultural IPs significantly enhance long-term tourism spending, as seen with Disney and iconic film locations like New Zealand's "The Lord of the Rings" [2] Fixed Income - Credit expansion across industries remains moderate, with structural differentiation evident, as overall leverage has not returned to pre-pandemic levels [4] - Industries currently experiencing credit expansion include light manufacturing, electronics, and public utilities, characterized by stable cash flows and predictable capital expenditure returns [4] - Sectors facing credit contraction include real estate and consumer goods, which require broader economic recovery to boost demand [4] Non-Banking Financial Sector - The wealth management industry is transitioning from a seller-driven model to a buyer advisory model, influenced by rapid fintech development and increasing national wealth [5] Automotive Industry - 2025 marks a pivotal year for automotive smart technology, with significant advancements in urban NOA (Navigation on Autopilot) capabilities among leading manufacturers [6] - A comparative evaluation of six smart driving suppliers indicates that Huawei and XPeng lead in overall performance, while other manufacturers are closing the gap [6] Non-Banking Financial Sector Insights - The non-banking sector is experiencing an upward trend in market conditions, with public fund holdings in this sector remaining relatively low, indicating potential for growth [8] Company-Specific Reports - Shoulu Hotel's RevPAR decline is narrowing, with ongoing optimization in store openings and structural upgrades, leading to adjusted profit forecasts for 2025-2027 [9] - Xingrong Environment's Q3 performance exceeded expectations, driven by stable pricing mechanisms and growing operational capacity in wastewater treatment [10] - The semiconductor and display sectors are expected to see continued growth, with significant orders and product deliveries enhancing revenue prospects for companies like Jingce Electronics [11] Energy and Environment - Nanfang Storage's Q3 results reflect a strong revenue increase, supported by new project launches and stable pricing in the energy sector [13] - The company is well-positioned for future growth with a focus on energy storage solutions and expanding its market presence [13] Miscellaneous Company Reports - Companies like China Ping An and Huazhong Technology are adjusting profit forecasts upward due to improved operational performance and market conditions [38][39] - The food industry is seeing mixed results, with companies like Anji Food adjusting profit expectations due to fluctuating demand and cost pressures [30][34]

Report Industry Investment Rating No relevant content provided. Core Viewpoints - The overall credit expansion of the entire industry is moderate, showing no significant momentum compared to the past. The non - current liabilities, financing inflows, and investment expenditures all indicate that the economy is in a slow - repair process, and the probability of a rapid turnaround in the economic fundamentals in the short term is low [1]. - There is still significant structural differentiation among industries in credit expansion. Different industries show different trends in non - current liabilities, financing inflows, and investment expenditures, presenting a "structural bias + uneven rhythm" mild recovery situation [2]. - Industries currently in the credit expansion stage, such as light manufacturing, electronics, basic chemicals, and public utilities, are recommended for credit bond allocation. Industries in credit contraction, like real estate, food and beverage, beauty care, and household appliances, suggest focusing on credit bonds of enterprises with controllable refinancing pressure and asset impairment risks [2]. Summary by Directory 1. The overall credit expansion of the entire industry is moderate, showing no significant momentum compared to the past 1.1 Non - current liabilities: Scale expansion continues, but growth rate remains low - As of the end of the first half of 2025, the total non - current liabilities of listed companies in the entire industry reached 20.28 trillion yuan, with a year - on - year increase of 3.62% and a quarter - on - quarter increase of 3.52%. The growth rate is at a low or medium - low level compared to historical data, indicating that the willingness of Chinese enterprises to expand credit through long - term bank loans and bond issuance is not significantly increasing [9][10]. 1.2 Financing inflows: The rhythm is stable, and the support from funding sources remains - In the first half of 2025, the financing inflows of listed companies in the entire industry reached 9.95 trillion yuan, with a year - on - year increase of 0.89% and a quarter - on - quarter increase of 12.51%. The growth rate is similar to recent years but slower than before 2023, suggesting that the ability and willingness of enterprises to obtain funds through medium - and long - term bank credit and bonds have not significantly increased, and the credit expansion is still moderate [12][15]. 1.3 Investment expenditures: Year - on - year growth is continuously negative, and credit implementation is somewhat weak - In the first half of 2025, the investment expenditures of listed companies in the entire industry were 2.13 trillion yuan, with a year - on - year decrease of 1.71% and a quarter - on - quarter decrease of 21.83%. The year - on - year data has been in a downward trend since 2024, indicating that enterprises' ability and willingness to carry out production investment activities by increasing leverage are still weak, and the signal of credit expansion is not obvious [18][19]. 2. Structural differentiation among industries remains the main theme of credit expansion 2.1 Non - current liabilities - In the first half of 2025, industries such as comprehensive, public utilities, building decoration, light manufacturing, and basic chemicals had high year - on - year growth rates of non - current liabilities, while industries like household appliances, food and beverage, agriculture, forestry, animal husbandry, and computer had significant contractions. The differentiation is affected by industry cycle attributes and factors such as consumer demand and policies [25][26]. 2.2 Financing inflows - In the first half of 2025, industries such as household appliances, coal, social services, electronics, light manufacturing, public utilities, non - ferrous metals, and environmental protection had high year - on - year growth rates of financing inflows, while industries like communication, real estate, food and beverage, and social services had negative growth rates. Credit expansion is shifting from traditional industries to industries related to high - end technology manufacturing, consumption upgrading, and export [30][31]. 2.3 Investment expenditures - In the first half of 2025, industries such as coal, automobiles, comprehensive, and electronics showed certain resilience in investment expenditures, while industries like real estate, building materials, petroleum and petrochemicals, and public utilities had weak performance. Many industries have room for improvement in investment implementation, and some industries' investment funds may come from internal sources [33][34]. 2.4 Summary - Credit expansion in recent years has not returned to the pre - pandemic level, showing a structural and moderate recovery. Industries in credit expansion, such as light manufacturing, electronics, basic chemicals, and public utilities, are recommended for credit bond allocation, while industries in credit contraction, like real estate, food and beverage, beauty care, and household appliances, suggest focusing on enterprises with controllable risks [38].

Core Viewpoint - The recent interplay of growth, dividend, and gold reflects a macroeconomic transition between old and new driving forces, with structural changes taking precedence over overall economic shifts [1] Group 1: Macroeconomic Environment - The coexistence of overall price decline and the robust development of AI indicates a complex macroeconomic landscape [1] - The framework of the Merrill Lynch clock is deemed less applicable to the current macro environment, suggesting analysis through the lens of "credit expansion" driven by growth and inflation [1] - Credit expansion is categorized into government credit expansion (fiscal deficit pulse) and endogenous credit expansion (private sector social financing pulse) [1] Group 2: Credit Cycle and Bond Market - Due to the high base effect from last year's fourth quarter and ineffective recovery of private credit, the credit cycle in China may trend towards volatility or weakness [1] - If the fourth quarter shows weak credit conditions, bonds may outperform other asset classes [1] - The recent performance of the ten-year government bond ETF (511260) and the overall bond market is viewed more optimistically compared to the third quarter, with a recommendation for investors to pay attention [3][11] Group 3: Bond Market Analysis - The fundamental analysis remains a core dimension for bond evaluation, emphasizing the importance of avoiding significant timing errors in a strong trend environment [5] - Historical trends indicate that significant increases in ten-year government bond yields are closely linked to fundamental and policy influences [6] - The current liquidity easing policy from the central bank is clear, with recent increases in easing measures [9] Group 4: Central Bank Actions and Market Expectations - There is caution regarding the potential for the central bank to restart government bond purchases, as this is seen as unpredictable policy behavior [10] - The logic that increased short-term bond purchases by major banks directly implies central bank intervention is considered flawed [10] - The increase in short-term government bond allocations by major banks may be driven by their own duration management needs rather than a direct correlation with central bank actions [10]

Market Overview - The A-share market experienced fluctuations, with the Shanghai Composite Index slightly down by 0.07% at 3913.76 points, and the Shenzhen Component Index down by 0.62% [1] - The total trading volume in the Shanghai and Shenzhen markets was 1.67 trillion yuan, a decrease of 224.8 billion yuan compared to the previous trading day [1] - The risk appetite in the market is neutral to weak, with nearly 3000 stocks declining [1] Sector Performance - Stable dividend sectors performed well, with gains in home appliances, oil, finance, and cash flow [1] - The gold sector saw a significant pullback, while cyclical sectors like coal, aquaculture, photovoltaic, and non-ferrous metals also experienced declines [1] Investment Outlook - The company maintains a neutral stance on the equity market but is more optimistic about the bond market compared to the third quarter [2] - In the fourth quarter, A-shares are expected to revolve around currently prosperous sectors (AI chain + anti-involution), making a broad-based rally less likely [2] - The consumer sector is currently facing downward pressure, with industries like liquor and aquaculture in a declining phase due to insufficient domestic demand [2] Bond Market Insights - The ten-year government bond ETF (511260) rose by 0.01%, with a five-day increase of 0.06%, and the active bond yield hovering around 1.76% [4] - The company suggests that the bond market may outperform due to downward pressure on the fundamentals and a potential weak credit environment in the fourth quarter [4] - Recommended bond investments include the ten-year government bond ETF (511260) and the government bond ETF (511010) [4]