Core Viewpoint - The international environment is becoming increasingly complex and severe, with intensified great power competition being a long-term trend. The defense strategy focus of the U.S. and its allies is gradually shifting towards the Indo-Pacific region, which may lead to escalating tensions around China [1]. Industry Summary - To win modern warfare, advanced aircraft and missiles are essential, along with cost-effective equipment like rockets for sustained consumption, and a reliable communication and command system for support [1]. - By 2027, the goal is to achieve the centenary military objectives, with the "14th Five-Year Plan" expected to accelerate the filling of gaps in military capabilities [1]. - The military industry is projected to have a long-term positive trend under these circumstances [1]. ETF and Index Summary - The military ETF (512660) tracks the CSI Military Industry Index (399967), which selects the top ten military groups listed on the Shanghai and Shenzhen markets, focusing on companies whose main business is related to the military industry [1]. - The constituent stocks cover various military fields, including aviation, aerospace, shipbuilding, and weaponry, and generally exhibit a small to mid-cap style [1].

Core Viewpoint - The Chinese military industry is transitioning from a model reliant on domestic demand to a new development pattern characterized by "domestic demand foundation, foreign trade expansion, and civilian backfeeding," leading to more diversified and sustainable growth [1] Group 1: Domestic Military Demand - The first growth curve focuses on domestic military demand, emphasizing "preparation for combat" and modernization of equipment, driven by stable growth in defense budgets and upgrades in military equipment [1] - Key growth directions include strong deterrence through high-precision technology and systematic unmanned low-cost solutions [1] Group 2: Military Trade Expansion - The second growth curve involves military trade expansion, leveraging cost-performance advantages, systematic combat capabilities, and geopolitical strategic cooperation [1] - China's share in global military trade continues to rise, establishing the country as a significant supplier in the global market [1] Group 3: Civilian Applications of Military Technology - The third growth curve represents the civilian application of military technology, resulting in the spillover of advanced military technologies into civilian sectors [1] - This trend is fostering the emergence of trillion-level new industries such as commercial aerospace, low-altitude economy, future energy, deep-sea technology, and large aircraft, thereby driving the development of new processes, materials, and components [1] - The cycle of "military technology for civilian use, backfeeding military industry" is forming a virtuous cycle [1]

Group 1 - The core viewpoint of the reports indicates that Russia is using peace negotiations as a manipulation tool to restore relations with the U.S. without intending to end the conflict with Ukraine [1] - The Estonian Foreign Intelligence Agency's annual report suggests that Russia is setting long-term operational goals for its conflict with Ukraine, indicating that recent peace talks are merely a strategy to buy time [1] - The Kremlin has instructed Russian state institutions to show an open stance towards cooperation with the U.S., aiming to fully restore relations with Washington, which could facilitate the flow of sanctioned goods and espionage activities [1] Group 2 - The report highlights that even if a peace agreement is reached, Russia's military-industrial complex will still pose a threat to its neighbors, and Moscow is likely to continue preparing for future conflicts while the current conflict persists [2] - The report anticipates stagnation in Russia's military production due to worsening economic prospects and rising borrowing costs, which are contributing to an economic recession [2] - The decline in oil production, a primary source of government revenue, is expected to continue, with increased taxes and reduced spending to cover conflict costs, alongside attacks from Ukrainian drones affecting consumer sentiment [2]

Core Insights - A significant number of actively managed equity funds established in 2021 are struggling to recover their initial investments, with over 50% reporting negative returns since inception [1] - Among the 667 active equity funds analyzed, 362 have negative returns, with 86 funds experiencing declines of over 30% and 34 funds exceeding 40% [1] - The Oriental Alpha Zhaoyang Mixed Fund, launched on March 17, 2021, has reported cumulative returns of -50.60% and -53.23% for its A and C shares respectively as of February 9, 2026 [1][2] Fund Performance - The Oriental Alpha Zhaoyang Mixed Fund A has a unit net value of 0.4940, with a cumulative return of -50.60% since inception [2] - The fund has shown a decline of -6.01% over the past month and -2.10% over the past year [2] - The C share of the fund has a unit net value of 0.4677, with a cumulative return of -53.23% since inception [2] Fund Management - The fund has been managed by Liu Ming, Gao Fengchen, and currently by Pan Lingzi, who has been in the role since November 2024 [2][5] - Pan Lingzi has 6 years of research experience but only 1 year of experience as a public fund manager [2] - The fund's performance has been consistently negative, with the current manager's tenure showing a return of -6.71% during a shared management period [5] Top Holdings - As of Q4 2025, the top ten holdings of the Oriental Alpha Zhaoyang Mixed Fund include companies such as AVIC Shenyang Aircraft Company, Gaode Infrared, and Guangdong Hongda [3]

Asset Allocation Insights - A-shares are focusing on mid-cap blue chips, with a neutral stance on bonds and US stocks, and a cautious outlook on gold in the short term[2] - The risk appetite in A-shares is shifting, with structural opportunities being the main focus amid overall market fluctuations[2] - Bond performance in February is expected to follow risk appetite trends, serving as a hedge against risk assets[2] Market Sentiment and Risk Assessment - Regulatory measures in January have led to a more balanced risk preference, with high-risk investors showing decreased appetite while low-risk investors gain confidence[9] - Trading sentiment across large, mid, and small-cap stocks has cooled, but medium-term uncertainty remains relatively stable[9] Industry and Sector Recommendations - Current price increases in cyclical goods are key indicators for asset allocation, with a positive outlook on sectors like chemicals, agriculture, and non-ferrous metals[30] - The report highlights two main drivers for price increases: industrialization in emerging economies and geopolitical tensions affecting import prices[30] Model and Strategy Suggestions - The recommendation includes increasing positions in mid-term bonds and focusing on sectors such as non-ferrous metals, chemicals, and military technology for February[5] - The multi-asset allocation strategy suggests a combination of passive and active enhancements, with a focus on risk parity models for stock and bond allocations[48] Performance Metrics - The low-volatility strategy has achieved an annualized return of 11.8%, while the high-volatility strategy has reached 18.1% since 2025[9] - The industry rotation strategy has outperformed benchmarks with an annualized return of 44.8% since 2025[9]

Core Viewpoint - The military industry sector experienced a significant rebound, with the high-profile military ETF, Huabao (512810), seeing a trading volume surge of over 150% compared to the previous day, indicating substantial capital inflow [1] Group 1: Market Performance - The military sector showed a V-shaped recovery in early trading, maintaining a positive trend throughout the afternoon [1] - Huabao ETF's trading volume exceeded 1 billion yuan, suggesting strong investor interest [1] - Notable performers included Hangjin Technology and China Power, both hitting the daily limit, while Yingliu Co. continued to rise over 6%, reaching a historical high [1] Group 2: Stock Performance - There was a significant divergence in the performance of constituent stocks, with some experiencing sharp declines, such as Aerospace Nanhu and Aerospace Development, which were among the worst performers in the commercial aerospace sector [1] - The report from Huatai Securities highlighted the importance of international military trade investment opportunities amid increasing uncertainties in global security [1] - The "14th Five-Year Plan" is expected to drive a shift from quantity to quality in military modernization, with structural opportunities emerging in new domains, unmanned intelligence, advanced weapons, and cost-effective equipment [1]

Market Outlook - A-shares are focusing on mid-cap blue chips, with a neutral stance on bonds and US stocks, and a cautious outlook on gold in the short term[2] - Risk appetite in A-shares is shifting, with structural opportunities being the main focus amid overall market fluctuations[2] - The bond market is expected to continue following risk appetite trends, serving as a hedge against risk assets[2] Investment Strategy - The report recommends increasing allocations to mid-cap blue chips and sectors such as non-ferrous metals, chemicals, new energy, military, communication, and electronics[5] - A dual strategy of passive and active enhancement is suggested for stock-bond allocation, with a focus on increasing positions in mid-term bonds[48] Industry Insights - Price increases in cyclical goods are highlighted as key investment clues, particularly in the chemical, agricultural, and non-ferrous sectors[30] - Geopolitical tensions are raising global economic risk assessments, which is a fundamental driver for commodity price increases[30] Performance Metrics - The low-volatility strategy has achieved an annualized return of 11.8%, while the high-volatility strategy has reached 18.1% since 2025[9] - The industry rotation strategy has outperformed benchmarks with an annualized return of 44.8% since 2025[9] Risk Considerations - Extreme risk events could disrupt market expectations, and there is a risk of quantitative models failing to predict future trends[6]

Group 1: Market Overview - The A-share market faced overall pressure last week, with major indices generally declining, while value stocks showed stronger performance [1][6] - Industries such as food and beverage, banking, and building materials continued to rise, whereas non-ferrous metals, telecommunications, and petrochemicals turned down, and electronics, computers, and chemicals continued to decline [1][6] Group 2: Macroeconomic Analysis - Local two sessions have commenced, focusing on expanding domestic demand and strengthening technology, with growth targets being stable or slightly lowered [2][7] - Specifically, 15 provinces have reduced their 2026 GDP targets by approximately 0.5 percentage points, while 12 provinces maintained their targets from last year [2][7] - Major economic provinces like Guangdong, Henan, and Zhejiang have adjusted their GDP growth targets downwards, while Jiangsu, Sichuan, and Henan did not make adjustments [2][7] - Shanghai aims to cultivate 20 new integrated service consumption scenarios and complete major project investments of 255 billion yuan this year [2][7] Group 3: Investment Strategy - The market is expected to gradually stabilize after fluctuations, with a focus on holding stocks through the holiday [4][9] - Positive factors include the global market quickly pricing in the potential hawkish stance of the Federal Reserve, while domestic policies are shifting towards prioritizing domestic demand, which is expected to boost China's economic outlook and asset returns [4][9] - The investment focus should be on two main directions: domestic demand value and emerging technology [4][9] - For domestic demand value, sectors such as food, retail, tourism services, and hotels are expected to perform well post-Spring Festival, with low-positioned opportunities in oil, non-ferrous metals, and chemicals [4][9] - In emerging technology, competition between China and the U.S. is evolving beyond trade to production efficiency, with potential investments in internet, media, computing, robotics, electronics, military, and energy sectors [4][9]

Core Viewpoint - Changyou Technology (301557) is actively advancing its layout and development in the military industry, emphasizing its commitment to this sector [1] Group 1: Company Developments - The company's wholly-owned subsidiary, Jiangsu Changzhuo Technology Co., Ltd., holds weapon equipment quality management system certification and military-level confidentiality qualification [1] - The company has already secured relevant orders in its military business and has achieved sales revenue from this segment [1] Group 2: Financial Impact - Currently, the revenue from the military business constitutes a very low proportion of the company's total income, and it does not significantly impact the company's current performance [1]

Core Viewpoint - The contract signed between the company and Envision Energy represents a significant step in deepening cooperation in the core material sector, laying a solid foundation for future collaborations [2] Group 1: Cooperation and Contracts - The company emphasizes its long-term good relationship with Envision Energy in the cabin business, in addition to the core material sector [2] - The company encourages investors to pay attention to future announcements regarding the progress of cooperation [2] Group 2: Military Sector Development - The company is actively pursuing development in the military sector, with its wholly-owned subsidiary Jiangsu Changzhuo holding weapon equipment quality management system certification and military-level confidentiality qualification [2] - The company has received relevant orders and achieved sales revenue in the military business, although this segment currently contributes a very low proportion to overall revenue and does not significantly impact current performance [2]