Core Insights - The report discusses the adaptability of secondary bond funds in high volatility environments, emphasizing diverse strategies for selecting aggressive products [3][12]. - It highlights the importance of high allocation and growth styles in secondary bond funds, suggesting that funds with a weighted average stock PE above 30 times are classified as growth style funds [4][12]. - The report also notes the increasing investment in Hong Kong stocks by secondary bond funds, with a stock market value ratio reaching 11.21% in Q3 2025 [12]. Summary by Sections High Allocation Strategy - High allocation secondary bond funds typically maintain high positions, with an average convertible bond allocation exceeding 30% across 64 funds, including both conservative and aggressive styles [3][12]. - A three-dimensional selection system is recommended, focusing on high elasticity, favorable holding experience, and cost-effectiveness, evaluated through three core indicators and five sub-indicators [12]. Growth Style - Growth style funds are identified by their holding stocks with a PE ratio above 30, with evaluations based on holding experience and risk-return ratios, particularly the Sharpe ratio [4][12]. - The report emphasizes the need to consider industry rotation, portfolio construction methods, and the balance between growth and quality [4][12]. Hong Kong Stock Strategy - The report indicates a continuous increase in the proportion of Hong Kong stock investments within secondary bond funds, with specific funds maintaining stable positions in this market [12]. - It mentions that the investment limit for Hong Kong stocks is capped at 50% of the stock assets for products that can invest in Hong Kong stocks [12]. Tool-based Products - Tool-based products within secondary bond funds include strategies focused on innovation and micro-cap stocks, with specific funds targeting these areas [12]. - The report identifies representative products for micro-cap strategies and highlights the unique index-enhanced strategy products focused on innovation [12].

Market Overview - The market opened lower but closed slightly higher, with minimal volatility, approaching a 4.9 star rating [1] - The CSI 300 index slightly declined, while small and mid-cap stocks experienced a slight increase. Value indices fell slightly, and growth styles rose, with the pharmaceutical sector showing strength [2] - Hong Kong stocks declined today, but the dividend stocks remained relatively stable with low volatility [3][4] - The technology sector in Hong Kong saw a significant pullback, yet it has not returned to undervalued levels, currently sitting at a normal low valuation [5] Dividend Stocks Performance - Recently, dividend-related stocks have been gradually rising, with Hong Kong dividend stocks returning to normal valuations. The low volatility dividend stocks in the Hong Kong-Shanghai-Shenzhen market are also close to normal valuations [6] - Concerns have been raised about whether dividend stocks, which performed well in recent years, might face a period of underperformance. Any investment strategy can have its strong and weak phases [7] Historical Performance of Dividend Stocks - From the valuation updates, dividend stocks have experienced two cycles of outperforming and underperforming the market [8] - In 2014-2015, dividend stocks underperformed the market during a bull market dominated by small and mid-cap stocks and the ChiNext index [9][10][11] - The period from 2016 to 2018 saw dividend stocks outperform the market as large-cap stocks rebounded while small-cap stocks fell from their bubble [18] - From 2019 to 2021, dividend stocks again underperformed during a growth style bull market, while from 2022 to 2024, they are expected to outperform due to lower valuations [13][20][22] Factors Affecting Dividend Stocks - A significant increase in interest rates could lead to a period of underperformance for dividend stocks. The past decade has seen a decline in interest rates in China, while the U.S. has experienced substantial rate hikes [24][25] - The potential for underperformance in dividend stocks may arise from strong performance in small-cap or growth styles, or from rising interest rates, which could make dividend yields less attractive [26] Long-term Effectiveness of Dividend Strategies - Dividend strategies have been effective in the A-share market over the long term, but not consistently. Periods of underperformance can provide a foundation for long-term effectiveness [27] - During periods of underperformance, many investors may abandon the strategy, which helps maintain its effectiveness [28] - Future phases of underperformance for dividend strategies are possible, but investing in undervalued areas can provide some protection [30] Valuation Tables and Investment Strategies - Various indices and their respective metrics, such as earnings yield, P/E ratio, P/B ratio, and dividend yield, are provided for reference [33][34][35][36] - The document includes a list of funds tracking these indices, detailing their scale and average dividend distribution [38] - Different investment strategies, including value, low volatility, growth, and quality, have their own phases of performance, with value strategies potentially stabilizing overall performance when paired with undervalued growth strategies [41][42]