1. Report Industry Investment Rating - Not provided in the content 2. Core Viewpoints of the Report - The recent escalation of the US-Iran conflict has led the global capital market to enter a phase of geopolitical risk repricing. Different durations of military conflicts have different impacts on major asset classes. Short - term conflicts cause a pulse - like increase in volatility, medium - term regional wars lead to supply shortages and trend - like movements in safe - haven assets, and long - term confrontations have far - reaching impacts on the global economy. For A - shares, short - term impacts are mainly through risk - preference and sentiment, while in the medium and long term, A - shares are still mainly driven by their own logic [5][8] - Short - term, the escalation of the US - Iran conflict may cause short - term shocks to A - shares, with defensive sectors strengthening and high - elasticity sectors correcting. Medium - term, the core variable is whether the conflict affects the Strait of Hormuz, leading to structural differentiation. Long - term, external geopolitical disturbances will not change the trend of A - shares returning to the domestic economic fundamentals, but will strengthen the allocation consensus on long - term investment themes [8] 3. Summary by Relevant Catalogs Market Review - **Market Performance**: Last week, most major market indices declined, with the Shanghai Composite Index performing relatively well, down 0.93% week - on - week. Among major industry indices, the energy and public utility indices performed well, up 7.38% and 3.44% respectively, while the telecommunications service and information technology indices were weak, down 5.23% and 4.35% respectively. Among the 30 Shenwan primary industries, 6 industries rose, with the petroleum and petrochemical, coal, and public utility industries rising 8.06%, 3.79%, and 3.42% respectively. The media, non - ferrous metals, and computer industries fell 6.97%, 5.47%, and 5.29% respectively [9][16][18] - **Trading Heat**: The average daily trading volume of the Wind All - A Index last week was 26446.19 billion yuan (previous value was 24402.93 billion yuan), at a relatively high historical level (96.70% of the three - year historical quantile) [21] - **Valuation Tracking**: As of March 6, 2026, the valuation (PE_TTM) of the Wind All - A Index was 23.43, down 0.28 from last week, at the 98.90% quantile of the past 5 years. Among the 30 Shenwan primary industries, 6 industries' valuations (PE_TTM) recovered [25] Market Observation - **How Major Asset Classes May Evolve After Geopolitical Conflicts**: Short - term conflicts (within one month) lead to a pulse - like increase in major asset volatility, with "safe - haven trading" as the main theme. For example, after the 2019 attack on Saudi Aramco's facilities, the Brent crude oil price rose sharply but quickly returned to fundamental pricing. Safe - haven trading was mainly focused on the US dollar rather than gold. If the conflict turns into a regional war lasting more than two months, the supply gap in the crude oil market will be persistent, and safe - haven assets will show a trend - like performance. For example, during the 2011 Libyan civil war, the oil price rose significantly, and gold and US Treasury bond prices increased for more than half a year. When the conflict becomes a long - term confrontation lasting several years, it will have a profound impact on the global economy. For example, after the Russia - Ukraine conflict entered the long - term stage in the second half of 2022, it led to European energy - supply structure adjustments. For A - shares, short - term impacts are mainly through risk - preference and sentiment, while in the medium and long term, A - shares are mainly driven by their own logic [5][8] - **Investment Recommendations**: Short - term, the escalation of the US - Iran conflict may cause short - term shocks to A - shares, with defensive sectors strengthening and high - elasticity sectors correcting. Beneficial assets include crude oil and natural gas. Medium - term, the core variable is whether the conflict affects the Strait of Hormuz, leading to structural differentiation. Beneficial assets include shipping, public utilities, and military industries. Long - term, external geopolitical disturbances will not change the trend of A - shares returning to the domestic economic fundamentals, but will strengthen the allocation consensus on long - term investment themes such as domestic substitution, national security, and industrial upgrading [8]

Macro and Strategy - The macroeconomic report indicates a downward adjustment of GDP growth target to 4.5%-5.0%, which is aimed at creating space for structural optimization and high-quality development [8][9][10] - The report highlights a significant increase in global stagflation expectations due to rising oil prices, driven by geopolitical tensions, particularly in the Strait of Hormuz [11][12] - The employment data for February shows a decline in non-farm payrolls by 92,000, which is significantly below the expected 59,000, indicating a potential economic slowdown [8][11] Industry and Company Insights - The chemical industry report notes that the fluorochemical sector is expected to see a positive growth rate in air conditioning production in Q2 2026, with prices of fluorinated polymers continuing to rise [3] - The public environmental sector report emphasizes the upcoming review of the Ecological Environment Code, suggesting investment opportunities in integrated environmental companies [3] - The banking industry outlook for 2026 suggests a focus on stock selection as the industry transitions from policy support to performance recovery, with high-quality stocks leading the value reassessment [3] - The lithium battery industry report mentions BYD's launch of the second-generation blade battery and the EU's proposal for an industrial acceleration bill, indicating growth potential in the electric vehicle sector [3] - The agricultural sector report indicates that beef prices remain strong despite seasonal trends, while the pig farming industry is expected to continue capacity reduction post-holiday, influenced by rising oil prices [3] Market Performance - The report provides a snapshot of major market indices, with the Shanghai Composite Index closing at 4124.19 points, reflecting a 0.38% increase, while the Shenzhen Component Index rose by 0.59% [2] - The report also highlights the performance of various global indices, with the Dow Jones down by 0.94% and the Nasdaq down by 1.58%, indicating a mixed performance across markets [4] Fixed Income Insights - The fixed income report indicates that the long-term bond market remains stable despite geopolitical tensions, with a slight increase in trading activity observed [15][16] - The report notes that the yield spread between 30-year and 10-year government bonds is at a historically low level, suggesting potential upward pressure on long-term rates [15][16] - The convertible bond market report highlights a decline in most convertible bonds, with the overall market facing challenges due to high valuations and geopolitical risks [18][19]

Core Viewpoint - The market is experiencing a "scarcity revaluation" as it shifts towards a more rational assessment of AI technology, leading to a reevaluation of the value of heavy asset companies in the context of macroeconomic changes [1] Group 1: Market Trends and AI Impact - The perception of AI technology has shifted towards a more rational examination, with increasing concerns about "creative destruction" potentially disrupting existing industry dynamics [1] - The software sector in the US has seen a decline of over 30% from its peak, reflecting capital outflows from light asset industries that are easily replaceable by AI [1] - The previous low-interest-rate environment allowed growth assets to enjoy valuation premiums, but rising geopolitical risks and supply chain localization trends are increasing capital costs, highlighting the value of tangible production capabilities [1] Group 2: HALO Concept and Investment Focus - The "HALO" (Heavy Assets, Low Obsolescence) concept has gained significant attention, focusing on assets that are less likely to be replaced by AI and can withstand technological shocks, shifting investment logic from growth chasing to certainty and scarcity [2] - The HALO trading theme has deepened and expanded, with the energy sector in the S&P 500 rising over 25%, and various heavy asset sectors in the A-share market, such as oil, coal, and basic chemicals, showing strong performance [2] Group 3: Sectors Resistant to AI Replacement - Key sectors that are difficult to replace by AI include heavy asset industries with stable cash flows and those providing core support for AI technology, such as infrastructure and upstream strategic resources [3] - Typical HALO sectors are characterized by high barriers to entry, significant capital expenditures, and long asset renewal cycles, making them less susceptible to technological disruption [4] Group 4: Detailed Analysis of HALO Sectors - A detailed analysis indicates that typical HALO sectors in the A-share market are concentrated in the upstream, including energy raw materials like coal, basic chemicals, and non-ferrous metals, which have high fixed asset ratios and stable profitability [5] - Midstream manufacturing sectors such as utilities, power equipment, and transportation also exhibit high asset density and benefit from rigid demand, with many fixed assets accounting for over 30% of revenue [5] Group 5: AI "Shovel Sellers" and Infrastructure - The rapid advancement of AI technology is driving demand in hard tech sectors like computing power and semiconductors, which require significant upfront capital and have high technical barriers, aligning with HALO trading principles [6] - Upstream resource products are essential for AI industry chain construction and are expected to benefit from the rapid expansion of computing power demand, while being less susceptible to technological disruption [6] Group 6: Investment Strategy for HALO Trading - HALO trading is expected to continue enjoying scarcity revaluation premiums, with a focus on sectors that are less likely to be replaced by AI, such as utilities, transportation, and basic chemicals, which are currently undervalued [7] - The supply-demand dynamics, price increases, and geopolitical factors are expected to support market performance in these sectors, while hard tech sectors within the AI industry chain still hold long-term growth potential [8]

- The report explores the use of convolutional neural networks (CNNs) to model price-volume data and predict future prices, mapping learned features to industry theme indices such as the National Green Power Index, CSI Green Power Index, and CSI Electric Power Equipment Theme Index[80][82] - The CNN-based approach involves constructing standardized charts of price-volume data for individual stocks over specific time windows, which are then used as input for the CNN model to identify patterns and trends[80] - The latest thematic allocation based on the CNN model includes sectors like electricity, power grids, and public utilities, with specific indices such as the CSI All-Electric Power Utility Index and CSI All-Public Utility Index being highlighted[80][82]

Group 1 - Market sentiment has declined, with the sentiment indicator dropping to 1.40 from 1.85, indicating a neutral to bearish outlook [2][8] - The inter-industry trading volatility has risen to high levels, suggesting increased sector rotation and a decline in market risk appetite [12][24] - The average daily trading volume for the entire A-share market decreased by 26.52% week-on-week, with an average of 17,932.48 billion yuan, indicating reduced market activity [18][23] Group 2 - The short-term score for industries shows that utilities, oil and petrochemicals, coal, environmental protection, and transportation are leading, with utilities scoring 100, the highest [41][44] - The correlation between industry congestion and weekly price changes is low at 0.39, indicating that high congestion sectors like oil and petrochemicals are experiencing significant price increases, but caution is advised for potential pullbacks [45][49] - The current model indicates a preference for large-cap and value styles, with signals suggesting a potential strengthening in the future [52][53]

Core Insights - The report highlights that the ongoing geopolitical conflicts in the Middle East are the primary variable affecting market risk appetite, leading to a decline in global equity markets, a strengthening dollar, and a significant rise in oil prices. The trading logic is focused on defensive demand and rising energy prices, with a need to monitor the duration of oil supply constraints and their potential long-term impact on supply-demand dynamics [2][12][16]. - A combination of rising commodity prices and declining interest rates is seen as favorable for a bull market. Historically, instances of rising commodity prices coinciding with falling stock markets are rare, with only three occurrences since 1968. Overall, both US and A-shares benefit from rising commodity prices, unless inflation pressures lead to significant liquidity tightening [2][4][25]. - The report suggests that the current domestic deflationary pressures reduce concerns about negative inflation impacts, and interest rates are unlikely to rise significantly in the absence of further positive signals in the fundamentals. The combination of rising ROE and declining interest rates creates a conducive environment for the stock market [2][4][25]. Market Changes This Week - This week, major A-share indices experienced declines, with the Shanghai Composite Index down by 0.93%, and the ChiNext Index down by 2.45%. The sectors leading the gains included oil and petrochemicals (+8.06%), while media (-6.97%) and non-ferrous metals (-5.47%) faced significant losses [32][33]. - Global stock markets also saw declines, with the S&P 500 down by 2.02%. In the commodity market, NYMEX crude oil surged by 36.18%, while LME copper fell by 3.61% [33][34]. Policy and Economic Outlook - The report indicates that the policy tone from the Two Sessions is generally stable, with limited expectations for unexpected easing policies in the short term. The economic growth target for 2026 has been adjusted to a range of 4.5%-5%, with other policy targets remaining consistent with 2025 [3][14]. - The report emphasizes that structural support policies aligned with long-term economic quality improvement and transformation are expected to be implemented effectively, particularly in sectors like services, AI commercialization, and new infrastructure [3][13]. Investment Recommendations - The report suggests focusing on sectors such as non-ferrous metals, oil and petrochemicals, and basic chemicals, which are expected to benefit from the current market dynamics. The energy security narrative is likely to strengthen due to ongoing geopolitical tensions, creating opportunities in these sectors [28][31]. - The report also highlights the potential for structural support policies to continue benefiting sectors aligned with long-term economic development logic, such as technology and consumption [27][31].

Group 1 - The report indicates that the U.S. is currently experiencing a phase of loose monetary policy but tight credit conditions, with a strong dollar being a method for short-term resolution [2][3] - Geopolitical conflicts are expected to drive up oil prices in the medium term, benefiting the U.S. with strong dollar and capital inflows, although the weakening military strength of the U.S. may harm dollar credibility [3][10] - In the short to medium term, the report suggests allocating investments towards broad energy dividends and U.S. capital goods inflation, while recommending an increase in insurance and leading Chinese heavy asset stocks once the dollar begins to depreciate [3][10] Group 2 - The report highlights a significant downturn in the U.S. employment market, with February's non-farm payrolls showing a decrease of 92,000 jobs, contrasting sharply with market expectations of an increase of approximately 55,000 jobs [8][12] - The report notes that job losses are widespread across various sectors, including education, healthcare, and construction, indicating a broader economic slowdown [9][12] - The report emphasizes that the weakening non-farm employment data has raised expectations for interest rate cuts, while the U.S. maintains a loose monetary policy despite a contraction in commercial credit [10]

Investment Rating - The report does not specify a direct investment rating for the industry but emphasizes a positive outlook on green transformation and ESG initiatives [2][3]. Core Insights - The government is accelerating the comprehensive green transition, focusing on carbon peak and carbon neutrality as key drivers for reducing carbon emissions, pollution, and promoting green growth [3][12]. - The establishment of a national low-carbon transition fund aims to foster new growth points such as hydrogen and green fuels, while effectively managing high energy-consuming and high-emission projects [3][12]. - The report highlights the importance of a dual control system for carbon emissions, focusing on both total emissions and intensity, to prevent rebound effects during economic recovery [8][44]. Summary by Sections Domestic Focus - The government work report emphasizes the need for comprehensive ecological environment governance, including air quality improvement plans and pollution control in key industries [3][12]. - It outlines the promotion of a green low-carbon economy through policy enhancements and the establishment of zero-carbon parks and factories [3][12]. - The report also mentions the importance of biodiversity protection and the integration of various ecological systems for sustainable development [3][12]. International Focus - The Net Zero Asset Managers Initiative was re-established with over 250 asset managers joining, providing a platform for public disclosure of net-zero commitments [4][18]. - The report discusses the IFRS's release of guidelines to assist jurisdictions in applying ISSB standards for sustainable financial information disclosure [19][20]. ESG Financial Products Tracking - As of March 8, 2026, China has issued 3,955 ESG bonds with a total scale of 5.77 trillion RMB, where green bonds account for 62.17% of the total [5][30]. - The market has 1,090 existing ESG products with a total net value of 17,597.86 billion RMB, with socially responsible products making up 41.67% [5][36]. - There are 1,235 existing ESG bank wealth management products, with pure ESG products constituting 53.28% of the total [5][41]. Index Tracking - As of March 6, 2026, major ESG indices, except for the CSI 300 ESG Leaders, underperformed the market, with the Wind All A Sustainable ESG index showing the largest decline of 1.33% [7][42]. - Over the past year, major ESG indices have generally increased, with the Shenzhen ESG 300 index rising by 20.69% [7][42]. Expert Opinions - An expert from Renmin University highlights the shift from energy consumption intensity to carbon emission intensity as a more effective approach to achieving carbon peak goals [8][44]. - The expert emphasizes the need for improved systems and data disclosure to ensure that carbon reduction targets are actionable and executable [8][44].

Market Overview - Recent geopolitical conflicts and changes in AI narratives are expected to impact risk appetite in the short term, but markets typically revert to their inherent trends in the medium term[1] - The National People's Congress (NPC) has set a positive and stable policy tone, with ongoing capital market reforms expected to support the market[3] - Despite short-term fluctuations, the overall bull market trend for the year remains intact, with a focus on AI applications, strategic resources under security considerations, and traditional assets related to domestic demand[3] Geopolitical Impact - The recent U.S.-Israel military actions against Iran have led to a decline in A and H shares, with the Shanghai Composite Index and Hang Seng Index dropping by 0.9% and 2.3% respectively[12] - WTI crude oil prices surged by 36.2% due to supply concerns, benefiting defensive sectors like oil and coal, which saw increases of 8.1%, 3.8%, and 3.4% respectively[12] Investment Strategies - The "HALO" trading paradigm has emerged, favoring heavy asset sectors that are less likely to be disrupted by AI, while light asset sectors are seeing outflows[16] - As of March 3, foreign capital has exited Hong Kong stocks by approximately HKD 80.8 billion since February, with significant outflows from software services and consumer discretionary sectors[16] Policy and Economic Outlook - The NPC's 2026 policy framework emphasizes a focus on domestic demand and technology, with a growth target set between 4.5% and 5%[19] - The report highlights the importance of expanding domestic markets and improving livelihoods, indicating a shift towards quality growth rather than just quantity[20] Risk Considerations - Potential risks include slower-than-expected policy progress and economic recovery volatility, which could impact market sentiment[4]

Group 1 - The report highlights that recent geopolitical conflicts and changes in AI narratives may temporarily affect risk appetite, but the market tends to revert to its inherent trends in the medium term [1][11] - The National People's Congress (NPC) has set a positive and stable policy tone, with ongoing capital market reforms expected to support the market, indicating that post-NPC market trends are often policy-related [1][3] - Despite short-term fluctuations, the overall bullish market pattern for the year remains intact, with a focus on AI applications, strategic resources under security considerations, and traditional assets related to domestic demand [1][3][26] Group 2 - The "HALO" trading paradigm has emerged as a significant investment logic among foreign capital, reflecting a shift towards heavy asset sectors that are less likely to be disrupted by AI, while light asset sectors are facing outflows [2][16] - Historical data suggests that foreign trading trends tend to have continuity, with upcoming earnings reports serving as a critical observation window for the sustainability of the "HALO" trading narrative [2][16] - The report indicates that if internet companies or leading overseas software firms report strong fundamentals, along with a potential easing of geopolitical tensions, the narrative around foreign "HALO" trading may reverse [2][16] Group 3 - The NPC's policy framework for 2026 emphasizes a balance between domestic demand and technological advancement, aiming for qualitative improvements and reasonable growth [3][19] - The report notes that the government aims for a growth target of 4.5-5% for 2026, reflecting a shift from quantity-focused to quality-focused growth strategies [19][20] - The capital market is expected to see enhanced stability and improved institutional frameworks, with a focus on deepening reforms and protecting investors [3][20] Group 4 - The report identifies three key investment themes from the NPC's policies: technology, security, and domestic demand, aligning with previous insights on investment opportunities in AI, resource sectors, and traditional assets [27][30] - The "smart economy," driven by AI, is highlighted as a primary investment focus, with an emphasis on the development of new infrastructure and energy systems [30][31] - The report suggests that traditional assets related to domestic demand, such as real estate and consumer goods, may see a reversal in expectations due to supportive policies and improving fundamentals [31][32]