Investment Rating - The investment rating for the construction and engineering industry is "Positive" and maintained [8] Core Insights - The ongoing conflicts in the Middle East present significant investment opportunities in the construction industry, particularly in areas such as rising energy prices, energy security construction, safe-haven asset allocation, and regional reconstruction themes [2][6] - The report emphasizes the importance of monitoring the chain reactions caused by the Middle East conflicts, including infrastructure damage, rising global energy prices, and declining market risk appetite [12] - The report highlights the potential for performance elasticity in companies like Northern International due to rising energy prices, with a notable increase in European electricity prices observed [12] - The economic viability of coal chemical projects is expected to improve, leading to accelerated capital expenditures, with key companies like China Chemical and Donghua Technology being highlighted [12] - The report suggests focusing on high-dividend, large-cap state-owned enterprises as safe-haven investments amid rising oil prices and increased market risk aversion [12] - The regional reconstruction theme is underscored, with recommendations for companies like Northern International, which has a history of benefiting from changes in the Middle East situation [12] Summary by Sections - **Energy Price Increase**: The report notes that the last round of the Russia-Ukraine conflict led to a significant rise in European electricity prices, with a year-on-year increase of 138% in Croatia's average electricity price in 2022 [12] - **Energy Security Construction**: The report indicates that the current high international oil prices and relatively abundant domestic coal supply are enhancing the economic viability of coal-to-chemical projects [12] - **Safe-Haven Asset Allocation**: Companies such as China State Construction and Sichuan Road and Bridge are highlighted for their defensive attributes and stable cash flows, with projected dividend yields of 5.4% and 5.6% respectively [12] - **Regional Reconstruction Theme**: Northern International is recommended due to its historical performance during Middle Eastern conflicts, with significant stock price increases following geopolitical developments [12]

Investment Rating - The report maintains an "Overweight" rating for the steel and non-ferrous metals sectors [5] Core Insights - The London gold spot price has dropped significantly by 10.49% week-on-week, marking the largest weekly decline in six years, with the current price at $4,492 per ounce [10] - The financing environment index for small and medium enterprises (SMEs) is at 48.66 for February 2026, reflecting a month-on-month decrease of 3.20% [15] - The cumulative year-on-year sales area of commercial housing in China for January-February 2026 is down by 13.50% [18] Liquidity - The total liabilities of the Federal Reserve are reported at $6.61 trillion, with a week-on-week increase of 0.15% [10] - The M1 and M2 growth rate difference in February 2026 is -3.1 percentage points, showing a month-on-month increase of 1.0 percentage points [15] Infrastructure and Real Estate Chain - The cumulative year-on-year new construction area of commercial housing for January-February 2026 is down by 23.10% [18] - The national average price index for cement has increased by 1.58% week-on-week, with a current operating rate of 46.95% [59] Industrial Chain - The operating rate for semi-steel tires is at a five-year high of 78.25%, with a week-on-week increase of 0.54 percentage points [2] - The price of electrolytic aluminum is reported at 24,030 yuan per ton, reflecting a week-on-week decrease of 4.26% [9] Price Relationships - The price ratio of rebar to iron ore is currently at 3.94, indicating a significant price relationship [3] - The price difference between hot-rolled and rebar steel is 90 yuan per ton, with a week-on-week increase of 40 yuan [3] Export Chain - The new export orders PMI for China in February 2026 is at 45.00%, down by 2.8 percentage points month-on-month [3] - The CCFI composite index for container shipping rates is at 1,120.61 points, reflecting a week-on-week increase of 4.52% [3] Valuation Levels - The CSI 300 index has decreased by 2.19%, with the steel and industrial metals sectors showing a PB ratio of 30.19% and 63.67% relative to the CSI 300 [4] - The current PB ratio for the steel sector is 0.49, which is near its historical high of 0.82 [4] Investment Recommendations - The report suggests a long-term positive outlook for the non-ferrous metals and steel sectors, while short-term observations should focus on oil price performance and steel production policies [4]

Group 1: Macro Insights - The report highlights the ongoing high oil prices, with Brent crude futures rising nearly 40% from $70 to $95.5 per barrel, and currently exceeding $110 per barrel, indicating a significant impact on asset prices due to geopolitical tensions [6] - There is a noted improvement in real estate sales, with new residential sales area declining by 13.5% year-on-year in January-February, a smaller drop compared to the 18.0% decline in Q4 2025, suggesting a trend of gradual recovery [6] Group 2: Market Performance - The Shanghai Composite Index fell by 3.38% over the week, confirming a daily downtrend across major indices including the CSI 300 and CSI 500, indicating a broad market decline rather than a structural one [7] - Despite the overall downtrend, 12 out of 28 sectors are still showing daily uptrends, suggesting potential opportunities for selective investments [7] Group 3: Industry-Specific Insights - The textile and apparel sector, particularly Mercury Home Textiles, is expected to benefit from the growing sleep economy, with projected revenue growth of 10% annually from 2025 to 2027, reaching approximately 56.42 billion yuan by 2027 [15][16] - The construction materials sector is experiencing a downturn, with a 6.46% decline in the SW construction materials index, and a focus on raw material price fluctuations is advised [19] - The coal industry is witnessing a significant rebound, with domestic coal prices rising sharply due to increased demand and geopolitical factors affecting LNG supply [20] Group 4: Investment Recommendations - The report suggests a cautious approach to investments in the current market environment, recommending defensive strategies and selective sector exposure, particularly in high-dividend yielding assets and growth-oriented companies [28][29] - In the non-bank financial sector, companies like China Pacific Insurance and Huatai Securities are highlighted as having strong performance potential due to favorable market conditions and valuation metrics [14]

Macroeconomic Overview - The policy focus is on the issuance of ultra-long special government bonds and the construction of a unified national market, aiming for high-quality economic recovery through precise investment and institutional optimization [2] - External demand shows more resilience than internal demand, with improvements in shipping and cargo tonnage at major ports, leading to synchronized increases in domestic and foreign shipping prices [2] - Domestic consumption remains weak, particularly in the automotive sector, which is affected by a policy transition period, while real estate sales continue to favor older properties over new ones [2] - Production indicators in coal, steel, and petrochemicals are generally weak, with many core production metrics at low levels compared to the same period last year [2] - Input inflation is driven by rising oil prices, impacting the energy and chemical sectors, while domestic demand remains insufficient to support a rebound in construction materials [2] Market Strategy - The Chinese stock market is expected to find an important bottom and rebound point, with stability being crucial and confidence as a key factor [5] - The Shanghai Composite Index has fallen below critical levels, with the average adjustment across the A-share market nearing 9%, and the CSI 1000 down by 10% [5] - Recent market adjustments are attributed to inflation risks and expectations of financial tightening, alongside a loosening micro-trading structure [5] - Despite external conflicts not directly impacting China, market risk appetite has decreased due to uncertainty [5] - The current market position suggests that blind selling is not advisable, as the Chinese stock market is poised for a significant rebound [5] Energy and Financial Tightening Risks - Investor concerns about energy price shocks and financial tightening are prevalent, with historical references indicating resilience in the market despite such shocks [7] - Risk pricing evolves through three stages: expectation shock, reality shock, and return to growth logic [7] - The end of risk pricing does not require the cessation of risks but rather a stabilization in their intensity [7] - The Chinese central bank emphasizes a supportive monetary stance, which, combined with increased technological investment, can help break the risk narrative [7] Industry Comparison - Financial and stability sectors remain preferred, with high dividend yields offering investment value, recommending sectors such as banking, electricity, highways, and coal [9] - Technology manufacturing and energy transition sectors are expected to benefit from energy shocks, with recommendations for power equipment, new energy vehicles, and engineering machinery [9] - The AI sector is projected to grow significantly, with increased investment expected to accelerate domestic production lines [9] - Domestic demand is anticipated to rise due to stable investment policies and inflation recovery, with recommendations for construction materials, real estate, hotels, and consumer goods [9] Banking Sector Dynamics - The banking industry is returning to a phase dominated by large banks, with state-owned banks expected to increase their asset share to 43.3% by the end of 2025 [12] - City commercial banks are showing strong regional economic resilience, benefiting from fixed asset investments and industrial upgrades [12] - Shareholding banks are generally reducing high-risk business exposure, leading to a decline in market share [12] - The market share of large banks in deposits is projected to rise to 54.0% by October 2025, driven by a shift in deposit dynamics [14] - In terms of loans, large banks maintain a competitive edge, with their market share expected to reach 46.1% by the end of 2024 [15]

Core Viewpoint - The micro trading impact is expected to be short-lived, and it is not advisable to blindly sell off at the current position. The Chinese stock market is likely to see an important bottom and rebound zone, supported by a loose monetary stance and diversified reserves [2]. Investment Highlights - The Chinese stock market is expected to find an important bottom and rebound point, with stability as the base and confidence as the key. The Shanghai Composite Index has broken key levels, with the average adjustment of the entire A-share market close to 9% and the CSI 1000 down by 10%. Recent market adjustments are attributed to inflation risks and financial tightening expectations, as well as loosening micro trading structures. Despite external conflicts not directly impacting China, the unclear situation has reduced market risk appetite. The simultaneous adjustment of stocks and bonds has created investment constraints for institutions with high leverage and positions since the beginning of the year. The impact of micro trading shocks is expected to be short-lived, and the current position should not be blindly sold off. While inflation risks are still to peak, it is important to recognize that Chinese assets have improved productivity and a relatively stable security situation, making them scarce even globally [4][9]. Pricing of Energy Shock and Financial Tightening Risks - The pricing of energy shocks and financial tightening risks can be divided into three stages: expectation shock, reality shock, and return to growth logic. Historical references indicate that the U.S. stock market showed resilience and rebound despite the challenges posed by the Russia-Ukraine conflict and multiple Fed rate hikes in 2022. The first stage involves expectation shocks, where oil prices surged and the U.S. stock market fell. The second stage is the reality shock, where the intensity of the conflict did not escalate further, leading to a decline in oil prices and a stabilization of risk pricing. The third stage is the return to growth logic, marked by advancements in the U.S. AI industry and increased capital expenditure. Key insights include that risk pricing ends not with the cessation of risks but when their intensity no longer rises, and the market's growth capability becomes crucial post-risk pricing [5][14]. Industry Comparison - Financial and stable sectors remain preferred, with Chinese technology manufacturing and stable domestic demand being key to breaking the narrative of stagflation. The financial and stability sectors are seen as important stabilizers with high dividend yields, recommending investments in banks, electricity, highways, and coal. The technology manufacturing and energy transition sectors, particularly companies with global competitiveness and cost advantages, are expected to benefit from energy shocks and transitions, recommending investments in power equipment, new energy vehicles, and engineering machinery. The AI sector is anticipated to grow significantly, with increased technology investment expected to drive domestic production growth by 2026, recommending investments in semiconductors, communication equipment, and machinery. Domestic demand is expected to be bolstered by stable investment policies and rising inflation, recommending investments in construction materials, real estate, hotels, and consumer goods [6][15]. Thematic Recommendations - 1. Energy Transition: Focus on new energy infrastructure and advanced energy equipment benefiting from clean energy transitions, with investment opportunities in power grids, new energy storage, and nuclear fusion energy. 2. Computing Power Collaboration: Emphasizing the integration of computing power, electricity, and energy storage, with investment opportunities in computing facilities, digital power grids, and green power operators. 3. Token Globalization: Chinese models are increasingly called upon globally, with investment opportunities in leading model companies and domestic computing power. 4. Commercial Aerospace: The acceleration of low-orbit satellite internet networks and new technology breakthroughs, with investment opportunities in medium and large rocket manufacturing and launch services [22][23][24][26][28].

Core Insights - The report emphasizes that the Russia-Ukraine conflict has significantly impacted global inflation and economic conditions, extending the duration of high inflation rather than initiating a new round of global reflation [5] - The liquidity environment has tightened due to the conflict, increasing pressure on monetary policy across major economies, which has affected asset pricing through interest rates and stock market performance [5] - The report suggests a "HALO PLUS" strategy for asset allocation, focusing on defensive cash flow and offensive low-crowding growth sectors, particularly in coal, utilities, and construction for defense, while targeting commercial aerospace, batteries, and military themes for growth [6] Group 1: Impact of the Russia-Ukraine Conflict - The conflict has pushed inflation in Europe and the U.S. from around 6% to approximately 10% over six months, maintaining a high inflation rate of over 3% for nearly two years [19][20] - Japan's inflation, initially low, has risen due to energy price shocks, with CPI remaining above 2% for an extended period, indicating a different inflationary dynamic compared to the U.S. and Europe [20] - China's CPI has been less affected, primarily driven by structural price disturbances rather than a sustained inflationary trend [20] Group 2: Historical Inflation Experiences - Historical periods of stagflation in China, such as from June 2007 to February 2008 and January 2010 to July 2011, show that early stagflation phases are characterized by high commodity prices and resilient growth, with a shift to valuation and earnings certainty logic as tightening occurs [11][14] - In the 2007-2008 period, upstream cyclical sectors significantly outperformed, with coal prices rising by 49%, chemicals by 46%, and non-ferrous metals by 44%, reflecting strong demand and price increases [15][16] - The 2010-2011 period saw a market shift where defensive consumption sectors and small-cap growth stocks outperformed as inflationary pressures peaked and monetary tightening began [17][18]

Core Viewpoint - The article highlights the severe corruption within the construction industry, exemplified by the case of Zhao, a former deputy director of the emergency management bureau in Zhangjiajie, who misused regulatory power for personal gain, undermining the authority of oversight and safety standards [1][5]. Group 1: Power Corruption - The case of Zhao is not an isolated incident but a typical example of the corruption of regulatory power, similar to the bribery case involving two former heads of the safety supervision station in Xiaoshan, Zhejiang [2][6]. - In the construction industry, regulatory power is seen as a "lifeline" for businesses, where a single directive can lead to significant financial losses [2][6]. - Zhao's actions reflect a broader trend where regulatory power is treated as a purchasable "amulet" for future preferential treatment, leading to a culture of "power-money transactions" [2][6]. Group 2: Ecological Collapse - Both Zhao's case and the Xiaoshan incident illustrate the transformation of regulatory authority into a "collection right," with inspection powers becoming tools for financial gain [3][8]. - This transformation has catastrophic consequences, leading to lax enforcement, negligence towards safety hazards, and superficial compliance checks, ultimately compromising public safety [3][8]. - The market environment deteriorates as honest companies face scrutiny while those with connections receive preferential treatment, resulting in a "bad money drives out good" phenomenon [3][8]. Group 3: Solutions for Reform - To end the cycle of corruption exemplified by Zhao's case, systemic reforms are necessary, including reducing discretionary power, clarifying regulatory standards, and ensuring transparency in operations [4][8]. - Implementing comprehensive record-keeping, random selection of inspectors, and full documentation of processes can minimize human interference in regulatory practices [4][8]. - Breaking the cycle of vested interests and encouraging internal reporting and social oversight are crucial to severing the chains of corrupt practices [4][8].

- Model Name: 250-Day New High Distance; Model Construction Idea: The model tracks the distance of the latest closing price from the highest closing price in the past 250 trading days to identify market trends and hotspots[11] - Model Construction Process: - Calculate the 250-day new high distance using the formula: $ 250 \text{ Day New High Distance} = 1 - \frac{Closet}{ts\_max(Close, 250)} $ where Closet is the latest closing price, and ts_max(Close, 250) is the maximum closing price in the past 250 trading days[11] - If the latest closing price is a new high, the 250-day new high distance is 0; if the latest closing price has fallen from the new high, the distance is positive, indicating the extent of the decline[11] - Model Evaluation: The model effectively captures market trends and hotspots by identifying stocks and indices that are close to their 250-day highs[11] - Factor Name: Stable New High Stocks; Factor Construction Idea: The factor identifies stocks that have recently reached new highs and exhibit stable price paths, which are less likely to be influenced by extreme price movements[23] - Factor Construction Process: - Select stocks that have reached a 250-day new high in the past 20 trading days from a pool of stocks listed for at least 15 months[19] - Filter stocks based on analyst attention (at least 5 buy or hold ratings in the past 3 months), relative strength (top 20% in 250-day price change), and price stability (using the sum of absolute daily returns over the past 120 days and the average 250-day new high distance over the past 120 days)[26] - Rank stocks based on the smoothness of their price paths and the persistence of their new highs, selecting the top 50 stocks[26] - Factor Evaluation: The factor effectively identifies stocks with strong momentum and stable price paths, which are likely to continue performing well[23] - Model Backtest Results: - 250-Day New High Distance for major indices as of March 20, 2026: - Shanghai Composite Index: 5.39% - Shenzhen Component Index: 4.40% - CSI 300: 4.67% - CSI 500: 10.38% - CSI 1000: 9.08% - CSI 2000: 9.84% - ChiNext Index: 1.07% - STAR 50 Index: 15.27%[12][13][15] - Factor Backtest Results: - Number of stocks reaching a 250-day new high in the past 20 trading days: 1204 - Industries with the most new high stocks: Machinery (172), Basic Chemicals (161), Electronics (139) - Industries with the highest proportion of new high stocks: Oil & Petrochemicals (66.67%), Coal (58.33%), Utilities (48.26%)[19][20] - Selected stable new high stocks: Asia Integration, Biwei Storage, Yankuang Energy, etc. - Sectors with the most stable new high stocks: Technology (5 stocks), Manufacturing (2 stocks)[27][30]

Market Trends and Highs Tracking - The report aims to track stocks, industries, and sectors reaching new highs, serving as market indicators, with increasing evidence supporting the effectiveness of momentum and trend-following strategies [1][4] - As of March 20, 2026, the distance to the 250-day new highs for major indices are as follows: Shanghai Composite Index at 5.39%, Shenzhen Component Index at 4.40%, CSI 300 at 4.67%, CSI 500 at 10.38%, CSI 1000 at 9.08%, CSI 2000 at 9.84%, ChiNext Index at 1.07%, and STAR 50 Index at 15.27% [6][25] High-Performing Stocks Monitoring - A total of 1,204 stocks reached 250-day new highs in the past 20 trading days, with the highest number of new highs in the machinery, basic chemicals, and electronics sectors [12][25] - The sectors with the highest proportion of new high stocks are oil and petrochemicals at 66.67%, coal at 58.33%, and electric utilities at 48.26% [12][25] - The cyclical and technology sectors had the most new high stocks this week, with respective counts of 413 and 351 [14] Stable New High Stocks Tracking - The report identifies 10 stable new high stocks, including Yaxiang Integration, Baiwei Storage, and Yanzhou Coal, based on criteria such as analyst attention, relative strength, price path stability, and continuity of new highs [20][26] - The technology and manufacturing sectors had the most stocks selected, with 5 and 2 respectively, and the electronics industry leading within technology [20][26]

Market Overview - The A-share market showed a decline with the Shanghai Composite Index at 4006.55 points, down 1.39%. The Shenzhen Component Index fell to 13901.57 points, down 2.02%, and the ChiNext Index decreased to 3309.10 points, down 1.11% [10] - In the Asia-Pacific market, the Hong Kong Hang Seng Index dropped 2.02% to 25500.58 points, while the Hang Seng Tech Index fell 2.19% to 4996.28 points. The KOSPI Index in South Korea decreased by 2.73% to 5763.22 points, and the Nikkei 225 Index in Japan fell 3.38% to 53372.53 points [10] - European markets also experienced declines, with the UK FTSE 100 down 2.35% to 10063.50 points, Germany's DAX 30 down 2.82% to 22839.56 points, and France's CAC 40 down 2.03% to 7807.87 points [10] - In the US market, the Dow Jones Industrial Average fell 0.44% to 46021.43 points, the Nasdaq Composite decreased by 0.28% to 22090.69 points, and the S&P 500 also dropped 0.28% to 6606.49 points [10] International News - US President Trump met with Japanese Prime Minister Fumio Kishida, discussing military actions against Iran and asserting that the US would not deploy more troops to the Middle East [9] - The US SEC released a document clarifying which types of cryptocurrencies can be considered securities and how non-securities can become investment contracts under specific conditions [11] Domestic News - The People's Bank of China emphasized the need for a moderately loose monetary policy, utilizing various monetary policy tools to maintain liquidity and stabilize financial markets [11] - The Ministry of Industry and Information Technology held a roundtable meeting focusing on enhancing the self-sufficiency of critical materials and promoting innovation in key sectors [11] - The China Securities Regulatory Commission held a meeting with representatives from various investment institutions to discuss the "14th Five-Year Plan" for the capital market [11] - The Hong Kong Securities and Futures Commission set limits on the number of active projects that a sponsor can manage simultaneously, capping it at six [11] Important Announcements - Dinglong Co., Ltd. announced the completion of its 300-ton KrF/ArF photoresist production project [12] - Tunnel Co., Ltd. participated in a 3.5 billion yuan subscription for China Energy Construction's private placement [12] - China Jushi aims to achieve a revenue of 18.881 billion yuan by 2025, with record sales in fiberglass yarn and electronic cloth [12]