Report Industry Investment Rating No relevant information provided. Core Views - The US government shutdown and Sino-US frictions before the APEC meeting have led to a RISK OFF trading mode, negatively impacting overvalued and crowded AI technology assets. The upcoming 15th Five-Year Plan and the Fourth Plenary Session in China next week may bring unexpected positive effects; otherwise, the market may face further adjustment risks [4]. - Domestically, economic data remains weak, especially in consumption and real estate. Industrial enterprise capacity utilization has declined marginally, indicating slow progress in anti-involution policies and ongoing efforts to reverse deflation. Leading companies in pro-cyclical industries are expected to have better profit prospects [4]. - Domestic liquidity is generally loose, but the central bank has tightened funds in the open market. Passive ETF funds and margin trading funds have continued to attract capital, while industrial capital has increased its reduction, and foreign capital has flowed out significantly recently. Credit impulses have started to decline from their peak, weakening the positive impact of market liquidity [4]. - After a short-term small adjustment, the valuations of various indices remain at relatively high historical levels. The equity-bond risk premiums at home and abroad are at historical lows, and broad-based indices have limited attractiveness to allocation funds, but there are still structural opportunities [4]. - Overall, the limited liquidity in the large-scale market makes it difficult to drive continuous growth. During the window of positive macro-policy implementation, the market will choose a direction, with funds shifting from the aggressive growth style to the cyclical style for year-end valuation switching. It is recommended to adopt a high-selling and low-buying strategy for stock index futures next week, selling short IC and IM index futures on rebounds and buying long IF and IH index futures on sharp declines [4]. Summary by Directory 1. Market Review - **Global Stock Performance**: In the past week, the Dow Jones Index led the gains, while the Hang Seng Tech Index led the losses. The performance order was Dow Jones Index > FTSE Europe > FTSE Emerging Index > Shanghai Stock Exchange 50 > Nikkei 225 > Germany DAX > CSI 300 > CSI 500 > Hang Seng Tech Index [8]. - **Domestic Stock Performance**: The Shanghai Composite Index fell by 1.47%, the Shenzhen Component Index by 4.99%, the ChiNext Index by 5.71%, and the Hang Seng Index by 3.97%, among others [9]. - **Industry Performance**: The banking sector led the gains, while the consumer services sector led the losses [12]. - **Futures Performance**: The basis rates of the four major stock index futures (IH, IF, IC, and IM) changed by 0.47%, 0.63%, 0.9%, and 0.88% respectively, and the delivery discounts of the four major futures converged to par. The inter - period spread rates (between the current month and the next month) of the four major stock index futures changed by - 0.55%, - 0.67%, - 1.05%, and - 0.57% respectively, and the inter - period discounts significantly widened. The inter - period spread rates (between the next quarter and the current month) of the four major stock index futures changed by - 0.66%, - 0.73%, - 1.27%, and - 0.58% respectively, and the forward discounts of each futures contract widened significantly [20]. 2. Fund Flow - **Margin Trading and Stabilization Funds**: Margin trading funds continued to flow in 15.42 billion yuan last week, reaching 2.46 trillion yuan, and the proportion of margin trading balance to the circulating market value of the Shanghai and Shenzhen stock markets increased by 0.08% to 2.63%. The scale of passive stock ETF funds decreased by 70.07 billion yuan to 3638.85 billion yuan last week, due to the market decline [23]. - **Industrial Capital**: In October, the cumulative equity financing was 13.56 billion yuan, with 1 company involved. Among them, IPO financing was 0.79 billion yuan, private placement was 12.77 billion yuan, and convertible bond financing was 3.8 billion yuan. The scale of equity financing decreased significantly. The market value of stock market unlockings last week was 78.4 billion yuan, an increase of 32.6 billion yuan from the previous week. The annualized reduction in October was 248.4 billion yuan, and the scale of reduction continued to increase marginally [26]. 3. Liquidity - **Monetary Injection**: Last week, the central bank's OMO reverse repurchase expired at 1021 billion yuan, with a reverse repurchase injection of 67.3 billion yuan, resulting in a net monetary withdrawal of 347.9 billion yuan. The MLF had a net injection of 300 billion yuan in September, and the overall liquidity supply was neutral to loose but tightened marginally [28]. - **Monetary Demand**: Last week, the net monetary demand from national debt issuance was 16.63 billion yuan, and from local debt issuance was 18.09 billion yuan. The total net monetary demand from the bond market was 557.58 billion yuan. The debt financing demand of local governments and national debt decreased significantly, while that of enterprises increased marginally [31]. - **Fund Price**: DR007, R001, and SHIBOR overnight rates changed by - 1.4bp, 3.8bp, and 0bp respectively to 1.41%, 1.36%, and 1.32%. The issuance rate of inter - bank certificates of deposit rebounded by 8.2bp, and the CD rate of joint - stock banks increased by 4.4bp to 1.67%. The overall fund price fluctuated at a low level and increased marginally [34]. - **Term Structure**: Last week, the yields of 10 - year, 5 - year, and 2 - year national bonds changed by - 1.6bp, - 1.4bp, and - 0.7bp respectively, and the yields of 10 - year, 5 - year, and 2 - year national development bonds changed by - 4.6bp, - 2bp, and 0.3bp respectively. The yield term structure continued to flatten, the long - end yields declined slightly due to stock market adjustments and weak economic data, and the short - end yields were relatively strong due to liquidity tightening. The credit spread between national bonds and national development bonds narrowed at the long - end, and the expectation of broad credit cooled down [38]. - **Sino - US Interest Rate Spread**: As of October 17, the US 10 - year Treasury yield changed by - 3.0bp to 4.02%, the inflation expectation changed by - 3.0bp to 2.27%, and the real interest rate remained unchanged at 1.75%. The Sino - US interest rate spread inversion narrowed by 3.42bp to - 219.43bp, and the offshore RMB appreciated by 0.28% [40]. 4. Macroeconomic Fundamentals - **Real Estate Demand**: As of October 16, the weekly trading area of commercial housing in 30 large - and medium - sized cities was 2.129 million square meters, a seasonal increase of 0.483 million square meters from the previous week, but a 49.7% decrease compared to the same period in 2019. The second - hand housing sales rebounded seasonally, but the overall real estate market still showed a weak peak season. The market sales were supported by rigid demand at a low level, and more incremental policies were awaited to boost the recovery [43]. - **Service Industry Activity**: As of October 17, the average daily subway passenger volume in 28 large - and medium - sized cities decreased by 0.8% year - on - year to 81.44 million person - times, but increased by 24.8% compared to the same period in 2021. The Baidu congestion delay index of 100 cities rebounded slightly from the previous week, and the service industry economic activity tended to grow naturally and stably but cooled down marginally [47]. - **Manufacturing Tracking**: The capacity utilization rate of the manufacturing industry stopped falling and rebounded. The capacity utilization rates of steel mills, asphalt, cement clinker enterprises, and coke enterprises changed by - 0.22%, 1.3%, - 2.87%, and - 0.94% respectively. The average operating rate of the chemical industry chain related to external demand decreased by 0.13% from the previous week. Overall, the internal and external demand of the manufacturing industry cooled down, the capacity utilization rate decreased marginally, and the external demand was under short - term pressure due to the resurgence of Sino - US trade frictions [51]. - **Goods Flow**: The goods flow and passenger flow remained at relatively high levels but declined marginally beyond the seasonal norm, indicating the pressure on the real economy. The transportation volume of highways and railways decreased beyond the seasonal norm, indicating a cooling of exports [56]. - **Imports and Exports**: In terms of exports, the resurgence of Sino - US trade frictions, the approaching expiration of the 90 - day exemption, and the end of the rush to export under tariff disturbances will increase the export pressure marginally in the future [58]. - **Overseas Situation**: The US economic data is strong. Although the US government shutdown has affected the release of CPI and non - farm payroll reports, the market still expects the Fed to cut interest rates twice in the remaining part of 2025, with a total reduction of about 50bp. The probability of an interest rate cut in October is as high as 99%, and the probability in December has risen to 94%. The expected end - of - year interest rate is between 3.5% - 3.75% [61]. 5. Other Analyses - **Valuation**: The equity - bond risk premium was 2.68%, an increase of 0.1% from the previous week, at the 48.3% quantile, below the central level. The foreign capital risk premium index was 3.62%, a rebound of 0.08% from the previous week, at the 18.5% quantile, indicating a low level of attractiveness to foreign capital. The valuations of the Shanghai Stock Exchange 50, CSI 300, CSI 500, and CSI 1000 indices were at the 90.1%, 83.9%, 93.6%, and 79.7% quantiles respectively in the past five years, at relatively high levels. The quantiles changed by 3.3%, - 3.1%, - 5%, and - 4.1% respectively from the previous week, indicating that the attractiveness of the cyclical style decreased marginally, while that of the growth style index increased marginally [64][69]. - **Quantitative Diagnosis**: According to the seasonal pattern analysis, the stock market in October is in a period of seasonal oscillatory rise and structural differentiation, with the cyclical style dominant and the growth style generally oscillating at a high level. The stock market in October generally has a good profit - making effect, and the style is easy to switch. Considering the high valuation of the growth style and the relatively weak real economy, but with positive macro - policy expectations in October, it is recommended to buy long stock index futures on sharp declines this week and bet on the oversold rebound opportunities of IC and IM [72].

Market Performance - Alibaba-W led the rebound with a nearly 5% increase, followed by Kuaishou-W and Bilibili-W with over 4% gains, and Meituan-W with over 3% [1] - The Hong Kong Internet ETF (513770) rose by 2.25%, with a trading volume exceeding 160 million yuan within the first half hour of trading [2][3] Industry Insights - The Hong Kong Internet ETF tracks the CSI Hong Kong Internet Index, with Alibaba-W, Tencent Holdings, and Xiaomi Group-W being the top three holdings, accounting for 18.92%, 15.60%, and 11.54% of the total weight, respectively [4][5] - The index has shown significant resilience this year, outperforming the Hang Seng Technology Index, with a year-to-date increase of 55.11% compared to 45.79% for the Hang Seng Technology Index [6] Economic Context - Recent video calls between U.S. and Chinese trade leaders have eased market tensions, with expectations for further trade negotiations [3] - The Federal Reserve Chairman Jerome Powell hinted at a potential 25 basis point rate cut in the upcoming meeting, which could encourage foreign capital inflow into Hong Kong stocks [3][4] Valuation Metrics - The current price-to-earnings (P/E) ratio of the CSI Hong Kong Internet Index is 26.69, which is lower than the historical average and significantly better than U.S. and A-share technology sectors [6] - The index's performance over the past five years has varied, with notable fluctuations, including a 109.31% increase in 2020 and a 36.61% decrease in 2021 [8]

- The report highlights the performance of the index enhancement portfolios, where the CSI 500 enhancement portfolio outperformed the benchmark by 1.19% this week, while the CSI 300 enhancement portfolio underperformed the benchmark by 0.52% [2][46][52] - The CSI 500 enhancement portfolio has achieved a cumulative excess return of 53.08% relative to the CSI 500 index since 2020, with a maximum drawdown of -5.73% [46] - The CSI 300 enhancement portfolio has achieved a cumulative excess return of 37.09% relative to the CSI 300 index since 2020, with a maximum drawdown of -5.86% [52] - The report identifies momentum factor as the dominant style factor this week, delivering high excess returns, while beta factor showed significant negative excess returns. High-leverage stocks performed well, whereas residual volatility and non-linear size factors underperformed [2][57][56] - The report mentions the construction of the A-share sentiment index, which is based on market volatility and trading volume changes. The sentiment index includes bottom warning and top warning signals. Currently, the bottom signal indicates bearish sentiment, and the top signal also points to bearish sentiment [32][37][35] - The A-share prosperity index was constructed using the YoY growth of net profit attributable to the parent company of the Shanghai Composite Index as the Nowcasting target. As of October 17, 2025, the index stands at 21.71, up 16.28 compared to the end of 2023, indicating an upward cycle [29][30][31]

Group 1 - Federal Reserve Chairman Jerome Powell's speech on October 14 indicated a potential end to the balance sheet reduction in the coming months, supporting investor expectations for another rate cut this month [2][3] - Powell noted a deterioration in the labor market, with evidence showing low levels of layoffs and hiring, which further bolstered the outlook for a rate cut [3] - The Hong Kong stock market has seen significant activity this year, particularly in sectors like innovative pharmaceuticals, renewable energy, and technology, with the Hong Kong Technology ETF (513020) rising over 50% year-to-date [2][3] Group 2 - The Hong Kong Technology ETF (513020) tracks the CSI Hong Kong Stock Connect Index, including major stocks like Alibaba, Tencent, and BYD, making it a quality investment option for exposure to the Hong Kong market [4] - The top ten constituents of the Hong Kong Technology ETF include Alibaba (11.93%), Tencent (10.79%), and Xiaomi (8.08%), among others, indicating a diverse portfolio in the technology sector [5] Group 3 - The Hong Kong Technology Connect Index has outperformed the Hang Seng Technology Index and the Hong Kong Internet Index, with a cumulative increase of 76.06% since 2018, compared to 7.18% and 16.50% for the latter two indices [6] - The expectation of continued rate cuts by the Federal Reserve may enhance the attractiveness of Hong Kong technology stocks, as lower interest rates typically boost the valuation of growth sectors [8]

Market Liquidity Overview - R007 decreased from 1.6118% to 1.4850%, a reduction of 12.68 basis points; DR007 fell from 1.4376% to 1.4229%, down by 1.47 basis points. The spread between R007 and DR007 narrowed by 11.21 basis points [9][13] - The net inflow of funds this week was 41.556 billion yuan, an increase of 67.826 billion yuan compared to last week. Fund supply was 85.419 billion yuan, while demand was 43.863 billion yuan. Specifically, fund supply increased by 66.981 billion yuan, with net financing purchases rising by 76.935 billion yuan [13][16] Industry Sector Liquidity Tracking - Most sectors in the CITIC first-level industry index rose this week, with the non-ferrous metals sector showing the strongest performance, gaining 4.35%. Coal and steel sectors also saw slight increases. In contrast, the media and consumer services sectors led the declines, falling by 3.58% and 2.81%, respectively [18][21] - The electronic industry received the most net leveraged funds, totaling 7.780 billion yuan, while the coal industry experienced a net outflow of 0.38 billion yuan, marking the most significant reduction [21][22] Style Sector Liquidity Tracking - The stable style index had the highest increase at 2.58%, while the growth style index saw the largest decline at 1.78%. The growth style remains the most active sector, accounting for 59.89% of the average daily trading volume [3][11]

Core Viewpoint - Southbound capital inflow into Hong Kong stocks has accelerated, with a cumulative net inflow of HKD 395.2 billion in Q3, an increase compared to Q2 [1][2] Flow Perspective - In Q3, southbound funds continued to flow into Hong Kong stocks, with a cumulative net inflow of HKD 395.2 billion, which is an increase from Q2 [2] - The outflow of foreign capital has slowed down, with a cumulative net outflow of HKD 66.4 billion in Q3, marking a decrease in outflow for three consecutive quarters [2] - The proportion of southbound holdings in Hong Kong stocks has reached a new high, with the Hong Kong Stock Connect holding amount rising from 20.7% at the end of Q2 to 21.8% at the end of Q3 [2] Industry Perspective - In Q3, the main inflows from southbound funds were into consumer discretionary, non-bank financials, and pharmaceuticals, while software and hardware saw net outflows in Q2 [3] - Foreign capital dominates most sub-sectors in Hong Kong stocks, particularly in the internet, finance, and most consumer sectors [3] - Southbound funds have gained significant pricing power in sectors such as semiconductors, general consumption, and general dividends over the past two years [3]

Group 1 - The Hong Kong stock market opened high but experienced a decline, with the Hong Kong Internet Index falling by 0.62%, reflecting a broader market pullback [1] - Major tech stocks such as Alibaba, Meituan, and Kuaishou saw declines, while Tencent experienced a slight drop of 0.22%. Xiaomi and Bilibili managed to rise slightly [1] - The Hong Kong Internet ETF (513770) saw a nearly 2% drop, indicating active buying interest despite high premiums, with a real-time premium rate of nearly 0.5% [1] Group 2 - Alibaba has established a "Robot and Embodied AI Group," marking its strategic expansion from AI software to hardware applications, aiming to capture a share in the growing embodied AI market [3] - Alibaba Cloud led a $140 million financing round for the robotics startup X Square Robot, indicating strong investment in AI infrastructure [3] - International institutions have renewed their focus on Chinese tech assets, with significant price target increases for Alibaba and Tencent, highlighting their advancements in AI capabilities [3] Group 3 - The Hong Kong Internet ETF tracks the CSI Hong Kong Internet Index, with Alibaba, Tencent, and Xiaomi being the top three holdings, accounting for over 73% of the index [4] - The index has shown significant resilience, outperforming the Hang Seng Tech Index, with a year-to-date increase of 55.11% compared to 45.79% for the Hang Seng Tech Index [6] - The current price-to-earnings (P/E) ratio of the CSI Hong Kong Internet Index is 26.69, which is lower than both the US and A-share tech sectors, indicating potential value [6] Group 4 - The Hong Kong Internet ETF has surpassed 11.7 billion yuan in size, achieving a historical high, with an average daily trading volume exceeding 600 million yuan [8] - The index has shown varied performance over the past five years, with a notable increase of 23.04% in 2024, following declines in previous years [8]

Core Insights - The Hong Kong IPO market has experienced significant growth in the first three quarters of 2025, leading globally with 68 new listings and total fundraising of HKD 182.45 billion, representing a 51% and 227% increase year-on-year, respectively [1][4] - The market has seen a high level of oversubscription, with 98% of new stocks being oversubscribed and 86% having oversubscription multiples exceeding 20 times, doubling from the previous year [1][4] - The decline in the first-day drop rate to 24% marks a nine-year low, with an average first-day return of 28%, significantly up from 10.82% in the previous year [6][7] Market Activity - A total of 15 new stocks had oversubscription multiples exceeding 1,000 times, accounting for nearly 23% of the new listings, with the highest being Daheng Technology at 7,558.40 times [2][3] - The pharmaceutical and durable consumer goods sectors have been particularly favored, with several biotech companies achieving high oversubscription rates, indicating strong investor interest in innovative drug companies [2][3] Regulatory Environment - The recent surge in market activity is attributed to a healthier growth environment following regulatory changes that ended the era of high-leverage IPO subscriptions, with the Hong Kong Securities and Futures Commission implementing measures to curb excessive leverage [4][5] - The previous year saw only 2 new stocks with oversubscription multiples exceeding 1,000 times, highlighting the shift in market dynamics post-regulation [4][5] Investment Returns - The significant increase in first-day returns and the reduction in the drop rate have contributed to a more favorable investment environment, attracting more investors to the IPO market [6][7] - The performance of large new listings, such as NIO's H-shares, which saw a first-day increase of 16% and a cumulative rise of over 87% by September 30, has further enhanced the appeal of IPO investments [6][7] Market Drivers - The robust performance of the Hong Kong IPO market is driven by a combination of policy incentives, ample liquidity, and an evolving industrial landscape, with the medical and pharmaceutical sectors leading in new listings [7][8] - The Hong Kong Stock Exchange has received 348 listing applications as of October 5, 2025, indicating strong interest from companies, particularly in the technology and consumer sectors [7][8]

Core Viewpoint - The Hang Seng Index experienced a slight decline of 0.1% from October 1 to October 8, while the Hang Seng Tech Index saw an increase of 0.75% [1] Industry Performance - The steel, non-ferrous metals, and pharmaceutical sectors led the market, while the agriculture, forestry, animal husbandry, fishery, real estate, and consumer services sectors lagged [1] Market Trends - Post-holiday, Hong Kong stocks typically face a brief increase in volatility risk [1] - Despite external events and data during the holiday, the mid-term market logic remains unchanged and is further reinforced by several factors: 1. The rising importance of scarce and certain assets [1] 2. Increased demand for cross-asset and cross-regional capital reallocation [1] 3. A renewed emphasis on AI narratives [1] 4. Strong performance in experiential consumption [1]

Market Overview - The domestic equity market experienced high-level fluctuations last week, with the Wind All A Index rising by 0.25% and maintaining an average daily trading volume above 2 trillion yuan [1] - The Sci-Tech Innovation 50 Index reached a new high, increasing by 6.47% due to breakthroughs in domestic photolithography technology [1] - Sectors such as new energy, non-ferrous metals, and electronics saw significant gains, while light industry manufacturing, commercial retail, and consumer services faced notable declines [1] Policy Insights - At a press conference on September 22, the CSRC Chairman Wu Qing highlighted the achievements of the capital market during the 14th Five-Year Plan period, emphasizing its role in accelerating technological innovation [1] - Over 90% of newly listed companies in recent years are technology-oriented or have high technological content, with the tech sector now accounting for over 25% of the A-share market capitalization, surpassing the combined market cap of banking, non-bank financials, and real estate [1] - The number of technology companies in the top 50 by market cap increased from 18 at the end of the 13th Five-Year Plan to 24 currently [1] - By the end of August, various long-term funds held approximately 21.4 trillion yuan of A-share circulating market value, a 32% increase compared to the end of the 13th Five-Year Plan [1] Fund Flow Analysis - As of September 25, the total share of stock funds increased by 79.6 billion to 3.52 trillion, while mixed fund shares decreased by 45 billion to 2.96 trillion [2] - The margin trading balance exceeded 2.4 trillion yuan, marking a historical high and a net increase of over 600 billion since June 20, contributing significantly to the current market rally [2] - The ongoing market rally, which began on September 24 last year, continues, with artificial intelligence and overseas expansion themes being the main drivers [2] Bond Market Trends - Last week, yields on government bonds continued to rise, with credit bond yields following suit [3] - The central bank's stance on maintaining liquidity support for the banking sector remains evident, which is expected to provide strong support for short- to medium-term bonds [3] - The "stock-bond seesaw" effect is expected to persist, necessitating attention to the sustainability of policy support for stock market sentiment [3]