Core Viewpoint - Momentum stocks that have led the rise in the U.S. stock market this year are experiencing a significant sell-off, indicating a shift in market dynamics and investor sentiment towards quality stocks [1][3]. Group 1: Market Dynamics - The market is undergoing a notable rotation, with significant outflows from momentum stock portfolios based on performance over the past 3, 6, and 12 months [3]. - The sell-off is particularly pronounced in speculative sectors, including heavily shorted stocks, quantum computing concepts, and unprofitable tech companies [1][3]. - Historical data suggests that the momentum factor typically underperforms from November to January, indicating that the current downtrend may not be over [5][7]. Group 2: Performance Data - High Beta 12M Winners have a year-to-date return of 60%, while Global Rare Earths have surged by 258% [4]. - Non-profitable tech stocks have seen an 83% increase, but the overall trend indicates a shift towards quality stocks as speculative assets lead the market decline [4][11]. Group 3: Investor Behavior - Investors are moving from chasing high growth to seeking certainty in fundamentals, reflecting a clear change in risk appetite amid rising market uncertainties [4][11]. - Hedge funds maintain a high exposure to momentum stocks, positioned at the 90th and 94th percentiles over the past year and five years, respectively, which could trigger a cascading sell-off if positions are unwound [7][11]. Group 4: Sector Exposure - Current momentum stocks are heavily concentrated in information technology and industrial sectors, while being short on healthcare and consumer sectors, making them vulnerable to market shifts [11][12]. - The correlation between momentum stocks and gold has increased, suggesting that macroeconomic factors influencing both asset classes may be changing [12][14]. Group 5: Market Breadth - The performance of the S&P 500 has outpaced the "X7 index" (excluding seven major tech giants) in 13 out of the last 15 years, with a 6% annualized performance difference since January 2020 [14].

Report Investment Rating - The report gives a "★☆☆" rating to CITIC's five-style stability, indicating a slightly bullish view with limited operability in the market [5]. Core Viewpoints - In the week ending October 17, 2025, Tonglian All A (Shanghai, Shenzhen, Beijing), ChinaBond Composite Bond, and Nanhua Commodity Index had weekly returns of -3.39%, 0.21%, and -1.14% respectively. In the public fund market, equity long strategies retreated, pure bonds outperformed, neutral strategy products showed mixed performance, and among commodities, precious metal ETFs rose while non-ferrous metal ETFs declined, and energy chemical and soybean meal ETFs continued to weaken [5]. - Among CITIC's five styles, the financial style rose last week while others fell. The style rotation chart shows that the growth and consumption styles weakened marginally in terms of relative strength, and the financial style increased significantly in terms of indicator momentum. In the public fund pool, cyclical style funds had better excess performance in the past week, and other style funds underperformed the index on average. The product's deviation from cyclical and consumption styles increased marginally, and the overall market congestion indicator increased marginally this week, with the cyclical style currently in a historically high congestion range [5]. - In the neutral strategy, the stock index basis showed a marginal recovery trend last week. The IM contract rebounded from below the -2 standard deviation of the three - month average to within one standard deviation, and the premium rates of the corresponding spot index ETFs of IH and IF were in the top 20% quantile range of the past three months [5]. - Among Barra factors, the residual momentum factor had better performance in the past week with a weekly excess return of 2.49%, while the momentum and capital flow factors had excess drawdowns. The win - rates of the profitability and leverage factors improved. The cross - section rotation speed of factors increased significantly this week and is currently in a relatively high quantile range in the past year [5]. - According to the latest scoring results of the style timing model, the consumption and financial styles recovered marginally this week, the cyclical style declined, and the current signal favors the stable style. The return of the style timing strategy last week was 0.52%, with an excess return of 1.45% compared to the benchmark equal - weighted allocation [5]. Summary by Directory Fund Market Review - In the public fund market, equity long strategies had a drawdown in the past week, pure bonds had better returns, neutral strategy products showed mixed performance, precious metal ETFs in commodities had large increases, non - ferrous metal ETFs had a return correction, and energy chemical and soybean meal ETFs' net values continued to weaken [5]. - Among CITIC's five styles, the financial style rose last week while others fell. Cyclical style funds had better excess performance in the public fund pool, and other style funds underperformed the index on average. The product's deviation from cyclical and consumption styles increased marginally, and the overall market congestion indicator increased marginally this week, with the cyclical style in a historically high congestion range [5]. - In the neutral strategy, the stock index basis recovered marginally last week, and the premium rates of the corresponding spot index ETFs of IH and IF were in the top 20% quantile range of the past three months [5]. - Among Barra factors, the residual momentum factor had a weekly excess return of 2.49%, the momentum and capital flow factors had excess drawdowns, and the win - rates of the profitability and leverage factors improved. The factor cross - section rotation speed increased significantly and is in a relatively high quantile range in the past year [5]. - According to the style timing model, the consumption and financial styles recovered marginally this week, the cyclical style declined, and the style timing strategy had a return of 0.52% last week, with an excess return of 1.45% compared to the benchmark [5]. Recent Market Returns - The weekly, monthly, quarterly, and semi - annual returns of Tonglian All A (Shanghai, Shenzhen, Beijing), ChinaBond Composite Bond (net), and Nanhua Commodity are presented in the report, along with data on the establishment scale of public funds in the past year, the maximum drawdown of major public fund strategy indices in the past three months, and the weekly returns of major public fund strategy indices [7]. CITIC Style Index - The net value trends of CITIC's financial, cyclical, consumption, growth, and stable style indices are shown, as well as the relative rotation chart of these style indices, which reflects the relative strength and momentum of different styles in different time periods [8][9]. - The excess return performance of CITIC style - based fund style indices in different time periods (weekly, monthly, quarterly, semi - annual, annual) is presented, along with the congestion levels of different styles (excluding the stable style due to data limitations) [10][11]. Barra Factors - The preference levels of Barra single - factors (ranging from 0 - 1) are shown, indicating the degree of preference for different factors. The excess return performance of Barra single - factor style strategies in different time periods (weekly, monthly) is also presented, as well as the excess net value trends of Barra single - factor styles since this year [13][14][17].

- Model Name: "Day and Night Convergence" New Momentum Factor; Model Construction Idea: Based on the price-volume relationship during the day and overnight, the intraday factor and overnight factor are improved and then recombined into a new momentum factor[1][7] - Model Construction Process: 1. Split the trading period into day and night sessions[7] 2. Explore the price-volume relationship in each session separately[7] 3. Construct the "Day and Night Convergence" new momentum factor based on the findings[7] - Model Evaluation: The new factor significantly outperforms the traditional momentum factor in terms of stock selection ability[6][7] - Factor Name: "Day and Night Convergence" New Momentum Factor; Factor Construction Idea: Incorporate the information of "trading volume" into the previous "momentum factor segmentation" research to further explore the differences in investor trading behavior[7] - Factor Construction Process: 1. Split the trading period into day and night sessions[7] 2. Explore the price-volume relationship in each session separately[7] 3. Construct the "Day and Night Convergence" new momentum factor based on the findings[7] - Factor Evaluation: The new factor significantly outperforms the traditional momentum factor in terms of stock selection ability[6][7] Model Backtest Results - "Day and Night Convergence" New Momentum Factor, Annualized Return: 17.95%, Annualized Volatility: 8.70%, IR: 2.06, Monthly Win Rate: 77.86%, Maximum Drawdown: 9.07%[1][7][14] Factor Backtest Results - "Day and Night Convergence" New Momentum Factor, Annualized Return: 17.95%, Annualized Volatility: 8.70%, IR: 2.06, Monthly Win Rate: 77.86%, Maximum Drawdown: 9.07%[1][7][14]

Group 1: Southbound Capital - Southbound capital has significantly flowed into the Hong Kong stock market in 2025, with a cumulative net purchase of 979 billion HKD from January to August, surpassing the total of 807.9 billion HKD for the entire year of 2024 [2][24]. - Despite the increasing transaction share of southbound capital, its net purchases have shown little predictive power for the future movements of the Hang Seng Index, with a negative correlation observed between daily net purchases and index fluctuations [2][24]. - The top 10% of stocks by net purchase amount from southbound capital yielded an annualized return of 12.08%, significantly higher than the average of 2.61% and the bottom 10% group which saw a return of -2.94% [3][29]. Group 2: Industry Rotation - The analysis of industry rotation indicates that the southbound net purchase amount has a poor monotonicity across industries, but after adjusting for transaction amounts, the excess returns for bullish positions significantly improve, with the top three industries showing an annualized return of 11.64% [4][32]. - The retail sector, particularly represented by Alibaba, has been the most favored by southbound capital, with a net purchase scale significantly outperforming other sectors [4][32]. - The report highlights the effectiveness of style factors in guiding industry allocation, with growth and long-term momentum factors showing particularly strong performance in the Hong Kong market [6][65]. Group 3: IPO Trends - The Hong Kong stock market has experienced a surge in IPO activity in 2025, with 43 companies listed by June 30, raising a total of 106.71 billion HKD, which is significantly higher than the 88.15 billion HKD raised in 2024 [7][38]. - Notable IPOs include Heng Rui Pharmaceutical and Ningde Times, which raised 11.3 billion HKD and 41 billion HKD respectively, indicating a strong market interest and improved liquidity [7][38]. - The new IPO regulations implemented in August 2025 aim to enhance the attractiveness of the Hong Kong market by reducing public shareholding requirements and shortening the listing review process [7][38]. Group 4: Real Estate Market - The Hong Kong real estate market is showing signs of stabilization following the government's removal of property control measures, which has significantly reduced transaction costs for residential properties [11][12]. - High-frequency data indicates a rebound in private residential price indices since March 2025, suggesting a recovery in market sentiment and price stabilization [12][11]. - The low-interest environment and financial wealth effects are contributing to the improved outlook for the real estate sector, with transaction volumes increasing significantly [11][12].

Core Insights - The momentum factor is driving strength in international equities, particularly benefiting the Invesco S&P International Developed Momentum ETF (IDMO) due to increased defense spending in Europe [1] Defense Spending Trends - The ongoing Russia/Ukraine conflict has catalyzed increased defense spending, with NATO members agreeing to allocate 5% of their GDP for defense over the next decade [2] - Europe has historically relied on the U.S. for defense, but recent geopolitical changes necessitate greater self-reliance among European nations [3] Economic Impact - Increased defense spending in Europe is expected to positively impact economic growth, as highlighted by European Commission President Ursula von der Leyen [4] - The IDMO fund, which has attracted $1 billion in assets this year, is positioned to benefit from this trend, with significant allocations to European countries like Germany (15%) and the UK (16.68%) [5] Fund Holdings - IDMO's top holding is Rolls-Royce Holdings, which has a strong presence in the European defense industry and also serves key U.S. defense customers [6][7]

Group 1: Market Sentiment and Trends - Goldman Sachs emphasizes a rationally optimistic view on the market, supported by capital flows, historical trends, and Federal Reserve policies [1] - Recent capital flows indicate a strong buying trend in U.S. stocks, particularly in technology, with hedge funds recording the largest buy-in over the past three months [2] - The current market environment is characterized as a "stock picker's market," requiring selective investment strategies rather than broad-based approaches [1][19] Group 2: Sector Strategies - In a scenario where the Federal Reserve lowers interest rates amid economic growth, technology and discretionary consumer sectors are expected to perform well [4] - Small-cap stocks have shown strong performance recently, but there are concerns about their long-term fundamentals, suggesting that this may be a temporary opportunity [7] - The performance of the Nasdaq 100 index since 2009 has been driven primarily by earnings and dividends, rather than excessive valuation expansion [5][6] Group 3: Global Market Insights - The European market has shown stagnation after a strong start to the year, with several factors contributing to skepticism about its future performance [10] - In contrast, Japan's stock market is performing well, with expectations of positive impacts from the upcoming elections [11] - China is highlighted as another strong performer, although there is a cautious long-term outlook despite recent tactical openness [12] Group 4: Investment Themes - The ongoing developments in artificial intelligence are noted, with fluctuations in the narrative being a consistent feature over the past three years [17] - The options market shows resilience, with high implied volatility indicating increased demand for upside exposure, particularly in individual stocks [9] - The trend of the U.S. Treasury yield curve steepening contrasts with widening credit spreads in corporate bonds, indicating differing market dynamics [25]

Report Investment Rating - The operation rating for CITIC Five-Style - Growth is ★☆☆, indicating a bullish bias but with limited operability in the market [5] Core Viewpoints - In the week ending September 19, 2025, the weekly returns of Tonglian All A (Shanghai, Shenzhen, Beijing), ChinaBond Composite Bond, and Nanhua Commodity Index were -0.27%, -0.03%, and 0.24% respectively. The growth and cyclical styles of CITIC Five-Style closed up, while the others closed down. The growth style continued to strengthen in terms of indicator momentum [5] - Among public funds, the ordinary stock strategy performed well with a weekly return of 0.48%. The convertible bond strategy in the bond strategy weakened, and the pure bond strategy's return rebounded. The net value of the soybean meal ETF declined by 2.68%, and the return of the precious metal ETF slightly corrected [5] - In the neutral strategy, the basis of IH, IF, and IC contracts was within 1 standard deviation of the three - month average, and the IM contract was below -1 standard deviation of the three - month average, indicating that the hedging cost was still at a relatively high level [5] - The short - term momentum factor had a good performance with a weekly excess return of 1.84%. The leverage and ALPHA factors continued to weaken, and the winning rate of the dividend factor rebounded month - on - month [5] - According to the latest score of the style timing model, the growth style rebounded this week, while the consumption and stable styles weakened, and the current signal favored the growth style [5] Summary by Directory Fund Market Review - The ordinary stock strategy in the public fund market performed well with a weekly return of 0.48%. The convertible bond strategy in the bond strategy weakened, and the pure bond strategy's return rebounded. The net value of the soybean meal ETF declined by 2.68%, and the precious metal ETF's return slightly corrected [5] - The financial - style funds in the public fund pool had excellent excess performance with a weekly excess return of 3.14%. The product's deviation from the growth style increased marginally, and the overall market indicator of the crowding degree declined slightly this week. The financial style was in a historically high - crowding range [5] Equity Market Strategy - In the neutral strategy, as of last Friday, the basis of IH, IF, and IC contracts was within 1 standard deviation of the three - month average, and the IM contract was below -1 standard deviation of the three - month average, indicating a relatively high hedging cost. The premium rates of the spot index ETFs corresponding to IH and IF were in the high quantile range of the past three months, while those of IC and IM were in the medium quantile range [5] - The short - term momentum factor had a weekly excess return of 1.84%. The leverage and ALPHA factors continued to weaken, and the winning rate of the dividend factor rebounded month - on - month. The cross - section rotation speed of factors rebounded month - on - month and was currently in the low - to - medium quantile range of the past year [5] - According to the style timing model, the growth style rebounded this week, the consumption and stable styles weakened, and the signal favored the growth style. The return of the style timing strategy last week was -1.72%, and the excess return compared to the benchmark balanced allocation was -0.71% [5]

Quantitative Models and Construction Methods 1. Model Name: PB-ROE-50 Combination - **Model Construction Idea**: This model focuses on selecting stocks with low Price-to-Book (PB) ratios and high Return on Equity (ROE) to construct a portfolio that aims to achieve excess returns[24] - **Model Construction Process**: The portfolio is constructed by screening stocks based on their PB and ROE metrics. Stocks with the lowest PB ratios and highest ROE values are selected to form the top 50 stocks in the portfolio. The portfolio is rebalanced periodically to maintain the selection criteria[24] - **Model Evaluation**: The model demonstrates significant excess returns in the all-market stock pool, though it underperforms in specific indices like the CSI 500 and CSI 800[24][25] 2. Model Name: Public and Private Institutional Research Combination - **Model Construction Idea**: This model leverages the stock selection strategies of public and private institutional research to identify stocks with potential for excess returns[27] - **Model Construction Process**: The portfolio is constructed by tracking the stocks that public and private institutions have recently researched. Stocks with higher research frequency or positive sentiment are included in the portfolio. The portfolio is rebalanced periodically to reflect updated research data[27] - **Model Evaluation**: The public institutional research strategy shows significant excess returns compared to the CSI 800 index, while the private institutional research strategy also achieves positive but smaller excess returns[27][28] 3. Model Name: Block Trade Combination - **Model Construction Idea**: This model identifies stocks with high block trade activity and low volatility, as these characteristics are associated with better subsequent performance[31] - **Model Construction Process**: The portfolio is constructed based on two key metrics: "block trade transaction amount ratio" and "6-day transaction amount volatility." Stocks with higher transaction ratios and lower volatility are selected. The portfolio is rebalanced monthly[31] - **Model Evaluation**: The model experienced a drawdown in the past week, with negative excess returns relative to the CSI All Share Index[31][32] 4. Model Name: Directed Issuance Combination - **Model Construction Idea**: This model focuses on stocks involved in directed issuance events, which are analyzed for their potential investment value based on event-driven factors[37] - **Model Construction Process**: The portfolio is constructed by identifying stocks with directed issuance announcements. Factors such as market capitalization, rebalancing cycles, and position control are considered. The portfolio is rebalanced periodically to reflect new issuance events[37] - **Model Evaluation**: The model experienced a drawdown in the past week, with negative excess returns relative to the CSI All Share Index[37][38] --- Model Backtesting Results 1. PB-ROE-50 Combination - **Weekly Excess Return**: All-market stock pool: +0.79%; CSI 500: -0.57%; CSI 800: -0.02%[24][25] - **Year-to-Date Excess Return**: All-market stock pool: +22.30%; CSI 500: +3.00%; CSI 800: +16.16%[25] - **Weekly Absolute Return**: All-market stock pool: +2.87%; CSI 500: +2.79%; CSI 800: +1.89%[25] - **Year-to-Date Absolute Return**: All-market stock pool: +48.27%; CSI 500: +28.59%; CSI 800: +36.42%[25] 2. Public and Private Institutional Research Combination - **Weekly Excess Return**: Public research: +3.82%; Private research: +0.51%[27][28] - **Year-to-Date Excess Return**: Public research: +8.10%; Private research: +12.02%[28] - **Weekly Absolute Return**: Public research: +5.81%; Private research: +2.44%[28] - **Year-to-Date Absolute Return**: Public research: +26.96%; Private research: +31.56%[28] 3. Block Trade Combination - **Weekly Excess Return**: -1.77%[31][32] - **Year-to-Date Excess Return**: +0.26%[32] - **Weekly Absolute Return**: Not explicitly stated - **Year-to-Date Absolute Return**: +62.65%[32] 4. Directed Issuance Combination - **Weekly Excess Return**: -1.71%[37][38] - **Year-to-Date Excess Return**: -0.77%[38] - **Weekly Absolute Return**: Not explicitly stated - **Year-to-Date Absolute Return**: +20.29%[38] --- Quantitative Factors and Construction Methods 1. Factor Name: Beta Factor - **Factor Construction Idea**: Measures the sensitivity of a stock's returns to market movements, capturing systematic risk[20] - **Factor Construction Process**: Beta is calculated using regression analysis of a stock's returns against the market index over a specified period[20] - **Factor Evaluation**: Demonstrated significant positive returns in the past week, indicating a preference for high-beta stocks[20] 2. Factor Name: Momentum Factor - **Factor Construction Idea**: Captures the tendency of stocks with strong past performance to continue performing well in the short term[20] - **Factor Construction Process**: Momentum is calculated based on the cumulative returns of a stock over a specific lookback period, such as 1 month or 5 days[20][22] - **Factor Evaluation**: Significant positive returns were observed, with notable momentum effects in sectors like media, real estate, and agriculture[20][22] 3. Factor Name: Scale Factor - **Factor Construction Idea**: Reflects the size effect, where larger-cap stocks tend to outperform smaller-cap stocks in certain market conditions[20] - **Factor Construction Process**: Scale is measured using market capitalization, with adjustments for sector and industry effects[20] - **Factor Evaluation**: Demonstrated positive returns, indicating a preference for large-cap stocks in the past week[20] --- Factor Backtesting Results 1. Beta Factor - **Weekly Return**: +0.70%[20] 2. Momentum Factor - **Weekly Return**: +0.46%[20] 3. Scale Factor - **Weekly Return**: +0.16%[20]

Core Viewpoint - The article highlights that the current market dynamics, driven by ETFs, quantitative trading, QE, and 0DTE options, are creating a bubble that is likely to burst, with a Shiller CAPE ratio of 38 indicating an inevitable market reset [2][9][14] Group 1: Market Dynamics - The S&P 500 is projected to reach 6512 points in 2025, with a 25% increase in the year, primarily driven by momentum rather than earnings [3] - The Shiller CAPE ratio is at 38, significantly above the historical average of 17, indicating a severe disconnection between valuation and earnings growth, which is only 7-10% [3][9] - The market is experiencing a similar scenario to the lead-up to the 1987 "Black Monday," where momentum and technical risks are overlapping [7][8] Group 2: Momentum Factors - Four key momentum factors are identified as driving the market: index ETFs, quantitative funds, QE liquidity, and 0DTE options [4] - The total assets under management (AUM) of U.S. ETFs reached $12.2 trillion in 2025, a 74% increase from $7 trillion in 2020, with significant inflows into large-cap stocks [4] - Quantitative hedge funds achieved an 11% return in the first half of 2025, with momentum strategy ETFs rising by 15.5%, indicating a strong reliance on price trends [5] - The Federal Reserve's balance sheet is projected to be $6.2 trillion in 2025, still 55% higher than pre-pandemic levels, contributing to a liquidity-driven market environment [6] - Retail trading volume has surged, with retail investors accounting for 10-36% of market activity in 2025, and 0DTE options making up 61% of S&P 500 options volume [6] Group 3: Historical Comparisons - The article draws parallels between the current market conditions and those of 1987, noting that both periods exhibit high CAPE ratios and reliance on momentum-driven trading strategies [9][12] - Historical data shows that when CAPE exceeds 30, markets typically experience a 20-30% decline, suggesting a similar outcome is likely in 2025 [9] Group 4: Investment Implications - The article suggests that value stocks, particularly in sectors like energy and finance, may outperform momentum stocks in the current environment, similar to post-1987 trends [13] - Diversifying assets and returning to fundamental analysis are emphasized as key strategies to navigate the current momentum-driven market [13][14]

Group 1: Weekly Index Enhanced Portfolio Performance - The CSI 300 index enhanced portfolio achieved an excess return of 0.61% this week and 17.47% year-to-date [1][6] - The CSI 500 index enhanced portfolio recorded an excess return of -0.85% this week and 8.97% year-to-date [1][6] - The CSI 1000 index enhanced portfolio had an excess return of -0.05% this week and 17.24% year-to-date [1][6] - The CSI A500 index enhanced portfolio reported an excess return of -0.55% this week and 9.19% year-to-date [1][6] Group 2: Stock Selection Factor Performance Tracking - In the CSI 300 component stocks, factors such as three-month institutional coverage, one-month volatility, and one-year momentum performed well [1][7] - In the CSI 500 component stocks, one-year momentum, expected net profit month-on-month, and single-quarter revenue year-on-year growth showed strong performance [1][7] - In the CSI 1000 component stocks, single-quarter EP, three-month earnings adjustments, and single-quarter ROE were notable factors [1][7] - In the CSI A500 index component stocks, one-year momentum, standardized expected external income, and single-quarter revenue year-on-year growth performed well [1][7] - Among public fund heavy stocks, one-year momentum, single-quarter revenue year-on-year growth, and expected net profit month-on-month were strong factors [1][7] Group 3: Public Fund Index Enhanced Product Performance Tracking - The CSI 300 index enhanced products had a maximum excess return of 2.13%, a minimum of -1.11%, and a median of 0.05% this week [1][20] - The CSI 500 index enhanced products had a maximum excess return of 0.44%, a minimum of -1.86%, and a median of -0.42% this week [1][22] - The CSI 1000 index enhanced products had a maximum excess return of 0.63%, a minimum of -1.37%, and a median of 0.03% this week [1][26] - The CSI A500 index enhanced products had a maximum excess return of 0.84%, a minimum of -0.79%, and a median of -0.02% this week [1][27]