Core Viewpoint - The article discusses the review of the "14th Five-Year Plan" and the prospects for the "15th Five-Year Plan," emphasizing the importance of high-quality development, institutional reform, and industrial transformation as key themes for the upcoming planning period [9][10]. Deep Dive Topics - The "15th Five-Year Plan" period is seen as a critical phase for consolidating the foundations for achieving the 2035 long-term goals, focusing on high-quality development and economic resilience [9]. - The article highlights the rapid increase in AI capital expenditure in the U.S., questioning whether this trend indicates a bubble and how long the capital expenditure expansion cycle can last [13][14]. - The "14th Five-Year Plan" review indicates that significant reforms and modernization efforts are necessary to achieve the goals set for 2035, including a doubling of GDP compared to 2020 levels and a substantial reduction in carbon emissions [10][16]. Hot Topics - The article outlines the expectations for the new "Five-Year Plan," focusing on high-quality development, institutional reforms, and industrial upgrades as the three main lines of action [10][12]. - It discusses the outcomes of the 20th Central Committee's Fourth Plenary Session, which emphasizes the need for a robust economic foundation and the importance of maintaining strategic confidence in the face of challenges [16][24]. - The article also addresses the implications of the U.S. government shutdown and its potential impact on global markets, particularly in relation to interest rates and gold prices [20][21]. Economic Insights - The article provides insights into the resilience of the economy in the third quarter, attributing this to both short-term factors and medium-term strengths that support reasonable growth [18][23]. - It notes that the current cycle of AI investment is significantly faster than previous technological revolutions, with AI-related sectors contributing 1.5% to GDP in the current cycle compared to lower percentages in past cycles [14][15].

Core Insights - The article discusses the review of the "14th Five-Year Plan" and the prospects for the "15th Five-Year Plan," emphasizing the importance of this period for achieving the long-term goals set for 2035 [9]. Deep Dive Topics - The "15th Five-Year Plan" is seen as a critical phase for deepening the development strategies established in the "14th Five-Year Plan" and laying the groundwork for the 2035 vision [9]. - The article highlights the need for high-quality development, institutional reforms, and industrial transformation as the three main themes for the new five-year plan [12]. Hot Topics - AI capital expenditure is identified as a potential pillar of the U.S. economy, raising questions about whether the current investment boom is a bubble and how long the capital expenditure expansion cycle can last [13]. - The upcoming "Four Central" meeting is anticipated to set new expectations for the next five years, focusing on sustainable economic growth and social stability [12]. - The article reflects on the spirit of the recent plenary session, emphasizing the need to continue writing new chapters of economic miracles and social stability [12]. High-Frequency Tracking - The article notes that the recent fiscal spending pressures are being addressed through the implementation of two types of incremental fiscal funds [18]. - It reports that overseas risk-free interest rates have declined, leading to a significant rise in gold prices, which have reached new highs [20]. - The third quarter economic performance is characterized by resilience, supported by both short-term factors and medium-term strengths [23].

Core Viewpoint - The convertible bond market is experiencing significant short-term valuation compression, but given the resilience of the equity market, convertible bonds still present investment opportunities, particularly through a low premium strategy [1][2]. Group 1: Market Performance - The Shanghai Composite Index declined by 1.47% last week, while the China Convertible Bond Index fell by 2.35%, indicating a notable compression in convertible bond valuations [1]. - Institutional profit-taking is a major factor influencing short-term valuations in the convertible bond market, although long-term trends remain positive as long as the equity market continues its upward trajectory [1][2]. Group 2: Valuation and Risks - As of October 17, the average parity of convertible bonds was 97.34 yuan, with an average conversion premium rate of 39.99%. High premium convertible bonds have seen significant compression in their conversion premium rates due to increased expectations of forced redemptions [1]. - Large-scale convertible bonds, such as those from Liugong and Hengbang, have experienced rapid compression in premium rates following market speculation about forced redemptions, highlighting the risks associated with high premium and large-scale convertible bonds [1]. Group 3: Investment Strategy - Despite external disturbances, the equity market's upward trend is expected to continue, providing a favorable environment for convertible bonds, which exhibit relative resilience and investment value [2]. - In a sustained bull market, a low premium strategy is recommended as it allows for better participation in the upside of underlying stocks while minimizing valuation compression risks [2]. - The technology sector, particularly semiconductor stocks and TMT industries benefiting from increased overseas AI capital expenditure, is identified as a key investment focus, alongside a balanced approach to cyclical and financial sectors [2].

Core Viewpoint - The convertible bond market is experiencing significant short-term valuation compression, but given the resilience of the equity market, convertible bonds still present investment opportunities, particularly through a low premium strategy [1][2]. Group 1: Market Performance - The Shanghai Composite Index declined by 1.47% last week, while the China Convertible Bond Index fell by 2.35%, indicating a notable compression in convertible bond valuations [1]. - Institutional profit-taking is a major factor influencing short-term valuations in the convertible bond market, although long-term trends remain positive as long as the equity market continues its upward trajectory [1][2]. Group 2: Valuation and Risks - As of October 17, the average parity of convertible bonds was 97.34 yuan, with an average conversion premium rate of 39.99%. High premium convertible bonds have seen significant compression in their conversion premium rates due to increased expectations of forced redemptions [1]. - Large-scale convertible bonds with high premiums face risks related to forced redemptions, particularly when conversion premium rates are elevated, which could lead to dilution of the underlying stock [1]. Group 3: Investment Strategy - Despite external disturbances, the equity market's upward trend is expected to continue, providing a favorable environment for convertible bonds, which exhibit resilience and potential for both appreciation and downside protection [2]. - In a sustained bull market, a low premium strategy is recommended as it allows for better participation in the underlying stock's gains while minimizing valuation compression risks. The technology sector, particularly semiconductor stocks and TMT industries benefiting from increased AI capital expenditure, is highlighted as a key area for investment [2].

Core Insights - The report highlights the tightening safety regulations in the coal industry, which is expected to lead to a rebound in coal prices during the peak demand season, thus benefiting the performance of elastic stocks [3][4][10] - The analysis suggests that the coal supply is constrained due to stricter safety inspections, with a notable decrease in coal production in major regions like Shanxi [3][4] - The demand side shows a stable iron and steel production rate, which is expected to support coal prices, with projections indicating that thermal coal prices will stabilize between 700-750 RMB per ton [4][10] Supply Side Summary - Safety inspections in major coal-producing regions are becoming stricter, with the Ministry of Emergency Management announcing a comprehensive safety inspection plan for 2025 [3][4] - In August, Shanxi's raw coal production was 108 million tons, a year-on-year decrease of 6.7%, while national coal production fell by 3.2% [3][4] - September saw a continuous decline in coal imports for the seventh consecutive month, with imports at 46 million tons, down 3.3% year-on-year [3][4] Demand Side Summary - The "golden September and silver October" period maintains a high iron and steel production level, with daily output exceeding 2.4 million tons [4][10] - The inventory of coking coal has been decreasing since mid-June, with a significant drop in stocks, which is expected to drive up coking coal prices [4][10] - As winter approaches, the demand for thermal coal is expected to improve marginally, supporting price stability [4][10] Investment Analysis - Recommended stocks include Shanxi Coking Coal, Huaibei Mining, Lu'an Environmental Energy, and Yanzhou Coal Mining, which are seen as undervalued and likely to benefit from rising coal prices [4][10] - The report also suggests focusing on stable, high-dividend stocks like China Shenhua, Shaanxi Coal, and China Coal Energy, which are expected to perform well in the upcoming season [4][10] AI Capital Expenditure Insights - The report discusses the significant rise in AI capital expenditure in the U.S., which has become a crucial driver for the economy and capital markets [12][14] - AI-related investments have outpaced other sectors, with a notable increase in productivity attributed to AI technologies [12][14] - The report raises questions about whether the current AI investment boom is indicative of a bubble, contrasting it with the internet revolution of the 1990s [12][14][17] Recycled Aluminum Industry Insights - The recycled aluminum sector is poised for growth due to resource security needs and carbon neutrality goals, with projected production reaching 10.5 million tons by 2024 [20][22] - The report emphasizes the importance of developing a robust recycling system to reduce reliance on imported bauxite, as domestic reserves are dwindling [20][22] - The green premium for recycled aluminum is expected to increase as carbon pricing becomes more stringent, enhancing the strategic position of recycled aluminum in the market [20][22]

Core Viewpoint - The article discusses the recent trends in major asset classes, highlighting the decline in overseas risk-free interest rates and the significant rise in gold prices, alongside the performance of various stock indices and the implications of political events in the U.S. and Japan [2][4][77]. Major Asset Classes & Overseas Events & Data - Overseas risk-free interest rates have uniformly declined, with the 10-year U.S. Treasury yield falling by 3 basis points to 4.02%. The S&P 500 rose by 1.7%, and the Nasdaq increased by 2.1%. The dollar index decreased by 0.3% to 98.6, while offshore RMB strengthened to 7.13. WTI crude oil dropped by 2.3% to $57.5 per barrel, and COMEX gold surged by 6.2% to $4,234.9 per ounce [2][4][77]. - In developed markets, stock indices showed mixed results, with the French CAC40, Nasdaq, and S&P 500 rising by 3.2%, 2.1%, and 1.7%, respectively. Conversely, the Hang Seng Index, German DAX, and Nikkei 225 fell by 4.0%, 1.7%, and 1.1% [4]. - The U.S. government shutdown has entered its third week, with expectations that it may last over 30 days. The Polymarket predicts a shutdown duration of over 30 days, while the Kalshi market estimates it could last up to 42 days [55][56]. - The Japanese Liberal Democratic Party (LDP) is seeking a coalition with the Japan Innovation Party after the Komeito party withdrew from their long-standing alliance. The new LDP president, Sanae Takaichi, is negotiating for majority support [50]. - Federal Reserve Chairman Jerome Powell indicated that the balance sheet reduction (QT) may end in the coming months, as liquidity indicators show signs of tightening. He noted that the economic situation has not changed significantly since the September meeting [62][77]. Sector Performance - In the U.S., all sectors of the S&P 500 saw gains, with communication services, real estate, information technology, consumer staples, and consumer discretionary rising by 3.6%, 3.4%, 2.1%, 2.0%, and 1.9%, respectively. The financial sector remained flat due to regional bank turmoil [10]. - In the Eurozone, most sectors also experienced increases, with consumer staples, technology, and consumer discretionary rising by 7.1%, 4.1%, and 3.7%, while financials and industrials fell by 2.1% and 1.0% [10]. - The Hang Seng Index saw a decline across most sectors, with the Hang Seng Tech Index, Hang Seng Index, and Hang Seng China Enterprises Index dropping by 8.0%, 4.0%, and 3.7%, respectively. The information technology, healthcare, and consumer discretionary sectors fell by 8.2%, 6.9%, and 5.7% [14]. Currency and Commodity Trends - The dollar index fell by 0.3% to 98.56, with most currencies appreciating against the dollar. The euro, British pound, and Japanese yen rose by 0.2%, 0.5%, and 0.4%, respectively. Emerging market currencies also saw appreciation, with the Mexican peso rising by 1.2% and the Brazilian real by 2.2% [25][32]. - Commodity prices mostly declined, with WTI crude oil and Brent crude both down by 2.3%. However, coal prices increased by 1.6% to 1,179 yuan per ton, while rebar prices fell by 2.1% to 3,037 yuan per ton [35][41]. - Precious metals saw a significant increase, with COMEX gold rising by 6.2% to $4,234.9 per ounce and COMEX silver increasing by 6.3% to $50.4 per ounce [41].

Group 1 - The article discusses the significant rise in AI capital expenditure in the US over the past few years, which has strongly supported the US capital markets and economic growth. It questions whether this investment boom signals a "bubble" and how long the capital expenditure expansion cycle can continue [2][7]. - From a micro perspective, the capital expenditure of major US tech companies is approaching $100 billion by Q2 2025, doubling from three years ago with a year-on-year growth rate of 64.8%. The public's interest in AI technology and investment has surged dramatically [8][11]. - From a macro perspective, AI investment is expected to contribute 1.0 percentage points to economic growth in the first half of 2025, nearly on par with consumer spending, but the negative impact of imports on net investment cannot be overlooked [3][22]. Group 2 - The article highlights that while AI has shown some potential to boost productivity, the overall effect remains limited. The probability of the US being in a "low growth" phase for productivity is still high at 85% as of Q2 2025 [4][26]. - Historical comparisons indicate that the current AI investment, productivity, and cost performance are lagging behind the internet revolution of the 1990s, suggesting that the AI revolution is still in its early stages [4][46]. Group 3 - The article raises concerns about the sustainability of the current AI capital expenditure cycle, noting that while the financial metrics of major tech companies are stronger than during the internet bubble, potential headwinds include declining free cash flow, pressure on profits, and rising electricity demands [5][60]. - It suggests that the macroeconomic environment remains favorable for AI capital expenditure, with expectations of continued Federal Reserve rate cuts and potential economic recovery supporting the capital expenditure cycle [5][69].

Core Viewpoint - The article discusses the significant rise in AI capital expenditure in the U.S. over the past few years, which has strongly supported the U.S. capital markets and economic growth. It questions whether the current AI investment boom signals a "bubble" and how long the capital expenditure expansion cycle can continue [2][7]. Group 1: AI Capital Expenditure as a Pillar of the U.S. Economy - Micro perspective: In Q2 2025, capital expenditure by the top seven U.S. tech companies (Mag 7) is expected to approach $100 billion, doubling from three years ago, with a year-on-year growth rate of 64.8%. The public's interest in AI technology and investment has surged dramatically [2][8]. - Mid-level perspective: AI-related investments in the U.S. have significantly outpaced other sectors, becoming a key driver of the U.S. stock market. From Q4 2022 to Q2 2025, U.S. computer equipment investment grew by 61%, far exceeding other investments, with Mag 7's capital expenditure accounting for about 30% of the S&P 500 [11][12]. - Macro perspective: In the first half of 2025, AI investment is expected to contribute 1.0 percentage points to economic growth, nearly matching the contribution from consumer spending. However, the negative impact of imports on net investment cannot be overlooked [3][22]. Group 2: Impact of AI on Productivity - The AI revolution has shown some positive effects on productivity, but there is still significant room for improvement. The labor productivity growth rate in the U.S. has increased compared to pre-pandemic levels, but the probability of remaining in a "low growth" phase is still high at 85% as of Q2 2025 [4][26]. - Historical comparisons indicate that the current investment, productivity, and cost performance in the AI revolution lag behind the internet revolution, suggesting that the AI revolution is still in its early stages [4][46]. Group 3: Outlook for AI Capital Expenditure - Concerns about whether the current AI investment boom is a "bubble" are addressed. Unlike the internet bubble, the current rise in market capitalization among leading tech companies is supported by profits, with financial metrics such as cash-to-market value and return on equity (ROE) being stronger than during the internet bubble [5][55]. - Potential headwinds for future AI capital expenditure include declining free cash flow, pressure on profits, and rising electricity demand leading to potential power bottlenecks [60][61]. - Despite these challenges, the macroeconomic environment remains favorable for AI capital expenditure, with expectations of continued support from the Federal Reserve's interest rate cuts and a potential economic recovery [69].

Core Viewpoint - The article discusses the recent trends in major asset classes, highlighting the decline in overseas risk-free interest rates and the significant rise in gold prices, alongside the performance of various stock indices and the implications of political events in the US and Japan [2][4][77]. Major Asset Classes & Overseas Events & Data - Overseas risk-free interest rates have uniformly declined, with the 10-year US Treasury yield falling by 3 basis points to 4.02%. The S&P 500 rose by 1.7%, and the Nasdaq increased by 2.1%. The dollar index decreased by 0.3% to 98.6, while offshore RMB strengthened to 7.13. WTI crude oil dropped by 2.3% to $57.5 per barrel, and COMEX gold surged by 6.2% to $4,234.9 per ounce [2][4][77]. - In developed markets, stock indices showed mixed results, with the French CAC40, Nasdaq, and S&P 500 rising by 3.2%, 2.1%, and 1.7% respectively, while the Hang Seng Index, German DAX, and Nikkei 225 fell by 4.0%, 1.7%, and 1.1% respectively. Emerging markets generally saw gains, with the Korean Composite Index, Brazilian IBOVESPA, and Indian SENSEX30 rising by 3.8%, 1.9%, and 1.9% respectively [4][10]. - The US government shutdown has entered its third week, with expectations that it may last over 30 days. The Polymarket predicts a shutdown duration of over 30 days, while the Kalshi market estimates it could last up to 42 days [55][56]. - The Japanese Liberal Democratic Party (LDP) is seeking a coalition with the Japan Innovation Party after the Komeito party withdrew from their long-standing alliance. The new LDP president, Sanae Takaichi, is negotiating for majority support [50]. - Federal Reserve Chairman Jerome Powell indicated that the balance sheet reduction (QT) may end in the coming months, citing tightening liquidity conditions. He noted that the economic outlook has not changed significantly since the September meeting [62][77]. Commodity Prices - The article notes that commodity prices have mostly declined, with WTI crude oil and Brent crude both down by 2.3%. However, coal prices increased by 1.6%, while rebar prices fell by 2.1% [35][41]. - Precious metals saw a significant increase, with COMEX gold rising by 6.2% and COMEX silver increasing by 6.3%. In contrast, base metals like LME copper and aluminum experienced declines of 1.9% and 0.4% respectively [41][36].

Market Performance - The Hang Seng Index (HSI) closed at 25,889, down 1.5% for the day but up 29.1% year-to-date (YTD) [2] - The MSCI China index decreased by 1.3% to 87, with a YTD increase of 34.0% [2] - The CSI 300 index fell 0.5% to 4,594, showing a YTD growth of 16.7% [2] Commodity Prices - Brent Crude oil rose by 1.0% to $63 per barrel, but is down 11.8% YTD [3] - Gold prices increased by 2.3% to $4,110 per ounce, reflecting a significant YTD rise of 56.6% [3] - Copper prices dropped by 3.2% to $10,518 per ton, with a YTD increase of 20.0% [3] Economic Indicators - China's exports grew by 8.3% YoY in September, up from 4.4% in August, exceeding market expectations [6] - Imports rose by 7.4% in September, significantly higher than the 1.3% increase in August [8] - The US PPI Final Demand YoY increased by 2.6%, slightly below the consensus of 2.7% [4] Company Insights - JD.com is projected to achieve a 15.2% YoY revenue growth in Q3 2025, despite a forecasted 65% decline in adjusted net profit to RMB 4.6 billion [11] - The stock is rated as a "BUY" with a target price of $41.00, indicating potential upside from enhanced supply chain capabilities [13]