Investment Rating - The report indicates a positive outlook for the Chinese equity market, particularly aligned with the 15th Five-Year Plan (FYP) [3][40]. Core Insights - The 15th FYP emphasizes high-quality, secure, and balanced growth, with a focus on technology, innovation, and improving people's livelihoods as key priorities for 2026-2030 [1][12]. - Historical analysis shows that aligning investment strategies with the FYP can yield significant alpha, with a potential 13% annualized alpha if portfolios are aligned with policy trends [2][18]. - The report identifies a universe of 35 GICS3 Industries that are expected to benefit from policy support, representing a total market cap of US$13 trillion, which is 66% of the full universe [3][40]. Summary by Sections 1. Historical Performance and Policy Alignment - MSCI China and CSI300 have delivered 8-10% total return CAGR since the 10th FYP, trailing nominal GDP growth of 11% [2][18]. - The report highlights that specific sectors mentioned in the 14th FYP significantly outperformed the benchmark, with average returns of 41% compared to -3% for the CSI300 [24][25]. 2. 15th FYP Portfolio Construction - The report screens for 50 mid-cap stocks across 21 sub-sectors, which have returned 68% in the past year, outperforming MSCI China by 33 percentage points [4][54]. - These stocks are expected to deliver a 30% EPS CAGR over the next two years, compared to 15% for MSCI China, indicating strong growth potential [4][54]. 3. Key Themes and Investment Opportunities - The report identifies several investment themes, including the return of private-owned enterprises (POEs), Going Global, AI, Anti-Involution, and Shareholder Returns, which are expected to outperform in a slower market [3][40]. - Emerging technologies such as 6G, bio-manufacturing, and hydrogen/nuclear fusion are highlighted as new areas of focus in the 15th FYP [12][15]. 4. Sectoral Analysis - The selected industries predominantly reside in Technology, Consumer, and Materials sectors, with a strong emphasis on tech-related industries expected to receive policy support [40][41]. - The report notes that the 15th FYP universe is expected to grow faster than the broader market, with higher profitability and growth capex intensity [40][39].

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **China A-shares market** and its performance in July 2025, highlighting solid price gains across various sectors [1][2]. Core Insights and Arguments - **Sector Performance**: - **Healthcare**: Led with a **13.5%** increase in July and **23.1%** year-to-date (YTD) performance, driven by recovering demand and strong drug pipelines [2][8]. - **IT**: Increased by **6.7%** in July and **14.7%** YTD, benefiting from Nvidia's resumption of sales to China [2][8]. - **Materials**: Gained **6.4%** in July and **18.0%** YTD, supported by government initiatives against overcapacity [2][9]. - **Energy**: Saw a **4.7%** increase in July but a decline of **1.8%** YTD [2]. - **Real Estate**: Increased by **4.5%** in July but declined **2.3%** YTD [2]. - **Financials**: Only **2.1%** increase in July and **10.5%** YTD, with some companies experiencing significant declines [2][10]. - **Market Drivers**: - The **CSI300** index rose **3.5%** in July, with improving liquidity and solid GDP growth of **5.2%** year-on-year (y-y) in Q2 2025 [5][39]. - **Net inflows** into A-shares totaled **US$193 million**, primarily in Financials, IT, and Materials, while Industrials and Consumer Discretionary saw outflows [5][14]. - **Macroeconomic Indicators**: - **GDP Growth**: China's GDP growth was **5.2%** y-y, with nominal GDP growth at **3.9%** y-y, indicating a decline in the GDP deflator to **-1.2%** [5][39]. - **Industrial Production**: Increased by **6.8%** y-y, with notable growth in high-tech sectors [5][42]. - **Retail Sales**: Grew by **4.8%** y-y, below expectations, indicating weak consumer sentiment [5][39]. - **Trade**: Exports rose **5.8%** y-y, with a rebound in exports to the US [5][41]. Additional Important Insights - **Margin Financing**: The margin buying as a percentage of A-share turnover rose to **10.5%** at the end of July from **9.6%** at the end of June, indicating increased investor confidence [5][24]. - **Fund Issuance**: Equity mutual fund issuance remained stable at **Rmb18 billion** in July, compared to **Rmb21 billion** in June [5][27]. - **Shareholding Structure**: By the end of 2024, retail investors held **42%**, controlling shareholders **43%**, domestic financial institutions **12%**, and foreign investors **3%** of A-shares' total market cap [5][28]. This summary encapsulates the key points from the conference call, providing a comprehensive overview of the current state of the China A-shares market and its underlying economic factors.