Report Investment Rating No relevant content provided. Core Viewpoints - The overall economic situation shows that China is in a marginal de - leveraging process. The growth rate of the real - sector's liabilities is expected to decline, and the government's liability growth rate is also trending down. The economic growth rate needs further observation, and the risk preference has increased recently, with the stock - bond ratio favoring stocks [1][2][6]. - It is recommended to use the equity growth style instead of the bond position this week, suggesting an allocation of 60% in the Shanghai Composite 50 Index and 40% in the CSI 1000 Index. In the de - leveraging cycle, the stock - bond ratio favors equities to a limited extent, and value stocks are more likely to outperform. A + H and A - share dividend portfolios are recommended, mainly concentrated in industries such as banking, telecommunications, petroleum and petrochemicals, and transportation [8][9][10]. Summary by Directory 1. National Balance Sheet Analysis - **Liability Side**: In September 2025, the real - sector's liability growth rate was 8.9%, expected to remain stable around 8.9% in October and then decline to about 8.5% by the end of the year. The government's liability growth rate was 14.5% in September, expected to drop to around 14.0% in October and 13.0% by the end of the year. The central bank's policies reinforce the judgment of stabilizing the macro - leverage ratio [1][2]. - **Monetary Policy**: Last week, the money market was generally stable. The one - year Treasury yield rose to 1.47% at the weekend, with an estimated lower limit of about 1.3%. The term spread between the ten - year and one - year Treasuries was stable at 38 basis points. The future yield ranges of the ten - year and thirty - year Treasuries are estimated to be around 1.6% - 1.9% and 1.8% - 2.3% respectively [3]. - **Asset Side**: The physical quantity data in September continued to weaken compared to August. The full - year nominal economic growth target for 2025 is around 4.9%, and it remains to be seen whether this will become the central target for China's nominal economic growth in the next 1 - 2 years [3]. 2. Stock - Bond Cost - effectiveness and Stock - Bond Style - **Overall Outlook for 2025**: China's asset prices are mainly affected by changes in the national balance sheet. The real GDP growth rate on the asset side is expected to fluctuate between 4 - 5%, and the liability growth rate of the real sector is expected to decline. The stock - bond cost - effectiveness generally favors bonds, but recently, due to the increase in risk preference, it has shifted towards stocks [21][6]. - **Recent Market Performance**: Last week, the money market was stable, risk preference increased significantly over the weekend, resulting in rising stocks and falling bonds. The equity style shifted to growth - oriented, and the stock - bond cost - effectiveness favored stocks. The ten - year Treasury yield rose by 2 basis points to 1.85%, and the one - year Treasury yield rose by 3 basis points to 1.47% [6]. - **Investment Recommendations**: This week, it is recommended to use the equity growth style instead of the bond position, suggesting an allocation of 60% in the Shanghai Composite 50 Index and 40% in the CSI 1000 Index [8]. 3. Industry Recommendations 3.1 Industry Performance Review - This week, the A - share market rose with shrinking trading volume. The Shanghai Composite Index rose 2.9%, the Shenzhen Component Index rose 4.7%, and the ChiNext Index rose 8.1%. Among the Shenwan primary industries, communication, electronics, power equipment, machinery, and petroleum and petrochemicals had the largest increases, while agriculture, forestry, animal husbandry, food and beverage, and beauty care had the largest declines [30]. 3.2 Industry Crowding and Trading Volume - As of October 24, the top five industries in terms of crowding were electronics, power equipment, machinery, computer, and communication, while the bottom five were beauty care, comprehensive, textile and apparel, social services, and steel. The trading volume of the entire A - share market decreased compared to last week [33][34]. 3.3 Industry Valuation and Earnings - This week, among the Shenwan primary industries, communication, electronics, power equipment, machinery, and petroleum and petrochemicals had the largest increases in PE(TTM), while agriculture, forestry, animal husbandry, food and beverage, beauty care, and others had the smallest increases. Industries with high 2024 full - year earnings forecasts and relatively low current valuations include banking, insurance, petroleum and petrochemicals, transportation, and others [38][39]. 3.4 Industry Prosperity - **External Demand**: There were mixed trends. The global manufacturing PMI declined from 50.9 in September to 50.8, and most major economies' PMIs decreased. The CCFI index rose by 2.02% in the latest week, and port cargo throughput increased. South Korea's export growth rate decreased in October, while Vietnam's increased [43]. - **Domestic Demand**: The second - hand housing price decreased in the latest week, and quantity indicators showed mixed trends. Highway truck traffic increased, the capacity utilization rate of ten industries declined from September to October, automobile sales were at a relatively high level, and new - home sales were at a historical low [43]. 3.5 Public Fund Market Review - In the third week of October (October 20 - 24), some active public equity funds outperformed the CSI 300. As of October 24, the net asset value of active public equity funds was 4.2 trillion yuan, slightly higher than 3.66 trillion yuan in Q4 2024 [60]. 3.6 Industry Recommendations - In the de - leveraging cycle, the stock - bond cost - effectiveness favors equities to a limited extent, and value stocks are more likely to outperform. The recommended A + H dividend portfolio consists of 20 A + H stocks, and the A - share portfolio consists of 20 A - shares, mainly concentrated in banking, telecommunications, petroleum and petrochemicals, and transportation industries [64].

Report Industry Investment Rating The provided content does not mention the report industry investment rating. Core Viewpoints of the Report - China remains in a marginal de - leveraging process, with the goal of stabilizing the macro - leverage ratio unchanged. The large - scale debt resolution reduces local government financing costs and the probability of large - scale defaults and liquidity risks [2]. - The current loose money - market conditions are difficult to sustain, and the peak of the current round of money - market conditions is expected to occur between June 23 and July 4 [2][7]. - The stock - bond ratio favors bonds, and the equity style trends towards value. Currently, long - term bonds have a slightly higher cost - performance ratio than value - type equity assets [6][22][23]. Summary by Directory 1. National Balance Sheet Analysis Liability Side - In May 2025, the liability growth rate of the real - sector was 8.9%, slightly lower than the previous value of 9.0%. It is expected to reach its peak in April, decline to around 8.8% in June, and then gradually decline to around 8% by the end of the year [2][17]. - The money - market conditions of the financial sector were marginally stable and slightly loose last week. Given the marginal de - leveraging of the real sector, the loose money - market conditions are unlikely to continue [2][17]. - The net reduction of government bonds last week was 316 billion yuan, lower than the planned net increase of 218.6 billion yuan. This week, the planned net increase is 575.4 billion yuan. The government liability growth rate was 14.8% at the end of May, expected to rise slightly above 15% in June and then decline to around 12.5% by the end of the year [3][18]. Monetary Policy - Last week, the average weekly trading volume and price of funds increased, and the term spread widened. After adjusting for seasonal effects, the money - market conditions were marginally stable and slightly loose [3][18]. - The yield of one - year Treasury bonds decreased to 1.36% at the end of the week. The lower limit of the one - year Treasury bond yield is estimated to be around 1.3%, the lower limit of the ten - year Treasury bond yield is around 1.7%, and the lower limit of the thirty - year Treasury bond yield is around 1.9% [3][18]. Asset Side - In May, the physical - quantity data weakened compared to April. The government's target for the annual real economic growth rate in 2025 is around 5%, and the nominal economic growth rate target is around 4.9%. It is necessary to further observe whether this will become the central target for China's nominal economic growth in the next 1 - 2 years [4][19]. 2. Stock - Bond Cost - Performance and Stock - Bond Style - Last week, the money - market conditions were marginally stable and slightly loose, but risk appetite continued to decline. Funds flowed more towards short - term bonds, resulting in a continued "bearish stocks, bullish bonds" situation with a value - dominant style [6][21]. - The yields of short - term and long - term bonds declined slightly. The ten - year Treasury bond yield remained stable at 1.64%, the one - year Treasury bond yield decreased by 5 basis points to 1.36%, and the thirty - year Treasury bond yield decreased by 1 basis point to 1.84% [6][21]. - The broad - based rotation strategy outperformed the CSI 300 index by 0.52 percentage points last week and has outperformed it by 6.45 percentage points since July, with a maximum drawdown of 0.0% [6]. - The report recommends a portfolio of 40% dividend index, 40% SSE 50 index, and 20% 30 - year Treasury bond ETF [7][23]. 3. Industry Recommendation 3.1 Industry Performance Review - The A - share market declined with lower trading volume this week. The Shanghai Composite Index fell 0.51%, the Shenzhen Component Index fell 1.16%, and the ChiNext Index fell 1.66% [27]. - Among the Shenwan primary industries, banks, communications, electronics, food and beverages, and household appliances had the largest increases, while beauty care, textile and apparel, pharmaceutical biology, non - ferrous metals, and social services had the largest declines [27]. 3.2 Industry Crowding and Trading Volume - As of June 20, the top five industries in terms of crowding were electronics, computers, power equipment, machinery and equipment, and pharmaceutical biology, while the bottom five were comprehensive, beauty care, steel, coal, and building materials [29]. - This week, the top five industries with increased crowding were electronics, power equipment, communications, machinery and equipment, and computers, while the top five with decreased crowding were pharmaceutical biology, non - ferrous metals, national defense and military industry, automobiles, and textile and apparel [29]. - The average daily trading volume of the entire A - share market decreased from 1.37 trillion yuan last week to 1.22 trillion yuan this week. The industries with the highest year - on - year growth in trading volume were petroleum and petrochemicals, national defense and military industry, electronics, computers, and public utilities [30]. 3.3 Industry Valuation and Earnings - This week, among the Shenwan primary industries, banks, communications, electronics, food and beverages, and household appliances had the largest increases in PE(TTM), while beauty care, textile and apparel, pharmaceutical biology, non - ferrous metals, and social services had the largest declines [34]. - As of June 20, 2025, industries with high full - year 2024 earnings forecasts and relatively low current valuations compared to history include coal, petroleum and petrochemicals, power equipment, pharmaceutical biology, and consumer electronics [35]. 3.4 Industry Prosperity - In terms of external demand, there were mixed trends. The global manufacturing PMI in May fell from 49.8 to 49.6, while most of the disclosed PMIs of major economies in May rebounded. The CCFI index rose 8% week - on - week [39]. - In terms of domestic demand, second - hand housing prices declined in the latest week, and quantitative indicators showed mixed trends. The traffic volume of trucks on expressways increased, and the capacity utilization rate of ten industries showed a slight rebound in May and continued to rise slightly in June [39]. 3.5 Public Fund Market Review - In the third week of June (June 16 - 20), most active public equity funds underperformed the CSI 300. The 10%, 20%, 30%, and 50% weekly returns were 0.4%, - 0.2%, - 0.6%, and - 1.2% respectively, while the CSI 300 fell 0.45% [53]. - As of June 20, the net asset value of active public equity funds was estimated to be 3.41 trillion yuan, slightly lower than 3.66 trillion yuan in Q4 2024 [53]. 3.6 Industry Recommendation - In the de - leveraging cycle, the stock - bond ratio favors equity to a limited extent, and the value style is more likely to dominate. Dividend - type stocks are generally expected to have the characteristics of non - expansion, good earnings, and survival [8][23][57]. - The recommended A + H dividend portfolio includes 20 A + H stocks, and the A - share portfolio includes 20 A - share stocks, mainly concentrated in industries such as banks, telecommunications, petroleum and petrochemicals, and transportation [8][9][57].