Report Industry Investment Rating No relevant content provided. Core Viewpoints - The probability of "stocks and bonds sharing the same origin" is increasing, and they are likely to be in sync with the nominal growth rate [22][34]. - The focus of the "same origin" lies in price elasticity and the impact of price changes on the stock and bond markets, with policy and market attention centered on demand - led non - food prices [38][47]. - The "anti - involution" policy is an important arrangement in the future, with clear long - term and short - term goals and implementation paths [60][61]. Summary by Directory "Stock - Bond Disconnection" - After "9.24" in 2024, both stocks and bonds were bullish under the stimulus of loose monetary policy. In 2025, there was a slight "seesaw" pattern between stocks and bonds, with stocks strong and bonds weak. The median return of a certain scale of interest - rate bond public funds was around 0.2%, and the stock index rose nearly 800 points while the interest rate only increased by 20 points [7][8]. - The reason for the "stock - bond disconnection" is that they have different driving factors. In 2025, the bond market's main line was the revision and adjustment of expectations, including policy and economic expectations [9][11][12]. Increasing Probability of "Stock - Bond Homology" - A stock bull market requires both PE and EPS. Currently, it seems to be in a period where EPS needs to take over. When the stock market focuses on EPS, the probability of stock - bond homology increases [22]. - In the past year or so, the main factor determining the rise and fall of long - term interest rates has been the term premium. Currently, the term premium is at a reasonable level, and the long - term interest rate center's rise and fall will return to fundamental factors such as growth or prices [32]. - When the stock index returns to EPS and the bond market level matches the current policy and fundamentals, the probability of stock - bond homology increases, and they are homologous to the nominal growth rate [34]. Focus of "Homology" - In terms of the 2035 goals, the real growth has limited elasticity, while prices still have elasticity. Industry profit changes are closely related to prices, which are crucial for the stock market, and whether to get out of deflation is crucial for the bond market [38]. - Policy and the market pay more attention to demand - led prices, especially non - food prices or core CPI. When food and non - food prices move in the same direction, the situation is clear; when they move in opposite directions, in - depth structural analysis is needed [47]. - Under neutral assumptions, there is a chance to get out of deflation, but the risk lies in whether the month - on - month can reach the neutral level of recent years. The trend is determined, and it is unlikely to return to the 2024 situation [50][51]. - The "anti - involution" policy is very important. In the short term, the implementation path is still under observation, while in the long term, the goals and implementation paths are clear. International experiences from the US and Japan can be used for reference, and in the short term, administrative production control may be used to improve industry profit margins [60][61][66].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The probability of "stocks and bonds being homologous" is increasing, and they are likely to be homologous to the nominal growth rate, which is of greater macro - significance to the country than the real growth rate [34] - When the stock index returns to EPS and the bond market level matches the current policy and fundamental aspects, the probability of stocks and bonds being homologous increases [34] - The overall long - term interest rate center's rise and fall will return to fundamental factors: growth or prices [32] 3. Summary by Relevant Catalogs "Stock - Bond Disconnection" - After "9.24" in 2024, both stocks and bonds were bullish under the stimulus of loose monetary policy. In 2025, there was a "seesaw" form where stocks were strong and bonds were weak, with the median return of a certain scale of interest - rate bond public funds around 0.2%. The stock index rose nearly 800 points while the interest rate only increased by 20 points [7][8] - The reason for "stock - bond disconnection" is that they have their own driving main lines. In 2025, the driving factors of stocks and bonds were mostly different, but there was a common linkage effect during the anti - involution market from June to August [9][11] - The main line of the bond market in 2025 was the revision and adjustment of expectations, including the revision of policy expectations and economic expectations [12][17] "Increasing Probability of Stock - Bond Homology" - The bull market of stocks requires both PE and EPS. Currently, it seems to enter a period where EPS needs to take over. PE - driven stock markets tend to weaken the stock - bond seesaw effect, while EPS - driven ones strengthen it. When the stock market focuses on EPS, the probability of stock - bond homology increases [22] - The long - term interest rate's rise and fall in the past year was mainly determined by the term premium. Currently, the term premium is at a reasonable level, and the overall long - term interest rate center's rise and fall will return to fundamental factors such as growth or prices [32] - When the stock index returns to EPS and the bond market level matches the current policy and fundamental aspects, the probability of stocks and bonds being homologous increases [34] "What is the Focus of Homology?" - In terms of the 2035 goals, the real growth has limited elasticity, while prices still have elasticity. Industry profit changes are closely related to prices, which is crucial for the stock market. Whether to get out of deflation is crucial for the bond market [38] - Since 2016, there has been significant differentiation in the internal price trends. Non - food (or core) prices are more demand - driven, while food prices are more supply - driven. Monetary policy and market interest rates pay more attention to demand - dominated prices, especially non - food prices [41][43][47] - Under neutral assumptions, there is a possibility of getting out of deflation. The risk lies in whether the month - on - month data can reach the neutral level in recent years. The trend is determined, and it is unlikely to return to the 2024 pattern [50][51] - "Anti - involution" is an important policy arrangement. In the short - term, the implementation path is under observation, with the goal of improving the profit margins of key industries. In the long - term, the path is clear, aiming to establish a unified national market through mergers, reorganizations, and reforms [60][61] - In the short - term, administrative production control may be used to improve industry profit margins. Attention should be paid to whether there will be production control policies for anti - involution key industries, which account for over 30% of China's PPI [69][70]

Group 1: Market Overview - By the end of October 2025, the Shanghai Composite Index rose from 3,351 points at the end of last year to around 4,000 points, indicating a strong stock market performance[4] - The 10-year government bond yield increased from approximately 1.60% at the end of last year to over 1.80%, reflecting a weaker bond market[4] - The median return of bond public funds for the year was around 0.2%, further illustrating the stock's strength compared to bonds[4] Group 2: Stock and Bond Dynamics - The year 2025 is characterized as a "disconnection" between stocks and bonds, with different driving forces for each asset class[5] - The stock market's main driver was the technology sector, with significant phases of performance influenced by events such as the release of Deepseek and the success of the movie "Nezha" in early 2025[5] - The bond market's interest rates rose primarily due to the correction of previous overly optimistic monetary policy expectations, particularly in the first quarter of 2025[7] Group 3: Future Outlook - As 2026 approaches, there is a potential for a return to a "synchronized" relationship between stocks and bonds, driven by macroeconomic factors, particularly price levels[15] - The focus on the "anti-involution" policy is expected to influence both short-term and long-term price dynamics, impacting industry profit margins and overall economic growth[16] - The goal of achieving a stable nominal GDP growth rate of 7.6% annually over the next decade is crucial for aligning stock and bond market performance[19]