Group 1 - The bond market has shown a preference for high coupon credit and mid-term rates with riding value, while the yield curve has steepened significantly due to strong short-term interest rates and weak long-term performance [7][11] - Two strategic approaches are recommended: gradually focusing on a barbell strategy and maintaining a spread compression strategy, as the short-end interest rates have limited downward space [11][39] - The current 1-year deposit rate is around 1.52%, with a potential optimistic scenario suggesting it could drop to approximately 1.5%, indicating limited room for further declines [7][11] Group 2 - The report suggests monitoring three types of spreads: the spread between government bonds and policy bank bonds, the new and old bond spreads for 30-year government bonds, and the spreads between 30-10Y and 50-30Y [11][39] - The 10-year government bond is expected to fluctuate within a range of 1.8% to 1.85% in the short term, reflecting concerns over inflation and economic growth [12][40] - The report highlights six bond selection strategies, including focusing on high-frequency trading and specific long-term and mid-term bonds [15][39] Group 3 - The bond market has experienced a recent shift with mid-term bonds performing better due to a loose funding environment and expectations of lower interbank deposit rates [18] - The current yield for 30-year government bonds is approximately 2.39%, reflecting a slight increase from the previous week [19] - The report indicates that the valuation of bonds is not high compared to other asset classes, suggesting potential investment opportunities [29][30]

Core Insights - Recent geopolitical conflicts have heightened market uncertainty, leading to a "macro data vacuum + Two Sessions expectations" phase, where a barbell strategy may enhance risk-reward ratios [1] Group 1: Convertible Bond Market Overview - The convertible bond market has continued its oscillating recovery pattern, with a stable overall style. The mid-cap index outperformed the large-cap index by 0.01% while the small-cap index declined by 0.10% [2][11] - The upcoming "Two Sessions" has opened a policy-setting window, leading funds to prefer structural layouts around expected differences during this "policy vacuum" period [2][11] - Defensive convertible bonds are gaining attention due to their attributes amid external geopolitical conflicts and commodity price fluctuations [2][11] Group 2: Structural Opportunities in Convertible Bonds - The spring market still has room for structural opportunities, with momentum style showing strong upward elasticity. For instance, "Hangyu Convertible Bond" surged by 9.14%, contributing significantly to the portfolio [3][14] - The market is experiencing a complex pattern of oscillation and localized heat, with funds shifting towards undervalued sectors with industrial logic, such as aviation and metal processing [3][16] - Investors are advised to grasp sector rotation rhythms and selectively realize profits from high-positioned crowded varieties while exploring low-premium elastic targets [3][16] Group 3: Barbell Strategy in High-Volatility Environment - The strategy should focus on a barbell framework to enhance risk-reward ratios, with one end concentrating on low-valuation, high-profit certainty, and stable cash flow defensive varieties [4][22] - The other end should dynamically allocate to quality growth stocks with clear growth paths, capturing structural elasticity from pricing misalignments and valuation repairs [4][22] - The defensive base should focus on high-rated large-cap varieties like banks and public utilities, while event-driven and hedging themes should consider oil, precious metals, and military industries [4][22]

Market Overview - The equity market experienced a general rise, with the Shanghai Composite Index increasing by 0.4%, the Shenzhen Index by 1.4%, the CSI 300 by 0.4%, the ChiNext Index by 1.2%, and the STAR 50 by 3.4% [1][14] - The bond market also saw gains, with the 10-year government bond yield closing at approximately 1.79%, down about 2 basis points [1][14] Industry Performance - In the Shenwan first-level industry classification, the comprehensive, computer, and electronics sectors showed significant gains, while the textile and apparel, food and beverage, and beauty care sectors experienced notable declines [2][16] Economic Events - During the Spring Festival period from February 16-20, global major stock indices mostly rose, driven by easing concerns over AI's disruptive impact, strong European corporate earnings, and a U.S. Supreme Court ruling invalidating tariffs, which boosted overall market risk appetite [3][17] - The KOSPI led the gains with a rise of 5.5%, followed by European indices such as France's CAC40 and the UK's FTSE 100, which rose by 2.5% and 2.3% respectively [3][17] - The U.S. stock market lagged behind due to a retreat in interest rate cut expectations and geopolitical tensions, with the Nasdaq and S&P 500 increasing by 1.5% and 1.1% respectively [3][17] Bond Market Dynamics - The U.S. bond market showed a mixed performance, with yields rising across all maturities due to a hawkish stance from Federal Reserve officials, while non-U.S. long-term bond yields generally declined [4][18] - The 2-year, 10-year, and 30-year U.S. Treasury yields increased by 7.1 basis points, 3.4 basis points, and 2.9 basis points respectively [4][18] Commodity Market Trends - The commodity market saw widespread increases, particularly in oil prices, which surged over 4% on February 18, with a cumulative increase of nearly 6% during the Spring Festival week [5][18] - Precious metals also rose, with London silver and gold prices increasing by 9.34% and 1.30% respectively [5][18] Real Estate Market Insights - The Spring Festival period in 2026 saw a significant increase in travel activity, with daily migration indices reaching a historical high of 871.44, marking a 27% increase from 2025 and a 39% increase from 2024 [6][19] - New housing transactions doubled year-on-year during the Spring Festival, with a total area of 5.18 million square meters sold in 13 cities, although this was largely due to a low base effect from 2025 [7][20] Market Outlook - The equity strategy remains optimistic about the technology sector's growth potential, with global risk appetite strengthening and many non-U.S. assets continuing a bullish trend [8][21] - The bond strategy suggests a "barbell" approach, focusing on the favorable supply-demand dynamics in the bond market, with expectations of continued liquidity support from the central bank [10][23]

Core Viewpoint - The article emphasizes the importance of strategic asset allocation and value investment in the context of a changing global economic landscape, particularly looking ahead to 2026 and the opportunities in cross-border asset management [1][2][3] Group 1: Economic Outlook - The global economy is expected to enter a phase of "moderate growth and policy coordination" in 2026, with China's long-term economic trends and the strengthening of Hong Kong's role as an international financial center providing structural opportunities for cross-border asset management [1] - The Chinese capital market is progressing steadily amid deepening reforms and high-level openness, showcasing resilience during structural adjustments in 2025 [1] Group 2: Investment Strategy - In equity investments, the company suggests maintaining strategic focus and increasing allocation to quality stocks, particularly in sectors like technology, biomedicine, new energy, and high-end manufacturing, supported by favorable policies and a recovering economy [2] - The fixed income sector is anticipated to see a stabilization in global interest rates, enhancing the allocation value of bond assets, with a preference for high liquidity and high safety cash-like assets [2] Group 3: Company Strategy - As a core platform for overseas investments of China Pacific Insurance Group, the company aims to strengthen its role as a "cross-border asset allocation bridgehead" by enhancing collaboration with the group, improving product lines, and accelerating digital transformation [3] - The company emphasizes the importance of long-term investment strategies, risk management, and innovation to navigate a volatile market environment [3]

Key Points - The report indicates that there is still potential for credit spread compression, particularly in the context of different bond types and their excess spreads compared to similar maturity and rating bonds [1][3][35] - As of January 30, 2026, the excess spreads for 3Y AAA-rated bank subordinated bonds, perpetual bonds, and industrial bonds are 6.1BP, 6.6BP, and 11.0BP, respectively, which are at the 92%, 79%, and 44% percentiles since early 2025 [1][3][35] - The report suggests that the selection of bonds based on value for money ranks as follows: bank subordinated bonds > perpetual bonds > urban investment bonds > industrial bonds [1][35] Credit Strategy Review for January 2026 - The yield of bank subordinated bonds has significantly decreased, and the excess spreads remain high, indicating potential for further compression [3][6] - The report notes that the 3Y AA+ urban investment bond yield decreased by 9BP, with the yield at the end of January 2026 being 1.91% [11] - Factors contributing to the decline in credit bond yields include limited corporate financing demand, stable credit issuance, and a loose funding environment [11][14] Performance of Different Credit Strategies - In January 2026, the performance of various credit strategies ranked as follows: duration extension > barbell strategy > 3Y bullet strategy > short-end sinking [15] - The returns for the duration extension strategy for urban investment bonds, industrial bonds, bank subordinated bonds, and perpetual bonds were 0.65%, 0.85%, 0.76%, and 0.82%, respectively [15][18] - The report highlights that the short-end sinking strategy yielded returns of 0.16%-0.19% across different bond types, although its performance was generally average [17][18] Outlook for February 2026 - The report anticipates that the overall funding environment will remain tight, with a weak recovery in the fundamentals [35] - It is expected that the central bank's operations will lead to a decrease in funding rates, potentially resulting in a further decline in long-term bond yields by 5-10BP in Q1 2026 [35] - The report emphasizes that the credit spread compression trend is likely to continue, with a focus on the performance of various bond types [35]

Report Industry Investment Rating - Not provided in the content Core Viewpoints - The report recommends holding bonds during the Spring Festival. The current fundamental situation provides background support for the bond market, with continued loose liquidity, potential further decline in short - term interest rates, limited post - festival bond supply pressure, stronger market allocation power, and limited impact of the stock market on the bond market due to the low duration of trading institutions. If trading institutions increase leverage, it will further boost the bond market. The overall market trend is in a gradual recovery, and the dumbbell strategy is relatively more advantageous [1][5][21] Summary by Related Content 1. Current Bond Market Performance - This week, the bond market continued to recover, with long - term bonds performing more prominently. Interest rates across all tenors declined. The yields of 10 - year and 30 - year treasury bonds decreased by 0.1bps and 3.8bps respectively to 1.81% and 2.25%. The yields of 3 - year and 5 - year secondary capital bonds dropped by 1.6bps and 1.8bps respectively, and the 1 - year AAA certificate of deposit (CD) rate broke through 1.6%, falling 1bps to 1.59%. The dumbbell strategy recommended earlier achieved better returns [1][9] 2. Reasons for Recommending Holding Bonds During the Spring Festival 2.1 Loose liquidity will continue - The current liquidity remains stably loose, which is beneficial for the leverage strategy. Overnight funds are around 1.4%, and the 7 - day repurchase rate is around 1.4% - 1.5%. This is not due to increased central bank capital injection but rather weak financing demand and capital supplementation from other channels such as fiscal deposits. After the Spring Festival, funds tend to be even looser [1][10] - The loose funds will protect the bond market and may drive interest rates to decline from short - term to long - term. As funds remain loose, the CD rate may further decline to 1.5% - 1.55%. The current steep curve means that a decline in short - term interest rates will enhance the cost - effectiveness of long - term bonds and drive down long - term interest rates. The spread between the 10 - year treasury bond and the 1 - year CD is over 20bps, the highest since the second half of 2023 [2][13] 2.2 Limited post - festival market supply pressure and high bank allocation demand - In the first five weeks of this year, government bond net financing was about 2 trillion. If the first - quarter net financing is the same as last year at about 4.1 trillion, the net financing in the five weeks after the festival until the end of the quarter will also be about 2 trillion, with a weekly average similar to that before the festival. Since credit is more concentrated in January, post - festival bank and other institutional allocation needs are stronger [3][14] - Bank liability costs are continuously decreasing, alleviating the pressure on net interest margins. The scale of bonds with high floating profits bought before the second half of 2024 has decreased after realizing floating profits last year, reducing the space and demand for banks to realize floating profits and thus lowering the risk in the second half of the quarter for the bond market [3][14] 2.3 Limited pressure from other capital markets on the bond market and potential new driving forces - Although the rise of other capital markets may impact the bond market, the impact is mainly through trading institutions such as funds and securities firms. The duration of these institutions has dropped to a low level. The duration of medium - and long - term public offering interest - rate bond funds decreased to 3.35 years at the end of 2025, lower than the 3.45 years at the end of 2024, which means limited continued adjustment pressure on the bond market [4][16] - If the market continues to strengthen, the leverage - increasing demand of funds and securities firms may become a new driving force for the bond market to strengthen [4][16] 3. Overall Market Trend and Strategy - The overall market trend is in a gradual recovery process. The dumbbell strategy is relatively more advantageous. Since the duration of allocation - type institutions is relatively high, the market direction is mainly determined by them. With the continuous decline of their liability costs, the cost - effectiveness of bonds as allocation assets has increased. The stable liabilities and insufficient real - economy financing demand lead to asset scarcity, enabling allocation - type institutions to continue increasing their bond holdings. Trading institutions mainly affect the speed of market recovery. If they quickly increase their positions, it will accelerate the decline of interest rates [6][21]

Group 1 - Core viewpoint one: The A-share market experienced a volatile upward trend in January 2026, with major broad-based indices rising, supported by long-term capital and stabilizing economic expectations [4] - Core viewpoint two: The spring market is still expected to be promising, although a short-term correction may occur before the Spring Festival due to tightening liquidity and decreased trading enthusiasm [5] - Core viewpoint three: In the spring market, small-cap stocks typically perform better, with a focus on growth and cyclical sectors, particularly in electronics, power equipment, machinery, non-ferrous metals, and communications [6] Group 2 - The Hong Kong market is advised to maintain a "growth + value" barbell strategy, benefiting from earnings recovery, improved liquidity, and supportive policies, with a structural rebound expected in the first quarter [7]

Summary of Conference Call Notes Industry Overview - The current bond market is showing signs of recovery, primarily driven by increased purchases from banks, with large banks favoring 7-10 year bonds and smaller banks preferring bonds over 10 years, stabilizing market expectations [1][4]. Key Points and Arguments - **Increased Bond Purchases**: Banks are enhancing their bond allocations due to the attractiveness of long-term bond yields, which have surpassed deposit costs. The average deposit cost for banks has decreased to 1.6%-1.7%, making long-term bonds more appealing [1][3]. - **Market Stability**: Despite concerns over credit growth, maturity of fixed deposits, and stock market gains potentially leading to capital outflows, there has been no significant outflow of funds from banks recently. Banks have shown the capacity to continue purchasing bonds [1][3]. - **Interest Rate Movements**: Last week, interest rates across various maturities declined, with 10-year and 30-year government bonds falling by 1.3 and 1.6 basis points to 1.83% and 2.29%, respectively. The market is in a recovery phase, supported by bank purchases [1][4]. - **Investment Strategy**: A "barbell strategy" is recommended for investors, suggesting an increase in short-term certificates of deposit and long-term interest-bearing assets. The market is expected to continue fluctuating downward in the short term, with long-term physical assets potentially nearing 100 billion [2][6]. Additional Important Insights - **Liquidity and Funding Sources**: Currency settlement (结汇) does not directly enhance market liquidity or funding sources. While it can improve certain liquidity indicators like NSFR and LCR, it does not increase actual funding sources. The potential for liquidity improvement may stem from other factors, such as the lack of outflows from fixed deposits and a shift in household savings towards deposits due to weak real estate sales [5][6]. - **Future Market Trends**: The market is expected to stabilize as non-bank institutions replenish their positions, leading to a normalization of the yield curve slope. Long-term interest rates may decline further, potentially reaching levels between 1.6% and 1.7% or lower [4][6]. This summary encapsulates the key insights from the conference call, focusing on the bond market dynamics, investment strategies, and liquidity considerations.

Regulatory Dynamics - The central bank has lowered the interest rates of various structural monetary policy tools by 0.25 percentage points, with the one-year re-lending rate decreasing from 1.5% to 1.25% [3][8] - The Financial Regulatory Bureau held a meeting to discuss regulatory work for 2026, emphasizing the need for banks and insurance institutions to focus on their main businesses and improve financial services [9] - The Ministry of Human Resources and Social Security has introduced new policies to enhance the second pillar of enterprise annuities, aiming to increase coverage for more employees [10] Company Dynamics - Taiping Asset has increased its stake in Shanghai Airport to 5% through a block trade [23] - Zhonghui Life has invested 547 million in establishing an equity investment fund in Tianjin [24] - TaiKang Pension has increased its registered capital to 11 billion, marking a 22% increase [25] - Hengqin Life has raised its registered capital to approximately 4.99 billion [26] - Ping An Life reported a total claim amount of 415.1 billion for 2025, with significant efficiency in claims processing [27] - AIA Life reported cumulative claims of 23.9 billion over the past five years, with a notable increase in high-value claims [29] - China Life's claims report for 2025 showed over 1 trillion in claims, reflecting strong service capabilities [52] Industry Dynamics - Insurance capital has seen a high level of capital replenishment, with a total of 145.47 billion raised through debt and equity in 2025 [49] - The insurance sector has experienced a significant increase in claims, with major companies reporting substantial payouts [52] - The insurance industry is undergoing a "thinning" trend, with over 3,100 branches exiting the market in 2025 [53] - The insurance sector is witnessing a strong performance in stock investments, with a notable increase in the number of companies being targeted for acquisition by insurance funds [48] - The 2026 insurance investment officer survey indicates a positive outlook, with over 70% of respondents expressing optimism about stock and equity investments [51]

Core Viewpoint - The new asset-liability management regulations for insurance companies are set to enhance long-term investment strategies, focusing on matching assets and liabilities while promoting stability and value over short-term gains [1][2][3]. Group 1: Regulatory Changes - The consultation period for the new asset-liability management regulations is nearing completion, with insurance companies preparing to refine their management systems based on the draft [1]. - The draft emphasizes the importance of long-term assessments to prevent excessive focus on short-term profits, encouraging a shift towards sustainable investment practices [2][3]. Group 2: Investment Strategies - Insurance companies are expected to adopt a "barbell" strategy, balancing low-risk and high-risk assets to achieve a stable risk-return profile [4]. - The focus will be on long-term value investments, with a preference for high-dividend blue-chip stocks and growth sectors that align with national strategies [6][7]. Group 3: Market Outlook - The investment landscape is anticipated to shift towards a more balanced approach, with high-dividend assets providing stability and growth sectors offering long-term opportunities [5][6]. - The dynamic adjustment of asset weights within the "barbell" strategy will be crucial to respond to market conditions and ensure effective risk management [7].