Macro Environment - The macroeconomic data for October shows a weak recovery, with the manufacturing PMI at 49%, down 0.8 percentage points from September's 49.8% [5][11] - The "Four Central Committee" meeting established the development direction for the 14th Five-Year Plan, emphasizing the expansion of domestic demand and the construction of a modern industrial system [5][11] - The Producer Price Index (PPI) decreased by 2.3% year-on-year, with the decline narrowing for two consecutive months, indicating some price recovery [5][11] Market and Industry Performance - In October, the bond market saw a rebound, with the 10-year government bond futures index rising by 0.74% and the 30-year index by 2.35% [5][43] - The equity market favored value over growth, with the Shenwan style index showing a rise in cyclical sectors by 3.23% and financial real estate by 1.98%, while technology (TMT) fell by 3.01% [5][48] - The top-performing industries in September included coal (10.02%) and steel (5.16%), while electronics (-3.53%) and automobiles (-3.58%) lagged [5][54] Monthly Allocation Recommendations - For November, the recommendation is to maintain low-volatility assets as a basic allocation, with potential adjustments to increase exposure to technology if valuations improve after corrections [5][63] - Key sectors to focus on include brokerage, insurance, banking, and pharmaceuticals [5][64] Current TMT Sector Status - The TMT sector has experienced multiple wave cycles from 2005 to 2025, with lower valuation stocks generally outperforming higher valuation ones [5][67] - The electronic industry shows a high PE ratio of 81.42, indicating relatively high valuations compared to historical extremes [5][73] - The relationship between inventory cycles and index performance in the electronic sector is complex, with cash flow growth not consistently aligning with index peaks [5][73]

Core Insights - In May, industrial enterprises' profits turned negative year-on-year, with a total profit of 27,204.3 billion yuan, reflecting a decline of 1.1% compared to the previous year, and a significant drop of 9.1% in May alone [16][29] - The report highlights a mixed performance across various sectors, with TMT (Technology, Media, and Telecommunications) showing resilience while resource sectors and essential consumption face challenges [29] Industry Overview - The industrial profit margin weakened due to factors such as export slowdown, insufficient effective demand, and price pressures, leading to a negative profit growth in May [3][29] - The TMT sector experienced a year-on-year profit growth of 11.9%, driven by strong demand for smart consumer devices, with some industries like intelligent consumer equipment manufacturing seeing a profit increase of 101.5% [28][29] - In the resource sector, profits in the mining industry saw a year-on-year decline of 29.0%, while manufacturing and electricity sectors also reported reduced profit growth [20][29] Information Technology Sector - The Philadelphia Semiconductor Index and Taiwan Semiconductor Industry Index both increased, indicating a positive trend in the semiconductor market [31] - DDR4 DRAM prices rose by 4.42% for 8GB modules and 5.88% for 16GB modules, reflecting a recovery in memory prices [34] - North American PCB shipments turned positive year-on-year, although order growth has slowed [31][34] Midstream Manufacturing - The cumulative installed capacity of solar power generation in China increased year-on-year, indicating growth in the renewable energy sector [4][30] - Prices for silicon wafers in the photovoltaic industry declined, while production of packaging equipment and metal forming machine tools saw a slowdown in growth [4][30] Consumer Demand - The report noted an increase in pork prices and a rise in profits for pig farming, while prices for chicken chicks decreased [4][30] - The film industry showed positive trends with box office revenues increasing year-on-year, reflecting a recovery in consumer spending [4][30] Resource Sector Tracking - Industrial metal prices generally increased, with a decline in inventories, while coal prices remained stable [4][30] - The cement price index showed a downward trend, indicating challenges in the construction materials market [4][30]