Group 1: Core Views - Short - term macro factors will increase market disturbances, but long - term policy guidance is bullish. In September, overseas focus on the Fed's interest - rate decision and the progress of the Russia - Ukraine issue, while domestic attention is on the 14th Five - Year Plan and Q4 economic policy guidance [4]. - The real estate market is in a weak state with both new and second - hand housing sales at low levels, but there is potential for improvement during the "Golden September and Silver October". The service industry is structurally differentiated and resilient at high levels, and the manufacturing industry is rebalancing after tariff policy disturbances [4]. - Domestic and overseas liquidity is tending to be loose. The domestic stock market has attracted leveraged funds and household deposits, but the pressure of share unlocks is increasing, and market divergence has emerged [4]. - After a sharp short - term rise, the valuation of each index has reached a relatively high historical level, and the stock - bond premium rate at home and abroad is low, so the attractiveness of allocation funds is average [4]. - It is recommended to adopt a high - selling and low - buying strategy for stock index futures in September. Consider going long on IF and IH during sharp drops or a short - term arbitrage opportunity of going long on IF and short on IM [4]. Group 2: Market Review Global Stock Market Performance - In the past month, A - shares led the rise, and German stocks led the decline. The performance order is:科创50 index > ChiNext Index > Shanghai Composite Index > Nikkei 225 > Hang Seng Tech Index > NASDAQ > S&P 500 > FTSE Emerging Markets > FTSE Europe > German DAX [8]. Industry Performance - In the past month, the communication industry led the rise, and the banking industry led the decline. The order is: communication > electronics > non - ferrous metals > computer > new energy… > transportation > steel > construction > coal > bank [12]. Futures Performance - In the past month, the basis rates of the four major stock index futures (IH, IF, IC, and IM) changed by 0.07%, 0.34%, - 0.04%, and - 0.23% respectively. The discounts of IF and IH narrowed. The inter - period spread rates (current month and next month) changed by - 0.09%, 0.21%, 0.33%, and 0.29% respectively, and the inter - period discounts of IF, IC, and IM significantly converged. The inter - period spread rates (next quarter and current month) changed by - 0.04%, 0.7%, 1.14%, and 1.36% respectively, and the long - term discounts of IF, IC, and IM converged significantly [21]. Group 3: Fund Flows Margin Trading and Stabilizing Funds - In August, margin trading funds flowed in 259.09 billion yuan, and the margin balance accounted for 2.39% of the circulating market value of the Shanghai and Shenzhen stock markets, an increase of 0.06%. The scale of passive stock ETF funds increased by 321.65 billion yuan to 3.49364 trillion yuan, with a share redemption of 14.8 billion shares last month and a subscription of 215.2 billion shares in the latest week [24]. Industrial Capital - In July - August, equity financing was 20.78 billion yuan, with 3 companies. IPO financing was 2.56 billion yuan, private placement was 18.21 billion yuan, and convertible bond financing was 3.22 billion yuan. In August, the market value of share unlocks was 539.34 billion yuan, an increase of 250.95 billion yuan from the previous month [27]. Group 4: Liquidity Monetary Supply - In August, the central bank's OMO reverse repurchase matured at 7.235 trillion yuan, and the reverse repurchase was 7.8518 trillion yuan, with a net monetary injection of 61.68 billion yuan. MLF had a net injection of 3 billion yuan, with a continuous net injection for six months and an increasing margin [29]. Monetary Demand - In August, the net monetary demand for national debt was 828.88 billion yuan, local debt was 804.34 billion yuan, and other bonds was 544.59 billion yuan. The total net monetary demand for the bond market was 2177.81 billion yuan [32]. Fund Price - In August, DR007, R001, and SHIBOR overnight rates changed by - 3.8bp, - 14.5bp, and - 6bp respectively. The inter - bank certificate of deposit issuance rate decreased by 0.8bp, and the CD rate of joint - stock banks rebounded by 4bp. The fund price rebounded slightly at a low level [35]. Term Structure - In August, the yield curve steepened significantly. The long - end yields of national debt and policy - bank bonds rebounded, and the long - end credit spread between national debt and policy - bank bonds widened [39]. Sino - US Interest Rate Spread - In August, the US 10 - year Treasury yield decreased by 11.0bp, the inflation expectation decreased by 2.0bp, and the real interest rate decreased by 9.0bp. The Sino - US interest rate spread inversion narrowed by 20.04bp, and the offshore RMB appreciated by 1.22% [42]. Group 5: Macroeconomic Fundamentals Real Estate Demand - As of August 28, the weekly transaction area of commercial housing in 30 large and medium - sized cities seasonally rebounded but was at a low level compared to the same period in 2019. Second - hand housing sales decreased seasonally. The real estate market is in a weak state, but rigid demand supports the lower limit [45]. Service Industry Activity - As of August 29, the subway passenger volume in 28 large cities remained high, with a year - on - year increase of 4.5% compared to last year and 51% compared to 2021. The traffic congestion delay index in 100 cities rebounded, and the service industry's economic activity is trending towards a natural and stable growth level [48]. Manufacturing Tracking - In August, the capacity utilization rates of the manufacturing industry declined under the anti - involution policy. The average operating rate of the chemical industry chain related to external demand increased by 0.58% [52]. Freight Flow - Freight and passenger flows remained at relatively high levels. The postal express and civil aviation sectors grew strongly, while highway transportation was relatively weak, and railway transportation rebounded significantly [57]. Import and Export - China's exports continued to grow strongly. After three rounds of Sino - US negotiations, a 90 - day exemption was extended, and Q3 exports were stronger than the season, which may continue [60]. Overseas Situation - In July, US PCE inflation continued to rebound, and the market's optimistic expectation of the Fed's interest rate cut this year has weakened. The market expects 2 interest rate cuts in 2025, with a total cut of about 50bp [62][66]. Group 6: Other Analyses Valuation - In the past month, the stock - bond risk premium was 2.64%, a significant decrease of 0.43% from the previous month. The foreign capital risk premium index was 3.63%, a decrease of 0.42% from the previous month. The valuations of the SSE 50, CSI 300, CSI 500, and CSI 1000 indices were at relatively high levels in the past 5 years [69][74]. Quantitative Diagnosis - According to seasonal patterns, the stock market is likely to be in a state of seasonal shock and decline in September, with a growth style that first outperforms and then corrects. It is recommended to pay attention to the arbitrage opportunity of shorting IC and IM and going long on IF and IH [77].

Profit Trends - In May, the profit growth rate of industrial enterprises fell to -9.1%, a decrease of 12.1 percentage points from April[3] - Cumulative profit growth from January to May was -1.1%, down from 3.2% in the previous four months[4] - The profit margin for May was 5.3%, slightly down from April, indicating a significant year-on-year decline due to high profit margins last year[5] Industry Performance - The share of profits from midstream industries dropped from 54% to 49%, reflecting weaker demand compared to upstream and downstream sectors[6] - Upstream industries faced profit declines primarily due to falling prices and volumes, while midstream sectors, particularly export-oriented ones, struggled to pass costs downstream[10] - Specific sectors like specialized equipment and electrical machinery saw profit growth rates drop by over 20 percentage points due to changing export dynamics[10] Economic Outlook - Active inventory reduction has continued for two months, with finished goods inventory growth at 3.5%[16] - Future profit recovery for enterprises will depend on the effectiveness of domestic demand policies amid ongoing external uncertainties[16] - The report anticipates that proactive policies will support domestic demand improvement, aiding in profit recovery for businesses[3]

Summary of Key Points Core Viewpoint - In May, industrial enterprise profits experienced a year-on-year decline of 9.1%, a significant drop of 12.1 percentage points compared to April, driven by falling volume, price, and profit margins due to disruptions in both domestic and external demand, as well as a decrease in commodity prices [1][2][4]. Group 1: Profit Trends - Cumulative profit growth for industrial enterprises from January to May was -1.1%, down from 3.2% in the previous period, with May's profit growth at -9.1% [2]. - The profit margin for May was reported at 5.0%, slightly up from the previous month, but the monthly figure of 5.3% showed a decline from April, indicating increased pressure on overall profits [4][9]. - The upstream sector faced significant profit margin declines due to falling international commodity prices, while the midstream sector struggled to pass on costs to downstream industries [9]. Group 2: Sector Performance - The share of profits from the midstream sector decreased from 54% to 49%, reflecting weaker demand compared to upstream and downstream sectors [5]. - In the upstream sector, only the chemical industry showed a narrowing profit decline, while other sectors experienced profit growth declines [7]. - The automotive sector saw a significant drop in profit growth, similar to trends in the midstream sector, while the pharmaceutical industry experienced a profit growth rebound [7][9]. Group 3: Inventory and Demand - Active inventory reduction has continued for two months, with a 3.5% increase in industrial product inventory from January to May [11]. - The overall revenue growth for enterprises from January to May was 2.7%, with May's growth at 0.8%, both showing a decline from previous months [11]. - Future profit recovery for enterprises will depend on the effectiveness of domestic demand policies amid ongoing external uncertainties [11].

Economic Performance - In the first quarter, GDP grew by 5.4% year-on-year and 1.2% quarter-on-quarter, indicating a strong economic performance driven by consumption and export activities [1] - The contribution rates to economic growth from consumption, investment, and net exports were 51.7%, 8.7%, and 39.5% respectively, with consumption and net exports accounting for over 90% combined, significantly higher than last year's figures [1] Investment Trends - Infrastructure and manufacturing investments maintained a high growth rate of around 10% year-on-year, supported by fiscal policies and increased special bonds [2] - The manufacturing PMI rose to 50.5, indicating expansion in production and new orders, which suggests a positive cycle of demand improvement leading to increased production [2] - Government consumption subsidies are set at 300 billion yuan, an increase of 150 billion yuan from last year, aimed at boosting domestic demand and stabilizing consumer confidence [2] Export Dynamics - The export sector is significantly influenced by U.S. tariff policies, with recent indications of potential easing in trade tensions, which could positively impact Chinese exporters [3] - The U.S. Treasury Secretary suggested that the current tariff situation is unsustainable, hinting at possible future negotiations that may alleviate pressure on exports [3] A-Share Market Outlook - A-share companies have shown positive earnings growth, with major indices like CSI 300 and SSE 50 reporting positive revenue and net profit growth [4] - The recovery in consumption and strong performance in the capital market are expected to support the rebound of blue-chip indices, which will gradually benefit smaller-cap indices as well [4]