Investment Rating - The report maintains a neutral to optimistic outlook for the equity market in February 2026, indicating a continued recovery in economic sentiment [26][27]. Core Insights - The report highlights that the recent significant drop in gold prices is attributed to a combination of short-term negative events and the inherent fragility of market structures, despite the long-term bullish outlook for gold remaining intact [9][16][25]. - The analysis suggests that managing positions based on gold's trading congestion can enhance returns while mitigating risks during periods of high volatility [21][25]. - The report emphasizes a favorable outlook for various sectors, particularly non-ferrous metals, basic chemicals, telecommunications, and renewable energy, while also identifying potential opportunities in sectors experiencing recovery from previous downturns [99]. Summary by Sections 1. Measuring Gold Trading Congestion - The report discusses the recent decline in gold prices, with a notable drop of 9.2% on January 30 and 13.2% on February 2, 2026, indicating a significant market reaction to external factors [13][16]. - It identifies that the trading congestion in gold was at a high level prior to the drop, suggesting that the market's speculative positions were vulnerable to negative news [19][25]. 2. Major Asset Quantitative Insights - **Equities**: The sentiment is neutral to optimistic, with a recovery in financial and industrial sectors, and analysts expect stronger net profits in sectors like non-ferrous metals and construction [26][27]. - **Interest Rates**: The report predicts a rise in the 10-year government bond yield by 6 basis points to 1.88% in February, driven by factors such as economic growth and inflation [44][50]. - **Gold**: All four factors analyzed (economic, employment, fiscal, and external debt) are currently favorable for gold, maintaining a bullish outlook [54][57]. - **Real Estate**: The pressure index for the real estate sector has increased slightly, indicating rising supply-side pressures while demand remains stable [64][66]. - **Overseas Markets**: The report notes a potential turnaround in trade conflicts, particularly between India and the US, which could enhance the attractiveness of Indian equities [68][78]. 3. Style Quantitative Insights - The market is expected to continue expanding, with recommendations for growth-oriented and profitability-focused investment styles [80][81]. - There is a specific emphasis on small-cap and growth stocks, with historical data suggesting that small-cap stocks tend to outperform in February [87][96]. 4. Industry Allocation Quantitative Insights - The report recommends a diversified industry allocation strategy, highlighting sectors such as non-ferrous metals, basic chemicals, telecommunications, and renewable energy as key areas for investment [99].

- The report introduces a structured static factor model for predicting 10Y government bond yield movements, utilizing four macroeconomic factors: economic growth, inflation, debt leverage, and short-term interest rates[44][50][53] - The model has achieved a historical prediction accuracy of approximately 70% since 2006, with a sample-out accuracy of 68% since 2023[47][50] - For February 2026, the model forecasts a 6BP increase in the 10Y government bond yield to 1.88%, driven by upward trends in all four macroeconomic factors[50][53] - A structured static factor model is also applied to gold price movements, incorporating four key factors: US economy, US employment, US fiscal policy, and US external debt[54][57] - The gold model has demonstrated a historical prediction accuracy of 65% since 2008, with a sample-out accuracy of 78% since 2023[54][55] - The report highlights that fiscal and employment factors are currently supporting gold price increases, while economic and external debt factors show mixed signals[57][60] - A quantitative strategy for managing gold positions based on trading congestion is proposed, using two metrics: 40-day price deviation rate and SHFE gold implied volatility (IV)[19][21] - The strategy suggests reducing portfolio exposure to 40% when the 40-day price deviation rate exceeds 9% and SHFE gold IV surpasses 30%, achieving an excess return of 53.4% and improving the Sharpe ratio from 1.26 to 1.62 during backtesting from 2020 to February 2026[21][19] - The report recommends a multi-dimensional industry allocation strategy combining "win-rate and odds" and "clearance reversal" approaches, with industries such as non-ferrous metals, basic chemicals, and steel being highlighted[99][102][115]