1. Report's Industry Investment Rating - No information about the industry investment rating is provided in the report. 2. Core Viewpoints of the Report - The Grid Equipment ETF (159326.SZ) managed by Huaxia Fund tracks the CSI Grid Equipment Theme Index (931994.CSI). From May 1, 2025, to December 12, 2025, the best convergent stock of the Grid Equipment ETF is Hongfa Co., Ltd. (600885.SH), selected by considering the trend deviation and research coverage between component stocks and the grid equipment index [3][9]. - From November 2024 to June 2025, Hongfa Co., Ltd.'s bottom - valuation based on 2024 EPS was close to 19.5 times PE. As of December 12, 2025, its stock price fluctuations did not exceed the value range defined by the fundamental value of T - 1 year and the expected fundamental value of T+2 year. Based on December 12, 2025, data, the expected per - share fundamental values from 2025 to 2027 were 24.25, 28.09, and 32.38 yuan respectively, and the closing price was 30.42 yuan/share. The rebound in December started near 28 yuan/share, and the current stock price is still lower than the 2027 per - share fundamental value [3][9]. - According to the position of Hongfa Co., Ltd.'s closing price in the expected per - share fundamental value range from 2025 to 2027, the closing position on December 12, 2025, was 52.81%. From October 9, 2025, to December 12, 2025, the Sharpe ratio and return - drawdown ratio of the Grid Equipment ETF based on Hongfa Co., Ltd.'s dynamic position allocation were better than those of the buy - and - hold strategy. The allocation strategy achieved a 11.60% terminal return with a maximum drawdown of 4.45%, while the buy - and - hold strategy of the Grid Equipment ETF achieved a 9.28% terminal return with a maximum drawdown of 14.03% [4][10]. 3. Summary by Relevant Catalog 3.1 Grid Equipment ETF Configuration Value Analysis - The Grid Equipment ETF (159326.SZ) is managed by Huaxia Fund and tracks the CSI Grid Equipment Theme Index (931994.CSI) [3][9]. - The best convergent stock of the Grid Equipment ETF from May 1, 2025, to December 12, 2025, is Hongfa Co., Ltd. (600885.SH) [3][9]. - Hongfa Co., Ltd.'s bottom - valuation from November 2024 to June 2025 was close to 19.5 times PE, and its stock price did not exceed the defined value range as of December 12, 2025 [3][9]. - The expected per - share fundamental values of Hongfa Co., Ltd. from 2025 to 2027 are 24.25, 28.09, and 32.38 yuan respectively, and the closing price on December 12, 2025, was 30.42 yuan/share [3][9]. - The closing position on December 12, 2025, was 52.81%. The dynamic position allocation strategy outperformed the buy - and - hold strategy in the period from October 9, 2025, to December 12, 2025 [4][10].

Group 1 - The report focuses on the November allocation strategy for the Traditional Chinese Medicine ETF (560080.SH), which tracks the CSI Traditional Chinese Medicine Index (930641.CSI) that selects listed companies involved in the production and sales of traditional Chinese medicine [3][8] - The best-performing stock in the ETF during the period from May 1, 2025, to October 31, 2025, is Lingrui Pharmaceutical (600285.SH), chosen based on the deviation of component stocks from the index and research coverage [3][8] - Lingrui Pharmaceutical's valuation at market bottoms in January 2024 and September 2024 was close to a 15x PE ratio based on EPS estimates for 2023 and 2024, respectively [3][8] Group 2 - Based on a 15x PE ratio, Lingrui Pharmaceutical's stock price fluctuations have not exceeded the value range defined by the T-1 year and T+2 year expected fundamental values, where T year fundamental value is calculated as T year expected EPS (or actual EPS if disclosed) multiplied by 15 [9] - As of November 14, 2025, the expected fundamental values per share for Lingrui Pharmaceutical from 2025 to 2027 are projected to be 22.09, 25.13, and 28.33 CNY, with a closing price of 22.68 CNY per share, indicating a rational investment sentiment in the market [9] - The closing position for Lingrui Pharmaceutical on November 14, 2025, was 90.48% based on its position within the expected fundamental value range [9] Group 3 - From October 9, 2025, to November 14, 2025, the dynamic allocation strategy for the Traditional Chinese Medicine ETF based on Lingrui Pharmaceutical outperformed the buy-and-hold strategy, achieving a terminal return of 5.82% with a maximum drawdown of 2.54%, compared to a 5.96% return and a 3% maximum drawdown for the buy-and-hold strategy [4][9]

Core Viewpoint - The article emphasizes the importance of ETF allocation strategies, suggesting that a "broad-based foundation + growth acceleration" approach may be key to achieving balanced investment outcomes in the current market environment [1][2]. Group 1: Performance of the CSI A500 Index - The CSI A500 Index has shown significant performance, rising 22.44% since Q2, outperforming the market median increase of 18.61% and the average increase of 22.22% for A-shares excluding extreme values [3]. - The index demonstrated a dual-phase performance, initially tracking the overall market and then accelerating in the latter phase, with a 17.01% increase from April to August, surpassing the market median increase of 15.47% [3]. - In the subsequent phase from September, the CSI A500 Index rose 4.64%, again outperforming the A-share median increase of -0.05% [3]. Group 2: Characteristics of the CSI A500 Index - The CSI A500 Index focuses on industry balance and has a strong growth attribute, driven by both technology growth and traditional cyclical sectors, with the top three sectors (industrial, information technology, and finance) accounting for over 50% of the index [4]. - The index covers nearly all A-share industries, avoiding excessive concentration in any single sector, which enhances its stability and risk resistance during market fluctuations [4]. - As of November 10, the total scale of ETFs linked to the CSI A500 Index exceeded 200 billion, making it a prominent choice among investors [4]. Group 3: Growth Strategy with ChiNext and STAR 50 - A combined strategy of allocating to the CSI A500 Index along with the ChiNext Index and STAR 50 Index yielded returns between 27.05% and 33.95% from April to November, outperforming the CSI A500 Index's 22.44% increase [6][8]. - The ChiNext Index focuses on new-generation information technology and new energy vehicles, with significant weightings of 34% and 24%, respectively, and has undergone an upgrade to stabilize individual stock volatility [9]. - The STAR 50 Index is heavily concentrated in the semiconductor sector, with over 65% weight, aligning with the trends of domestic semiconductor development and the global AI wave [9]. Group 4: ETF Performance - The ChiNext ETF has grown to over 1 trillion in scale, becoming a leading product for investors in this index [9]. - The STAR 50 ETF has reached a scale of 722.22 billion, reflecting a significant increase of over 13 billion in the year [9]. - The complementary nature of the ChiNext and STAR 50 indices enhances the overall risk-return profile when combined with the CSI A500 Index, allowing for better exploitation of high-volatility opportunities [9].

Core Insights - On August 15, a significant net inflow of 35.9 billion was observed, with the most funds flowing into the ETF Yingfu Fund rather than individual stocks, highlighting the growing influence of interconnectivity ETFs [1] - The report analyzes 17 Hong Kong ETFs that have entered the Stock Connect, detailing their allocation advantages and strategic highlights. With the AH premium at a new low, the Hong Kong market may see a secondary rally, focusing on broad-based ETFs like Yingfu Fund, Amundi Hang Seng Tech, and Hang Seng China Enterprises, as well as sector/style ETFs like Huaxia Hang Seng Biotech and GX Hang Seng High Dividend [1] Development of Stock Connect ETFs - After three years of development, Stock Connect ETFs have become a significant channel for southbound trading. As of now, there are 17 ETFs available, with mainland investors holding nearly 34 billion in total assets, indicating their importance in participating in the Hong Kong stock market. The average monthly trading volume is expected to exceed 68 billion by 2025, with active products like Yingfu Fund and Southern Hang Seng Technology showing good liquidity [2] - The performance of ETFs this year has shown significant relative advantages, with Huaxia Hang Seng Biotech doubling in value amid the innovative drug market, and GX Hang Seng High Dividend outperforming Hong Kong dividend ETFs by over 7% [2] Advantages of Stock Connect ETFs - Stock Connect ETFs offer three main advantages: higher precision in holdings, extended trading hours, and lower long-term fees. They allow investors to access non-Stock Connect Hong Kong or US stocks without QDII quotas, providing high tracking accuracy [3] - The trading hours for these ETFs extend by an additional 1.5 hours daily, allowing investors to capture incremental market movements after mainland ETF closures, thus avoiding the lag in net asset value calculations caused by traditional ETF premiums and discounts [3] - Long-term management fees are relatively low, exemplified by Yingfu Fund's management fee as low as 0.04%, which benefits long-term investors [3] Market Trends and Future Outlook - The downward trend of the AH premium reflects optimistic sentiment towards Hong Kong stocks, driven by strong A-share performance and expectations of rising US Treasury yields leading to foreign capital inflows. The convenience of investing through Stock Connect ETFs is expected to translate into performance advantages, with most of these ETFs outperforming their mainland counterparts this year [4] - The current requirements for ETFs to enter the Stock Connect are strict, including a minimum average asset size of 550 million HKD over the past six months and a stock purity of over 60% in the underlying index. There are various strategies for ETFs not yet included in the Stock Connect, such as the AGX Index Covered Call ETF, which aims for stable returns in volatile markets [4] ETF Performance Overview - The report lists five major broad-based ETFs tracking the Hang Seng Index, with an average excess return of 2.6% compared to mainland competitors this year. Additionally, three style ETFs focusing on high dividends and ESG-enhanced indices have shown strong performance, with GX Hang Seng High Dividend achieving a 28% return [6] - The report also highlights the performance of specific ETFs, such as Huaxia Hang Seng Biotech, which has a high concentration of innovative drug stocks, and the absence of redemption restrictions enhances its appeal [6]

Group 1 - The core viewpoint of the report is to select converging constituent stocks for ETF allocation based on data as of July 31, 2025, and to regularly track the effectiveness of the allocation strategy [1] - The best converging stock for the Software ETF (159852.SZ) as of the end of July 2025 is Kingsoft Office (688111), which is also a weighted stock in the ETF [2][7] - Kingsoft Office's stock price has mostly fluctuated below the expected fundamental value for 2027, which is based on a price-to-sales (PS) ratio of 17.2 times the expected earnings per share [2][7] Group 2 - The average closing position from July 31 to August 15, 2025, was 28.3%, with a closing position of 37.59% on August 15 [2][8] - The dynamic allocation strategy based on Kingsoft Office yielded a Sharpe ratio slightly better than a buy-and-hold strategy, achieving a final return of 1.72% with a maximum drawdown of 0.68% from August 1 to August 15, 2025 [2][8] - In comparison, the buy-and-hold strategy for the Software ETF achieved a final return of 3.29% with a maximum drawdown of 3.36% [8]

Group 1: Core Insights - The report focuses on the ETF allocation strategy for the photovoltaic sector, specifically highlighting Longi Green Energy (601012.SH) as the best-performing stock in terms of alignment with the CSI Photovoltaic Industry Index from August 2024 to July 2025 [1][7]. - Longi Green Energy's bottom valuation at the beginning of 2025 was 1.3 times PS, and its stock price has consistently remained below the expected fundamental value for 2027, which is calculated based on the consensus forecast of revenue per share multiplied by 1.3 times PS [2][7]. - The average position of Longi Green Energy from July 31 to August 12, 2025, was 35.6%, with a closing price on August 12, 2025, situated between the fundamental value ranges for 2026 and 2027 [2][8]. Group 2: Performance Metrics - The dynamic allocation strategy based on Longi Green Energy yielded a return of 1.68% from August 1 to August 12, 2025, with a maximum drawdown of 0.28%, slightly outperforming a buy-and-hold strategy which achieved a return of 4.33% but with a higher maximum drawdown of 0.82% [2][8]. - The report indicates that the Sharpe ratio of the allocation strategy was slightly better than that of the buy-and-hold strategy, suggesting a more favorable risk-adjusted return [2][8].

Group 1 - The core viewpoint of the report is to select converging constituent stocks for ETF allocation based on data as of July 31, 2025, and to regularly track the effectiveness of the allocation strategy [1] - The best converging stock for the Chip ETF (159995.SZ) at the end of July 2025 is Northern Huachuang (002371), which is also a weighted stock in the Chip ETF with a weight of 23.7% [2][7] - Northern Huachuang's bottom valuation at the beginning of 2025 was 5 times PS, and its stock price has remained below the expected fundamental value for 2027 since then [2][7] Group 2 - The earnings forecast for Northern Huachuang in 2025 is stable, with the closing price on August 14 being slightly above the expected fundamental value for 2026, indicating it is in the middle of the fundamental value range [8] - From July 31 to August 14, 2025, the average closing position was 57.16%, with a closing position of 50.09% on August 14 [8] - The allocation strategy based on Northern Huachuang's dynamic position achieved a Sharpe ratio slightly better than buy-and-hold, with a final return of 3.16% and a maximum drawdown of 0.97% during the period from August 1 to August 14, 2025 [2][8]