- The report defines the market environment using the distance between the long-term (120-day) and short-term (20-day) moving averages of the WIND All A index, which continues to expand, indicating an upward trend [2][9][10] - The industry allocation model recommends sectors such as innovative drugs in Hong Kong and securities for mid-term allocation, while the TWO BETA model continues to recommend the technology sector, focusing on military and computing power [2][3][10] - The current PE ratio of the WIND All A index is around the 70th percentile, indicating a moderate level, while the PB ratio is around the 30th percentile, indicating a relatively low level [3][10][15] Model and Factor Construction 1. **Model Name: Industry Allocation Model** - **Construction Idea**: Recommends sectors based on mid-term market trends - **Construction Process**: Utilizes historical data and market trends to identify sectors with potential for reversal and growth, such as innovative drugs and securities in the Hong Kong market - **Evaluation**: Effective in identifying sectors with potential for mid-term growth [2][3][10] 2. **Model Name: TWO BETA Model** - **Construction Idea**: Focuses on sectors with high beta values, indicating higher volatility and potential returns - **Construction Process**: Analyzes sectors with high beta values, recommending technology, military, and computing power sectors - **Evaluation**: Continues to recommend high-growth sectors, showing consistency in sector selection [2][3][10] Model Backtesting Results 1. **Industry Allocation Model** - **PE Ratio**: 70th percentile [3][10][15] - **PB Ratio**: 30th percentile [3][10][15] - **Moving Average Distance**: 6.92% [2][9][10] - **Profitability Effect**: 2.30% [2][9][10] 2. **TWO BETA Model** - **PE Ratio**: 70th percentile [3][10][15] - **PB Ratio**: 30th percentile [3][10][15] - **Moving Average Distance**: 6.92% [2][9][10] - **Profitability Effect**: 2.30% [2][9][10]

- The report defines a timing system signal based on the distance between the long-term moving average (120 days) and the short-term moving average (20 days) of the Wind All A Index, which is currently at 1.76%, indicating the market is still in a consolidation pattern[1][3][9] - The industry allocation model recommends mid-term allocation to sectors experiencing a turnaround, such as Hong Kong innovative drugs, new consumption, and Hong Kong finance, with the trend still intact[2][3][10] - The TWO BETA model continues to recommend the technology sector, with a focus on military and communication sectors[2][3][10] - The Wind All A Index's PE ratio is at the 65th percentile, indicating a medium level, while the PB ratio is at the 20th percentile, indicating a relatively low level[2][10] - The position management model suggests a 50% allocation to absolute return products based on the Wind All A Index[2][10] Model Backtest Results - Timing system signal: Moving average distance 1.76%[1][3][9] - Industry allocation model: Mid-term recommendation for turnaround sectors, Hong Kong innovative drugs, new consumption, and Hong Kong finance[2][3][10] - TWO BETA model: Recommendation for technology sector, focus on military and communication[2][3][10] - Wind All A Index PE ratio: 65th percentile[2][10] - Wind All A Index PB ratio: 20th percentile[2][10] - Position management model: 50% allocation to absolute return products[2][10]

Quantitative Models and Construction Methods - **Model Name**: Timing System Model **Model Construction Idea**: This model uses the distance between the short-term moving average (20-day) and the long-term moving average (120-day) of the Wind All A Index to determine the overall market environment and identify market trends [1][9][12] **Model Construction Process**: 1. Calculate the 20-day moving average (short-term) and the 120-day moving average (long-term) of the Wind All A Index 2. Compute the difference between the two moving averages: $ \text{Difference} = \text{20-day MA} - \text{120-day MA} $ 3. Evaluate the absolute value of the difference. If the absolute value is less than 3%, the market is considered to be in a consolidation phase [1][9][12] **Model Evaluation**: The model effectively captures the market's consolidation phase and provides a clear signal for timing decisions [1][9][12] - **Model Name**: Industry Allocation Model **Model Construction Idea**: This model identifies industries with medium-term growth potential and recommends allocation based on sectoral trends and macroeconomic factors [2][3][10] **Model Construction Process**: 1. Analyze macroeconomic factors and market sentiment 2. Identify sectors with potential for recovery or growth, such as "distressed reversal" sectors 3. Recommend specific industries, such as innovative pharmaceuticals, automobiles, and new consumption in the Hong Kong market, as well as technology sectors like consumer electronics [2][3][10] **Model Evaluation**: The model provides actionable insights for medium-term industry allocation, focusing on sectors with growth potential [2][3][10] - **Model Name**: TWO BETA Model **Model Construction Idea**: This model focuses on identifying high-growth sectors, particularly in technology, and recommends allocation based on their performance trends [2][3][10] **Model Construction Process**: 1. Analyze the performance of high-beta sectors, such as technology and consumer electronics 2. Monitor the upward trend of specific industries, such as banking and gold stocks, to identify allocation opportunities [2][3][10] **Model Evaluation**: The model is effective in identifying high-growth sectors and provides a focused approach to sectoral allocation [2][3][10] - **Model Name**: Position Management Model **Model Construction Idea**: This model determines the recommended equity allocation based on valuation indicators and short-term market trends [2][10][12] **Model Construction Process**: 1. Evaluate the PE and PB valuation levels of the Wind All A Index 2. Assess the relative position of these indicators within their historical ranges 3. Combine valuation analysis with short-term market trend signals to recommend an equity allocation level (e.g., 50% for absolute return products) [2][10][12] **Model Evaluation**: The model provides a balanced approach to equity allocation, considering both valuation and market trends [2][10][12] Model Backtesting Results - **Timing System Model**: The moving average difference is 0.68%, with the absolute value remaining below 3%, indicating a consolidation phase [1][9][12] - **Position Management Model**: - PE valuation level: 60th percentile, indicating a medium level - PB valuation level: 20th percentile, indicating a relatively low level - Recommended equity allocation: 50% [2][10][12]

Quantitative Models and Construction Methods 1. Model Name: Industry Allocation Model - **Model Construction Idea**: This model aims to identify and recommend industries with potential for medium-term outperformance based on specific market conditions and sectoral dynamics [2][3][9] - **Model Construction Process**: The model evaluates industries based on their recovery potential ("distressed reversal sectors") and ongoing trends. It recommends sectors such as Hong Kong-listed innovative pharmaceuticals, automobiles, and new consumption industries. Additionally, it highlights sectors like technology (e.g., consumer electronics) and those with upward momentum, such as banking and gold stocks [2][3][9] - **Model Evaluation**: The model is effective in identifying sectors with medium-term growth potential and aligns with current market trends [2][3][9] 2. Model Name: TWO BETA Model - **Model Construction Idea**: This model focuses on identifying sectors with high beta characteristics, particularly in the technology domain, to capture growth opportunities [2][3][9] - **Model Construction Process**: The TWO BETA model emphasizes technology-related sectors, such as consumer electronics, as key areas of focus. It also considers sectors with strong upward momentum, like banking and gold stocks [2][3][9] - **Model Evaluation**: The model is suitable for identifying high-growth sectors in a market environment characterized by volatility and selective sectoral strength [2][3][9] 3. Model Name: Timing System Signal - **Model Construction Idea**: This model uses moving average distances to assess market conditions and provide timing signals for market entry or exit [2][3][8] - **Model Construction Process**: - The model calculates the distance between the short-term moving average (20-day) and the long-term moving average (120-day) of the Wind All A Index - Current data: - 20-day moving average: 5063 - 120-day moving average: 5079 - Distance: -0.32% (short-term moving average below long-term moving average) - The absolute value of the distance is less than 3%, indicating a market in a consolidation phase [2][3][8] - **Model Evaluation**: The model provides a clear and quantitative framework for assessing market trends and timing decisions [2][3][8] 4. Model Name: Position Management Model - **Model Construction Idea**: This model determines optimal portfolio allocation based on valuation metrics and market trends [3][9] - **Model Construction Process**: - The model evaluates the Wind All A Index's valuation levels: - PE ratio: 60th percentile (moderate level) - PB ratio: 10th percentile (low level) - Based on these metrics and short-term market trends, the model recommends a portfolio allocation of 50% for absolute return products [3][9] - **Model Evaluation**: The model effectively balances valuation considerations with market dynamics to guide portfolio allocation [3][9] --- Backtesting Results of Models 1. Industry Allocation Model - Recommended sectors: Hong Kong-listed innovative pharmaceuticals, automobiles, new consumption, technology (e.g., consumer electronics), banking, and gold stocks [2][3][9] 2. TWO BETA Model - Focus sectors: Technology (e.g., consumer electronics), banking, and gold stocks [2][3][9] 3. Timing System Signal - Moving average distance: -0.32% (absolute value < 3%, indicating a consolidation phase) [2][3][8] 4. Position Management Model - Recommended portfolio allocation: 50% for absolute return products [3][9]