Company and Industry Insights - The Chinese AI application market shows strong demand from state-owned enterprises, while small and medium-sized enterprises are adopting subscription models, but consumer monetization remains slow [14] - Wahaha's chairwoman, Zong Fuli, is being sued over asset disputes by three individuals claiming to be her half-siblings, raising concerns about the company's governance and potential impacts on its operations [14] - Meituan reported a record 150 million orders over the weekend, with an average delivery time of 34 minutes, indicating a significant increase in rider income and a competitive landscape in the food delivery sector [11] - The organic silicon market is expected to benefit from Dow's announcement to close its UK plant, which will reduce European capacity by nearly one-third, potentially filling the supply gap with domestic exports [20] - The rare earth sector is poised for improvement as MP Materials is set to receive substantial investment from the U.S. Department of Defense, which may lead to price increases for rare earth magnets [20] - The construction sector is seen as having a recovery potential due to its financial-like business model, with current market pessimism already priced in, suggesting a need for a rebound [20] - The coal industry is expected to maintain a stable price range due to rigid supply and rising costs, despite short-term demand fluctuations [20]

Core Viewpoints - The current market environment shows similarities to the end of 2014, with a potential for policy changes aimed at stimulating domestic demand and addressing "involution" [5][4]. Economic Indicators - China's June CPI rose by 0.1% year-on-year, marking the first increase after four months of decline; core CPI increased by 0.7%, the highest in 14 months. PPI fell by 0.4% month-on-month and 3.6% year-on-year, with the decline expanding by 0.3 percentage points compared to the previous month [2]. - The shift in CPI is attributed to a recovery in industrial consumer goods prices, which saw a reduction in the year-on-year decline from 1.0% to 0.5% [2]. Equity Market Insights - A-shares are driven by capital rather than traditional macro factors, with significant inflows expected from insurance and public funds, particularly into the technology sector [4]. - Hong Kong stocks are viewed as having high cost-effectiveness and potential for growth, supported by expected inflows from Southbound capital and a favorable earnings outlook [6][7]. Industry Research - The "involution" policy is driving sectors like steel and new energy, while AI is enhancing the performance of technology leaders, suggesting a focus on high-quality stocks and sectors with significant growth potential [9][10]. - The introduction of Grok-4 is expected to significantly enhance AI reasoning capabilities, leading to new investment opportunities in the computing industry [10]. Macro and Fixed Income - The bond market is anticipated to experience a slowdown in the downward trend of interest rates, with a focus on the 10-year government bond yield remaining stable [18]. - The current high valuation of convertible bonds limits their upward potential, with a recommendation to focus on lower-priced strategies [19]. Asset Allocation Strategies - A "dividend base + small-cap growth" strategy is recommended, focusing on high dividend and cash flow assets to mitigate external risks while also investing in high-volatility new stocks [22].

Investment Rating - The report maintains a "Buy" rating for major construction enterprises, indicating a significant demand for rebound in the construction sector compared to the banking sector [8][31]. Core Insights - The domestic construction industry has evolved into a model with financial attributes similar to banks, where construction companies provide financing to clients, thus resembling "shadow banks" [1][14]. - The construction sector has lagged behind the banking sector in terms of stock performance, with a 76.1% increase in the banking sector since December 20, 2023, compared to only 13.5% in the construction sector, indicating a clear need for catch-up [2][15]. - The dividend yield of leading construction state-owned enterprises (SOEs) is attractive, with several companies offering yields above 3% in A-shares and over 5% in H-shares, making them appealing for long-term investors [3][22]. Summary by Sections Section 1: Industry Overview - The construction industry operates with a business model that has financial characteristics, requiring companies to provide upfront financing to secure projects, which has led to a high-leverage, asset-heavy structure [1][14]. - Major assets of construction firms include cash and receivables, which are akin to financial assets, while liabilities are primarily operational debts, similar to bank deposits [1][14]. Section 2: Market Performance - The construction sector's performance has been hindered by concerns over slow repayments from government and real estate developers, but these pessimistic expectations are now largely priced in, suggesting a potential for valuation recovery [2][15]. - The report highlights that the construction sector's valuation has been stabilizing, indicating a potential for upward movement as market conditions improve [2][15]. Section 3: Dividend Appeal - A-shares of leading construction SOEs show a competitive dividend yield, with companies like China Railway, China Railway Construction, and China Communications Construction yielding over 3% [3][22]. - In H-shares, the average dividend yield for construction SOEs matches that of leading banks, reflecting strong investment attractiveness [3][22]. Section 4: Policy Impact - Upcoming policies are expected to accelerate infrastructure project implementation, which, combined with a low base effect, may lead to improved revenue and performance for construction SOEs in the latter half of the year [4][26]. - The report anticipates that fiscal policies will be enhanced, with an increase in the issuance of special bonds and other financing tools to support infrastructure development [4][26]. Section 5: Competitive Landscape - The construction industry is witnessing a push against "involution" or excessive competition, with major players advocating for a focus on sustainable growth and innovation rather than aggressive expansion [7][30]. - This initiative aims to improve project profitability and stabilize the competitive environment within the industry [7][30]. Section 6: Investment Recommendations - The report recommends investing in undervalued construction SOEs, highlighting companies such as China Energy Engineering, China State Construction, and China Communications Construction as key targets for investment [8][31]. - The expected recovery in earnings and the attractive dividend yields position these companies favorably for long-term investment [8][31].

Macro - The recent high-frequency data indicates stable performance in consumer goods, particularly in the automotive and textile sectors during the off-season [3] - Service consumption has been affected by weather and supply issues, leading to average performance in travel, cinema, and entertainment sectors [3] - Investment is accelerating with the issuance of special bonds, while new home sales are experiencing seasonal declines and the land market is cooling down [3] - Import growth from Korea to China is slowing, and Vietnam's export substitution effect remains strong, with port operations slowing and export freight rates declining [3] - Overall production is stable with a slight increase, driven by high temperatures leading to increased residential electricity usage, while traditional industries like steel and petrochemicals remain steady [3] - CPI and PPI are both showing marginal increases [3] - The dollar index has rebounded, with slight increases in funding rates and government bond yields [3] Overseas Strategy - There are misconceptions regarding the dominance of small-cap stocks, including the belief that macro liquidity is beneficial for small-cap stocks, which is historically inconsistent [6][9] - The influx of quantitative private equity is not the primary driver of small-cap stock performance, as the scale of private equity entering the market has not been as significant as perceived [6][9] - Historical data suggests that high trading congestion does not necessarily lead to significant pullbacks in small-cap stocks [6][9] - The dominance of small-cap stocks may be attributed to changes in micro-funding structures, particularly the entry of retail investors and their irrational trading behaviors [9] - The correlation between retail investor inflows and small-cap index performance indicates a direct relationship, with significant retail inflows leading to outperformance of small-cap indices [9] - Future shifts between large-cap and small-cap styles may depend on turning points in economic trends, with historical patterns showing that institutional funds become the main drivers during significant macro policy shifts [10] Construction - The article from Qiushi Network emphasizes that urban renewal is essential for transforming urban development and improving living standards [15] - It advocates for the careful advancement of dangerous housing renovations, comprehensive upgrades of old urban communities, and improvements in urban functions [15] - High standards in municipal infrastructure construction are necessary, along with the deployment of IoT devices for enhanced urban risk management and governance [15]

Core Viewpoint - The article discusses the performance predictions for various industries in the upcoming mid-year reports, highlighting sectors that may show strong growth or improvement in performance [4]. Industry Performance Predictions - The manufacturing sector is expected to have the highest growth rate in performance, while the TMT (Technology, Media, and Telecommunications) sector may show the most significant improvement [4]. - Industries such as light industry, non-ferrous metals, and non-bank financials are predicted to have higher growth rates in their mid-year performance reports [4]. - Conversely, industries like construction materials, electronics, and telecommunications are anticipated to show substantial improvement in performance metrics [4]. Market Trends - The convertible bond market has seen a continuous increase for three weeks, with the China Convertible Bond Index rising by 0.8% in the last week, outperforming the equity market [5]. - The copper market is facing potential supply pressure due to a recent announcement of a 50% tariff on copper imports by the U.S., which may affect global copper inventory flows [6]. - Oil prices have rebounded due to seasonal demand increases and anticipated supply constraints from OPEC+, with Brent and WTI crude oil prices rising by 3.1% and 3.4% respectively [8]. Specific Industry Insights - Dow Chemical's decision to close its organic silicon plant in the UK is expected to reduce supply in Europe, potentially alleviating price pressures in the organic silicon market and benefiting high-quality exports from Chinese companies [8]. - The pork market is experiencing a decline in prices due to weak demand and increased storage costs, with the average price of live pigs dropping by 3.52% week-on-week [9]. - China State Construction's high dividend yield is becoming competitive compared to banks, with a stable dividend policy and a strong order book growth despite the low-interest-rate environment [10].

反内卷的本质就是让生意的归生意。就此而言，企业要提升产 品品质，创新求胜，地方政府也要各归其位。决策层对此显然 有深刻的认识。去年的中央经济工作会论及综合整治"内卷 式"竞争时，讲的正是"规范地方政府和企业行为"。 作者：社论 封图：图虫创意 对地方政府来说，当务之急是依法依规加强治理、精准施策，不干预市场，不提供妨碍市场公平的 竞争条件，打破地方保护主义，让生产要素能自由流动，促企业运行机制通畅，保营商环境优良， 如此才能实现优胜劣汰，进而推动中国经济走出内卷的怪圈。 7月8日，33家建筑类企业联合发出建筑行业反内卷倡议书，共同推动行业转型，摒弃"内卷式"竞 争。之前已经有包括汽车、纺织、玻璃、钢铁、光伏等在内的几十个行业发出了反内卷的倡议书。 中国经济的反内卷之战正在持续深入。 然而， 最近几年，无论是光伏还是新能源汽车行业，大规模并购重组并没有出现。 就算是那些持 续巨亏的企业，也依然硬挺着"我就活给你看"。何以如此？ 不得不说，这背后依然有地方政府的影子。还是以光伏行业为例，很多光伏项目既是地方政府招商 引资的结果，也是政府扶持的样板企业。在一些地方政府眼中，企业被并购或者退出市场就意味着 项目失败。 ...

A-Share Market Overview - The A-share market experienced an overall increase, with small-cap stocks showing significant gains while mid and large-cap value stocks faced pressure. The CSI 2000 index rose by 2.32%, and the ChiNext index increased by 2.36%, while the SSE 50 index only saw a modest rise of 0.60%. The average daily trading volume reached 1.50 trillion, a week-on-week increase of 3.80% [5][6]. - The real estate sector saw a notable increase of 6.06%, with steel rising by 3.90%, building materials by 3.07%, and construction by 2.71%. The recent "anti-involution" policies have raised expectations for production limits, leading to a continuation of strong performance in certain cyclical sectors. Additionally, there has been an acceleration in debt restructuring among real estate companies, with several debt resolution plans approved, significantly reducing risks in the real estate sector [5][6]. Market Outlook - Compared to the supply-side reforms of 2015, the current "anti-involution" policy is expected to be less aggressive, with the overall capacity reduction likely to be milder. The focus of the current policies is anticipated to be primarily on the new energy vehicle and photovoltaic sectors, with implications for other industries. Despite the recent increase in risk appetite due to policy expectations, there remains considerable pressure on overall market profitability in the second half of the year, necessitating caution regarding potential policy disappointments leading to market corrections [6]. Hong Kong Market Overview - The Hong Kong market showed signs of recovery, with the Hang Seng China Enterprises Index rising by 0.91% and the Hang Seng Technology Index increasing by 0.62%. The industrial and financial sectors performed well, while the materials sector experienced significant declines [7]. - The recovery in the Hong Kong market was supported by expectations of an imminent interest rate cut by the Federal Reserve, leading to a decline in long-term U.S. Treasury yields, which positively impacted the Hong Kong dollar's liabilities. Additionally, the appreciation of the Renminbi, influenced by the interest rate cut expectations and the "Big and Beautiful" legislation, contributed to the rise in Hong Kong stocks [7]. Future Expectations - Looking ahead, the "Big and Beautiful" legislation has raised the debt ceiling, and the high yield characteristics of U.S. Treasuries are expected to reduce uncertainties surrounding Trump, allowing international capital inflows to effectively offset liquidity constraints from increased borrowing. Therefore, the short to medium-term risk of a "black swan" event related to U.S. Treasuries has decreased. On the asset side, the AI capital expenditure wave is likely to favor leading technology stocks in Hong Kong, with high demand for upstream computing power and servers expected to continue into the second half of the year, providing strong earnings support for the Hang Seng Technology sector [7].

Group 1 - The construction industry is advocating against "involution" competition, aiming for industry transformation [2] - The central economic work conference in December highlighted the need to address "involution" competition, marking the beginning of this initiative [3] - The recent meeting of the Central Financial Committee emphasized the importance of regulating low-price competition and guiding companies to improve product quality [3] Group 2 - New industries like new energy vehicles and photovoltaic products are also experiencing "involution" competition characterized by high investment and low output [3][4] - Local government support and protectionism are significant factors contributing to the persistence of "involution" in these emerging industries [4][5] - The photovoltaic industry is facing a situation where production capacity exceeds demand, leading to significant price drops across various segments [3][5] Group 3 - The lack of large-scale mergers and acquisitions in the photovoltaic and new energy vehicle sectors is concerning, as companies continue to operate despite losses [5] - Local governments often view mergers or market exits as failures, leading to continued support for underperforming companies [5][6] - The essence of combating "involution" is to allow businesses to operate freely, with a focus on product quality and innovation [6] Group 4 - The central government recognizes the need to regulate local government and corporate behavior to foster a competitive market environment [6] - It is crucial for local governments to strengthen governance and avoid interfering with market dynamics to promote a healthy business ecosystem [6]

Core Viewpoint - The article highlights the ongoing challenges faced by small and medium-sized enterprises (SMEs) in the automotive supply chain, particularly regarding payment terms and the emergence of "invisible" payment periods that extend beyond the nominal payment terms set by large enterprises [1][3][4]. Group 1: Payment Terms and Challenges - The Ministry of Industry and Information Technology has opened a platform to address complaints regarding payment delays from key automotive companies, indicating a regulatory response to the issue [1]. - While some material suppliers have benefited from the new "60-day payment term" policy, other sectors like equipment and infrastructure still experience lengthy payment cycles, sometimes exceeding one year [1][3]. - The concept of "invisible payment periods" has emerged, where the time from delivery to payment confirmation can be significantly longer than the nominal terms, creating cash flow challenges for SMEs [3][4][5]. Group 2: Causes of Delayed Payments - Large enterprises often delay payment confirmations for several reasons, including tight cash flow, complex acceptance processes in large projects, and strategic decisions to enhance their own financial metrics [5][6][8]. - Some companies engage in "layered transactions" to circumvent regulatory requirements, effectively extending payment periods while appearing to comply with nominal terms [5][8]. Group 3: Impact on SMEs - SMEs face significant difficulties in obtaining financing due to the lack of formal payment confirmations, which hampers their ability to secure loans from banks [18][19]. - The cash flow cycle for listed SMEs in China has shown a deterioration, with accounts receivable periods increasing from 116 days to 135 days, indicating worsening cash flow conditions despite some improvements in overall cash flow cycles [13][14]. Group 4: Regulatory and Policy Responses - Recent regulations, such as the "Payment Protection for SMEs" and guidelines from the central bank, aim to ensure timely payments from core enterprises to protect SMEs' cash flow [14][15]. - The article suggests that learning from international practices, such as penalties for delayed payments in the UK and EU, could enhance the accountability of large enterprises in China [15][16]. Group 5: Future Considerations - The article emphasizes the need for core enterprises to recognize the benefits of optimizing payment terms for their operational efficiency and the stability of the supply chain [21]. - It calls for more detailed and enforceable regulations to ensure transparency and predictability in payment terms across the supply chain [21].

Group 1 - 33 construction companies jointly issued an initiative to combat "involution" in the construction industry, aiming to promote industry transformation and maintain fair competition [1] - The initiative emphasizes the importance of technological innovation for upgrading, focusing on intrinsic and long-term value rather than blind expansion and excessive debt [1] - The initiative calls for the elimination of "shell structures" that waste resources and aims to maintain market order [1] Group 2 - Evergrande's automotive subsidiary had approximately 437,441 square meters of land reclaimed after being idle for four years due to company-related reasons [2] - The land was designated for industrial use and was officially recognized as idle since June 9, 2021 [2] Group 3 - In the first half of 2025, the land transfer fees for residential land in 300 cities increased by 27.5% year-on-year, with first and second-tier cities seeing growth exceeding 40% [4] Group 4 - Wuxi's Binhu District introduced measures to promote housing consumption, offering subsidies of 30,000 to 50,000 yuan for home purchases to participants and spectators of the Jiangsu Super League [5] - The measures are effective until October 31, 2025, encouraging real estate developers to support these purchases [5] Group 5 - Beijing's government is developing a "mortgage transfer with collateral" policy to enhance the role of housing provident funds in supporting home purchases [6] - The plan includes prioritizing residential land supply near transit stations and employment hubs, aiming to improve the housing supply system [6]