Market Overview - A-shares experienced a slight increase on July 11, with the Shanghai Composite Index rising marginally, while the Shenzhen Component and ChiNext Index saw modest gains [1] - The total trading volume in the Shanghai and Shenzhen markets reached 1.71 trillion yuan, an increase of 218 billion yuan compared to the previous trading day, marking the highest trading volume since March 15 [1] Sector Performance - Strong performance was observed in sectors such as securities, rare earth permanent magnets, and CRO (Contract Research Organization), with several stocks hitting the daily limit [2][1] - Conversely, the banking sector faced a decline, with nearly 20 bank stocks, including Shanghai Pudong Development Bank and Changsha Bank, dropping over 2% [1][2] Institutional Insights - According to Jifeng Investment Advisors, the market is recovering due to rising expectations of a Federal Reserve interest rate cut, which enhances risk appetite in the domestic market [3] - China International Capital Corporation (CICC) noted that domestic power grid investment remains robust, with expectations for accelerated approvals in the third quarter, indicating a positive trend for the next few years [3] - CITIC Securities highlighted the stability of the banking sector's returns, supported by macroeconomic and regulatory policies, and suggested that trading funds will focus on undervalued stocks in the near term [3] Regulatory Updates - The Shenzhen Stock Exchange has revised the compilation scheme for the ChiNext Composite Index, introducing a monthly removal mechanism for stocks under risk warning and an ESG negative removal mechanism for stocks rated C or below [4] Industry Developments - The China Coking Industry Association held a market analysis meeting, where representatives from key coking enterprises agreed on the necessity to raise coking prices in response to current market conditions [5]

Investment Rating - The report indicates a favorable outlook for Chinese private-owned enterprises (POEs), suggesting selectivity is required for investment success in this sector [1][3]. Core Insights - Chinese POEs are in the process of regaining market strength after losing nearly US$4 trillion in market capitalization since late 2020, with a significant underperformance compared to state-owned enterprises (SOEs) [1][4]. - The importance of the private sector has been acknowledged by policymakers, with recent legislative support aimed at promoting private enterprises [3][19]. - Regulatory risks have eased, contributing to a more favorable investment environment for listed POEs [3][20]. - The ongoing advancements in AI and technology are expected to enhance growth prospects for POEs, which constitute 72% of the defined AI-Tech universe [3][40]. - POEs are increasingly leading China's "Going Global" strategy, allowing for organic growth and higher profit margins [3][41]. - Profitability metrics for POEs have shown improvement, with profits and return on equity (ROE) rising by 22% and 1.2 percentage points, respectively, since the lows of 2022 [3][47]. - There are early signs of renewed investment appetite within the POE sector, indicating a return of "animal spirits" [3][56]. - POEs are currently trading at valuation discounts compared to historical ranges and SOEs, with cash returns reaching record highs [3][62]. Summary by Sections Section 1: Market Performance - Listed Chinese POEs have lost almost US$4 trillion in market capitalization since their peak in 2020, reflecting a 32% decline [4][6]. - POEs represent 60% of the total market capitalization of the listed universe in China [6][19]. Section 2: Regulatory Environment - The regulatory cycle for POEs has shifted towards a more accommodating stance, reducing the perceived policy risk premium [3][20]. - Recent legislative actions, including the first-ever POE law, aim to support the private economy and enhance investor confidence [3][19]. Section 3: Technological Advancements - AI and technology breakthroughs are reshaping the growth narrative for POEs, with significant representation in the AI-Tech sector [3][40]. - Widespread AI adoption is projected to boost corporate earnings in China by 2.5% annually over the next decade [3][36]. Section 4: Global Expansion - POEs are increasingly diversifying their revenue sources, with non-domestic sales expected to reach nearly 20% of total sales by 2024 [3][46]. - The profitability of POEs in overseas markets is generally higher than in the domestic market, driven by better pricing and reduced competition [3][45]. Section 5: Profitability Recovery - POEs have shown signs of profitability recovery, with expectations for further improvement in ROE and net margins [3][55]. - The consensus forecast indicates a potential uplift in ROE to around 13%-14% in the coming years [3][55]. Section 6: Investment Opportunities - The report emphasizes the need for selectivity in investing within the POE universe, highlighting specific investment themes such as the Chinese Prominent 10 and GS China Select AI Portfolio [1][74]. - The thematic bias towards high-quality SOEs remains, particularly those with strong shareholder returns [1][74].

Group 1 - Midea Group reported a total revenue of 409.1 billion yuan for 2024, marking a year-on-year increase of 9.5%, and a net profit of 38.5 billion yuan, up 14.3% [3] - The company plans to distribute a cash dividend of 35 yuan per 10 shares, totaling 26.7 billion yuan, which is nearly 30% higher than the previous year, and the dividend payout ratio is close to 70% of net profit [3] - Midea's revenue growth has accelerated, surpassing 400 billion yuan in just three years since reaching 300 billion yuan in 2021 [3] Group 2 - Hisense Home Appliances achieved a revenue of 92.746 billion yuan in 2024, reflecting an 8.35% year-on-year growth, with a net profit of 3.348 billion yuan, up 17.99% [4] - The company plans to distribute a cash dividend of 12.3 yuan per 10 shares, which is a 21.42% increase compared to the previous year [4] - Both companies attribute their strong revenue and profit growth to successful international expansion efforts [5] Group 3 - Hisense's overseas revenue exceeded 35.6 billion yuan, growing by 28%, with significant increases in various regions including Europe and the Americas [5] - Midea's OBM (Own Brand Manufacturer) revenue accounted for 43% of its smart home overseas business, with exports to over 200 countries and regions, making it the top brand in global smart appliance sales for 2024 [5]