Group 1: Overview of Major Assets - In July, A-shares approached 3600 points, with the 10-year government bond yield rising and commodities experiencing fluctuations [1][8] - The A-share market saw broad-based index gains, with growth and consumption sectors leading the way [11][12] - The bond market experienced an upward trend in yields, breaking the inversion between deposit rates and government bond yields [24][26] - Commodity markets showed divergence, with the South China Industrial Products Index rising and then retreating, while domestic futures markets experienced significant volatility [28][30] - Global equity indices generally rose, with the Nasdaq leading among US indices and European stocks also showing strong performance [40][42] Group 2: A-share Market Dynamics - The economic fundamentals in June showed divergence, indicating resilience, with manufacturing PMI remaining in contraction territory [2][12] - Macro liquidity indicators suggested a warming trend, with social financing showing signs of recovery [2][12] - Micro-level funding saw a rebound in northbound capital and an increase in margin trading balances, indicating renewed market activity [2][12] Group 3: Bond Market Insights - The 10-year government bond yield rose to 1.75% by the end of July, marking a 5.7 basis point increase for the month [24][26] - The inversion between deposit rates and the 10-year government bond yield was broken, indicating a shift in market expectations [24][26] Group 4: Commodity Market Analysis - The South China Industrial Products Index reached a peak of 3824 points before retreating, with significant fluctuations in domestic commodity futures [28][30] - Major commodities like iron ore and Brent crude oil saw notable gains, while LME copper experienced a significant decline [28][30] Group 5: Global Equity Performance - The global equity market saw most indices rise, with the Nasdaq leading the US markets and the FTSE 100 index leading in Europe [40][42] - The VIX index remained below 20, indicating a relatively stable market environment [40][42]

Group 1: Government Bond Tax Policy Impact - The Ministry of Finance and the State Taxation Administration announced that from August 8, 2025, interest income from newly issued government bonds, local government bonds, and financial bonds will be subject to value-added tax, reversing the previous tax exemption [2][3] - The market is particularly concerned about whether this change will lead to cross-period arbitrage opportunities or short squeeze phenomena in government bond futures, which hinges on whether there will be a switch in the cheapest-to-deliver (CTD) bonds [2][4] Group 2: CTD Bond Switching Dynamics - Generally, new bonds find it difficult to replace old bonds as CTD bonds unless they offer a yield premium of over 15 basis points, which is challenging to achieve in practice [3] - However, exceptions exist for T contracts and TS contracts, where new bonds can more easily become CTD bonds due to their shorter duration and lower required discount [3][4] Group 3: Cross-Period Arbitrage Opportunities - The potential for cross-period arbitrage in government bond futures depends on whether the CTD bonds for near and far month contracts switch, which could lead to price discrepancies [4] - The upcoming issuance of new 2-year and 7-year bonds on September 12 may trigger CTD bond switches, creating arbitrage opportunities between TS2512-TS2603 and T2512-T2603 [4] Group 4: Short Squeeze Potential - There is a possibility of a short squeeze in government bond futures if new bonds become CTD bonds, especially given the limited supply of new bonds initially [5] - The market's lack of experience with new bonds as CTD bonds could exacerbate the short squeeze pressure, particularly for contracts like T and TS2603, which are associated with new 7-year and 2-year bonds [5] Group 5: Domestic Weight Loss Drug Innovations - Domestic pharmaceutical companies are making significant progress in the development of innovative weight loss drugs, with several companies completing key clinical trials and receiving regulatory approvals [9][10] - The year 2025 is anticipated to be a pivotal year for the commercialization of competitive domestic weight loss drugs, with notable advancements in clinical data and market readiness [10][11] Group 6: Fund Holdings in Communication Sector - The fund holdings in the communication sector have shown a positive trend, with a 1.31 percentage point increase in the market value share, indicating a recovery in investor confidence [15] - The AI computing power supply chain remains a focal point for investment, with significant capital expenditures expected from major domestic internet companies [14][15]

Market Overview - The A-share market saw a collective decline in the three major indices last Friday, with the Shanghai Composite Index down by 0.37%, the Shenzhen Component Index down by 0.17%, and the ChiNext Index down by 0.24%. The total trading volume in the Shanghai and Shenzhen markets was 15,981.54 billion yuan [2][7]. - In terms of industry performance, sectors such as environmental protection, media, and light manufacturing led the gains, while oil and petrochemicals, national defense and military industry, and steel sectors faced declines. Concept stocks related to animal vaccines, DRG/DIP, and BC batteries saw the highest increases, while those related to the China Shipbuilding Industry Corporation, military equipment restructuring, and domestic aircraft carriers experienced the largest declines [2][7]. Important News - The U.S. non-farm payroll data for July fell short of expectations, with only 73,000 jobs added, marking a nine-month low and significantly below the anticipated 110,000. The unemployment rate slightly rose to 4.2%. This data indicates a rapid slowdown in the U.S. labor market, raising concerns about a potential recession [3][8]. - OPEC+ has agreed to significantly increase oil production in September, with a planned increase of approximately 548,000 barrels per day, reversing the previous reduction of 2.2 million barrels per day in August [3][8]. Industry Insights Communication Industry - The communication industry index has significantly outperformed the Shanghai Composite and ChiNext indices in the first seven months of 2025, ranking third among 31 primary industries. The valuation level of the communication industry at the end of July 2025 is comparable to the beginning of the year, remaining within a reasonable range but higher than the historical three-year average [9]. - The industry is expected to benefit from the deep coverage of 5G infrastructure and the ongoing optimization of computing power infrastructure by the three major operators. The government is promoting the development of commercial aerospace and low-altitude economies, as well as nurturing future industries like quantum technology and 6G [9][10]. AI Computing Power Industry - The AI computing power industry is experiencing a surge in capital expenditure from leading domestic and international companies, with a significant increase in the usage of Tokens, which are essential for AI processing. This indicates a robust demand for computing power [10][11]. - The demand for AI infrastructure is expected to grow, with a focus on liquid cooling technology and high-speed optical connections. The growth in AI applications is driving the demand for optical modules and copper connections, with domestic suppliers positioned favorably in the global market [11]. Low-altitude Economy and Satellite Internet - The low-altitude economy is seeing infrastructure optimization, with leading eVTOL companies obtaining necessary licenses, indicating a move towards commercial operations. The government is actively promoting policies to support the development of this sector [12]. - The satellite internet industry in China is progressing with the launch of low-orbit satellites, and advancements in technology are accelerating the commercialization of satellite internet services, including mobile direct satellite connections [12][13]. Investment Recommendations - The report suggests focusing on the AI computing power industry and the low-altitude economy as key investment opportunities. Specific areas of interest include the enhancement of AI infrastructure, the surge in Token usage, and the development of low-altitude economic infrastructure [13][19]. - Investors are encouraged to monitor the growth of AI applications and the demand for computing power, as well as the advancements in satellite internet technology and its commercial applications [19].

Core Insights - The communication industry has significantly outperformed the Shanghai and Shenzhen 300 indices in the first seven months of 2025, ranking third among 31 primary industries [1][12] - The valuation of the communication industry as of July 2025 is comparable to the beginning of the year but remains at a higher level than the historical three-year average [1][15] - The industry is experiencing stable operations in the first half of 2025, with emerging businesses playing a prominent role in driving growth [1][17] - The report emphasizes investment opportunities in the AI computing industry chain and the integration of space and ground networks [1][30] Investment Themes AI Computing Industry Chain - Major domestic and international companies are increasing capital expenditures, indicating a global arms race in computing power [2][37] - The demand for AI infrastructure is accelerating, with liquid cooling technology becoming mainstream in data center construction [2][37] - The demand for optical modules is transitioning to higher speeds, while high-speed copper connections still have market demand [2][37] Space and Ground Integration - The low-altitude economy is optimizing infrastructure, with leading eVTOL companies obtaining necessary certifications for commercial operations [6][30] - China's satellite internet industry is continuously launching low-orbit satellites, with advancements in mobile direct satellite connectivity accelerating commercialization [6][30] Industry Performance - The communication industry index has shown a cumulative increase of 21.16% from January to July 2025, outperforming both the Shanghai and Shenzhen 300 indices [12][14] - Emerging business revenues, including cloud computing and big data, have increased significantly, contributing to overall revenue growth in the telecommunications sector [19][25] - The number of fixed broadband users is steadily increasing, with a notable rise in users with gigabit access speeds [20][27] Policy and Future Outlook - The government report emphasizes the importance of nurturing emerging and future industries, including commercial aerospace and low-altitude economies [30][31] - The Ministry of Industry and Information Technology is working on standardizing emerging and future industries, which will support the development of the communication sector [32][34] - The report suggests that investment opportunities should focus on AI computing infrastructure and the integration of space and ground networks, driven by policy support and technological advancements [7][30]

Group 1 - The core viewpoint of the news is that the A500 index shows mixed performance among its constituent stocks, with notable gains from companies like Jiejia Weichuang and YTO Express, while Baogang Co. leads the declines [1] - The A500 ETF fund has a recent price of 1 yuan, with a trading volume of 41.83 billion yuan and a turnover rate of 30.71%, indicating active market participation [1] - The National Development and Reform Commission (NDRC) reported that China's economy has performed better than expected in the first half of the year, and plans to implement policies to stabilize employment and the economy [1] Group 2 - According to Everbright Securities, the recent adjustments in the market are normal after a prolonged period of gains, and the mid-term upward trend remains intact, with a focus on technology growth stocks [2] - The A500 index consists of 500 securities selected from various industries based on market capitalization and liquidity, reflecting the overall performance of representative listed companies [2] - As of July 31, 2025, the top ten weighted stocks in the A500 index include Kweichow Moutai, CATL, and Ping An Insurance, collectively accounting for 19.83% of the index [2]

Group 1 - The core viewpoint of the news highlights a recent decline in the Huaxia Sci-Tech AI ETF (589010), which fell by 1.35% with an intraday drop exceeding 2.5%, suggesting a market correction following previous gains during the World Artificial Intelligence Conference [1] - The leading stocks in the ETF, such as Chipone Technology, fell by 4.52%, while other companies like Lattice Semiconductor, Cambricon Technologies, Kingsoft Office, and Tianzhun Technology experienced declines exceeding 2% [1] - The trading volume was active, with a turnover exceeding 20% and total transactions reaching 15 million, indicating robust market activity [1] Group 2 - The announcement of the expansion of "National Medicine AI Twins" by Gushengtang, covering eight core specialties in traditional Chinese medicine, marks a significant advancement in the integration of AI with traditional medicine [1] - The implementation of the OBBBA Act in the U.S. is expected to provide tax incentives for fixed assets and R&D expenses, potentially releasing approximately $40 billion in incremental cash flow for major North American cloud service providers (CSPs) by 2025 [1][2] - The favorable tax policies, along with the recovery of tariffs, accelerated growth in cloud business revenue, and monetization of AI applications, are anticipated to sustain the positive trend in the AI computing power industry chain [2]

Core Insights - The meeting held on July 28 emphasized the promotion of high-quality development in the information and communication industry, aiming to consolidate and enhance competitive advantages and leading positions [1] - The communication industry is currently underweight, with capital expenditure on computing power maintaining high growth, and the domestic market accelerating in line with global AI development [1][2] - By 2025, the AI computing power industry chain is expected to continue accelerating, benefiting the communication industry and related sectors [1] Group 1 - The meeting highlighted the need to promote the popularization and quality improvement of 5G and gigabit optical networks, as well as the ongoing "signal upgrade" initiative [1] - There is an increased focus on the construction and layout of computing power centers to enhance resource supply capacity and utilization efficiency [1] - Domestic AI application breakthroughs are anticipated, with significant capital expenditure growth from internet companies starting in 2024 [1] Group 2 - The communication industry is entering a period of technological iteration and policy dividends by 2025, with new productivity directions like AI and quantum communication driving growth [2] - Recovery in the inventory of cellular IoT modules is expected, alongside continued construction of communication facilities such as base stations, optical cables, and data centers [2] - Companies are advised to focus on opportunities arising from the intersection of technology commercialization, policy catalysis, and performance certainty [2]

Core Viewpoint - The communication industry is experiencing a positive turnaround in fund holdings, with a market value share of 3.90% in Q2 2025, reflecting a quarter-on-quarter increase of 1.31 percentage points, returning to the top ten sectors [1][3]. Group 1: Fund Holdings and Market Position - In Q2 2025, the communication sector's fund holdings ranked fifth among 31 primary industries, with the top five being electronics, power equipment, food and beverage, pharmaceuticals, and banking, with respective shares of 17.22%, 9.80%, 9.55%, 9.04%, and 7.90% [3]. - The AI industry chain remains a focal point, with the top three companies in the communication sector by fund holding market value being NewEase, Zhongji Xuchuang, and Hudian Co., with market values of 31.207 billion yuan (up 123.28%), 28.788 billion yuan (up 124.58%), and 12.311 billion yuan (up 178.32%) respectively [3]. Group 2: Industry Outlook and Growth Potential - The communication industry maintains an "overweight" rating, driven by the ongoing high growth phase of capital expenditure in computing power, closely aligned with the global AI development trajectory [2]. - Significant capital expenditures are anticipated in the domestic AI sector, with Alibaba projecting that its investment in cloud and AI infrastructure over the next three years will exceed the total of the past decade, while Tencent's capital expenditure is expected to triple year-on-year to 10.7 billion USD in 2024 [2]. - The AI computing power industry chain is expected to continue accelerating in 2025, with evolving demand in inference capabilities, presenting broader growth opportunities for the communication sector [2].

Investment Rating - The report indicates a positive outlook for the industry, suggesting an "Overweight" rating based on expected performance exceeding the market benchmark by more than 10% over the next 6-12 months [33]. Core Insights - The North Exchange A-shares saw a trading volume of 27.45 billion yuan on July 21, 2025, an increase of 4.99 billion yuan from the previous trading day, with the North Exchange 50 Index closing at 1452.34, up 2.38% [2][9]. - The report highlights significant market drivers, including the launch of the 1.2 trillion yuan Yarlung Tsangpo River hydropower project, which is expected to stimulate related industries such as tunnel equipment and engineering consulting [4][20]. - The report emphasizes the importance of focusing on high-scarcity and strong alpha attributes in specialized and innovative enterprises, particularly in new power equipment and smart hardware sectors [4]. Summary by Sections Market Review - On July 21, 2025, the North Exchange A-shares had 268 companies, with 208 rising, 4 flat, and 56 declining. The top five gainers included Iron Tuo Machinery, Jikang Instruments, and Wuxin Tunnel Equipment, each rising by 30% [2][16]. - The North Exchange Specialized and Innovative Index closed at 2477.21, up 2.0% [2][9]. Important News - A humanoid robot project by UBTECH won a record bid of 90.51 million yuan, with plans to deliver 500 units within the year, indicating a growing market for robotics [19]. - The Yarlung Tsangpo River hydropower project, with a total investment of approximately 1.2 trillion yuan, is set to begin construction, which may open growth opportunities in related sectors [20]. Key Company Announcements - Runpu Food announced that its major shareholder plans to reduce its stake by up to 1.76 million shares, representing 1.99% of the total share capital [21]. - Xuchang Intelligent won 13 projects from the State Grid, totaling 153 million yuan, enhancing its market presence [29].

Summary of TSMC Conference Call Company Overview - **Company**: TSMC (Taiwan Semiconductor Manufacturing Company) - **Industry**: Semiconductor Manufacturing Key Points Revenue Growth and Capital Expenditure - TSMC expects a revenue growth rate of approximately 25% over the next five years, driven by technological barriers [2][3] - Capital expenditure guidance for 2025 is set between $35 billion and $42 billion, representing a year-on-year increase of 34% [2][3] Profit Margin Risks - The company faces risks from the appreciation of the New Taiwan Dollar and the migration of manufacturing to the U.S., which could lead to a decline in gross margins by about 1% annually [2][4] - Despite these risks, TSMC anticipates that its gross margin will only decline by 1% per year, which is a relatively optimistic forecast [4][5] AI and HPC Revenue Growth - TSMC is positioned as a key player in the AI computing supply chain, with AI-related revenue expected to double from 2024 to 2025 and maintain a growth rate of around 45% from 2025 to 2029 [2][6] - High-Performance Computing (HPC) accounts for 60% of TSMC's revenue, with quarterly revenues ranging from $14 billion to $15 billion, showing a year-on-year growth of nearly 80% [4][14] Product Pricing and Margins - The average selling price (ASP) of TSMC's products increased by 3% to $8,088, significantly higher than competitors like SMIC [2][8] - The gross margin for Q2 was reported at 58.6%, with only a slight decline of 0.2 percentage points due to increased capacity utilization and ASP growth [2][8] Capacity Expansion and Technology Transition - TSMC plans to expand its 5nm capacity in the second half of 2025 to meet growing customer demand, transitioning some 7nm capacity to 5nm and further to 4nm [4][10] - The company confirmed that its 5nm capacity is currently very tight, which is a core issue for expansion [7][9] Market Dynamics and Competitor Analysis - Despite ASML's weaker performance and subdued EUV equipment investments, TSMC's end-user demand remains strong, indicating potential for upward adjustments in capital expenditures [2][7] - TSMC's wafer prices are projected to increase by 19% in 2025, followed by 12% in 2026 and 7% in 2027 [11] Industry Valuation and Investment Sentiment - TSMC's valuation is aligned with its profit growth, maintaining a price-to-earnings ratio of around 25 times, with a target price-to-book ratio of approximately 7 times [13][25] - Investors are attracted to TSMC due to its expected 25% revenue growth over the next five years and high visibility within the hardware cycle [25] Currency Impact - The recent appreciation of the New Taiwan Dollar by approximately 10% could impact TSMC's gross margins and stock price, necessitating close monitoring of this risk [22] Semiconductor Industry Trends - The global semiconductor industry has been experiencing growth since mid-2023, with a long-term growth rate of around 20%, although most sectors are in cyclical fluctuations [23] - The data center segment is expected to grow by 30% to 40% annually, contributing significantly to the overall industry growth [23][24] Conclusion - TSMC is well-positioned for future growth, particularly in AI and HPC sectors, despite facing some risks related to currency fluctuations and manufacturing shifts. The company's strategic focus on advanced technologies and capacity expansion is expected to drive revenue and maintain competitive advantages in the semiconductor industry.