1. Report Industry Investment Rating No information about the industry investment rating is provided in the document. 2. Core View of the Report - The convertible bond market experienced a volume - shrinking correction today, with valuations compressing on a month - on - month basis. The CSI Convertible Bond Index decreased by 1.03% month - on - month, and the trading sentiment in the convertible bond market weakened. The convertible bond price center declined, and the proportion of high - price bonds decreased. The valuation of convertible bonds was compressed, and most of the industry indices of underlying stocks declined [1][2]. 3. Summary According to Relevant Catalogs Market Main Index Performance - The CSI Convertible Bond Index closed at 525.93, down 1.03% day - on - day, - 0.53% in the past week, - 1.60% in the past month, and up 6.92% since the beginning of the year. The Shanghai Composite Index closed at 4146.63, down 0.01% day - on - day, up 0.31% in the past week, up 0.25% in the past month, and up 4.48% since the beginning of the year. The Shenzhen Component Index closed at 14503.79, up 0.19% day - on - day, up 1.55% in the past week, up 0.44% in the past month, and up 7.24% since the beginning of the year. Other major indices also showed different trends [7]. Market Capital Performance - The trading volume of the convertible bond market was 69.188 billion yuan, a month - on - month decrease of 7.81%. The total trading volume of the Wind All - A Index was 2556.639 billion yuan, a month - on - month increase of 3.05%. The net outflow of the main funds in the Shanghai and Shenzhen stock markets was 30.045 billion yuan, and the yield of the 10 - year Treasury bond increased by 1.30bp month - on - month to 1.83% [1][8]. Convertible Bond Price and Valuation - The weighted average closing price of convertible bonds was 143.90 yuan, a month - on - month decrease of 0.56%. The closing price of equity - biased convertible bonds was 218.78 yuan, a month - on - month decrease of 0.81%; the closing price of debt - biased convertible bonds was 121.74 yuan, a month - on - month decrease of 1.04%; the closing price of balanced convertible bonds was 134.76 yuan, a month - on - month decrease of 0.17%. The proportion of high - price bonds above 130 yuan was 78.17%, a month - on - month decrease of 4.27pct. The median price was 141.45 yuan, a month - on - month decrease of 1.01%. The fitted conversion premium rate of 100 - yuan par value was 39.86%, a month - on - month decrease of 1.43pct; the overall weighted par value was 108.96 yuan, a month - on - month increase of 0.41% [2]. Industry Performance - In the A - share market, the top three industries with the largest declines were real estate (- 2.25%), media (- 1.45%), and non - bank finance (- 1.42%); the top three industries with the largest increases were communication (+ 2.84%), electronics (+ 1.98%), and national defense and military industry (+ 1.52%). In the convertible bond market, 26 industries declined, and the top three industries with the largest declines were commerce and retail (- 2.55%), non - ferrous metals (- 2.44%), and media (- 2.37%); only two industries rose against the trend, namely communication (+ 4.48%) and power equipment (+ 2.21%) [3]. - In terms of different sectors: - Closing price: The large - cycle sector decreased by 1.31% month - on - month, the manufacturing sector decreased by 0.39% month - on - month, the technology sector increased by 0.22% month - on - month, the large - consumption sector decreased by 1.55% month - on - month, and the large - finance sector decreased by 0.82% month - on - month [3]. - Conversion premium rate: The large - cycle sector decreased by 1.8pct month - on - month, the manufacturing sector decreased by 2.0pct month - on - month, the technology sector decreased by 2.6pct month - on - month, the large - consumption sector decreased by 0.56pct month - on - month, and the large - finance sector decreased by 1.5pct month - on - month [3]. - Conversion value: The large - cycle sector increased by 0.11% month - on - month, the manufacturing sector increased by 1.40% month - on - month, the technology sector increased by 2.86% month - on - month, the large - consumption sector decreased by 0.72% month - on - month, and the large - finance sector decreased by 0.80% month - on - month [3]. - Pure - debt premium rate: The large - cycle sector decreased by 2.0pct month - on - month, the manufacturing sector decreased by 0.51pct month - on - month, the technology sector increased by 0.35pct month - on - month, the large - consumption sector decreased by 2.0pct month - on - month, and the large - finance sector decreased by 0.94pct month - on - month [4]. Industry Rotation - The communication, electronics, and national defense and military industry led the rise. For example, the communication industry had a daily increase of 2.84% in the underlying stocks and 4.48% in convertible bonds; the electronics industry had a daily increase of 1.98% in the underlying stocks and - 0.56% in convertible bonds; the national defense and military industry had a daily increase of 1.52% in the underlying stocks and - 0.84% in convertible bonds. The report also provided the weekly, monthly, and year - to - date increases, as well as the valuation quantiles of the underlying stocks [55].

Group 1 - The core point of the news is the significant performance of various ETFs, particularly the South Korea-China Semiconductor ETF, which surged by 9.64%, leading the market with a premium rate of 21.10% and a turnover rate of 125.76% [1][5] - The short-term bond ETF, Hai Futong, recorded a transaction volume exceeding 66 billion yuan, making it the top ETF in the market for that day [4][6] - There was a notable inflow of funds into broad-based ETFs such as the CSI 500 ETF and the A500 ETFs, indicating a shift in market sentiment [5][7] Group 2 - The semiconductor equipment sector continues to rise, driven by strong demand for AI and a persistent supply-demand imbalance in the global storage industry, which is expected to last until at least 2027 [2][3] - The chip design sector saw a significant rally, attributed to Nvidia's impressive earnings report and ongoing domestic industry development supported by favorable policies [3] - Several ETFs related to power grids and communications also experienced notable gains, reflecting a broader market trend towards these sectors [1][2] Group 3 - The market is currently experiencing a shift from valuation-driven growth to earnings-driven performance, with an increasing focus on the quality of earnings, cash flow, and dividend capabilities of listed companies [8] - The investment strategy is suggested to adopt a phased approach or dollar-cost averaging to capture long-term opportunities amidst market volatility [8] - The market is expected to continue its upward trend, with mid-cap and large-cap blue-chip stocks likely to outperform in the context of economic recovery [8]

Group 1 - The South Korea-China Semiconductor ETF (513310) surged by 9.64%, nearing the daily limit, leading the market ETFs with a premium rate of 21.10% and a turnover rate of 125.76% [1][4][8] - The Short-term Bond ETF (511360) recorded a transaction volume exceeding 66 billion yuan, ranking first among all market ETFs [2][8][9] - Several A500 ETFs, including A500 ETF Fund (512050) and A500 ETF Huatai (563360), saw significant trading volumes, indicating strong investor interest [2][8] Group 2 - The semiconductor equipment sector continues to rise, driven by a sustained "supply-demand imbalance" in the global storage industry, with expectations of continued growth until after 2027 [6] - The chip design sector experienced a significant rally, supported by strong performance from Nvidia and ongoing domestic industry development and policy support [6] - The film and insurance sectors faced declines, with the Hong Kong pharmaceutical sector experiencing substantial drops, as multiple Hong Kong pharmaceutical ETFs fell over 3% [6][7] Group 3 - Funds began to flow back into broad-based ETFs such as the CSI 500 ETF (510500) and the A500 ETF Southern (159352) on February 25, indicating a shift in investor sentiment [10] - The Hong Kong technology and internet-themed ETFs saw significant net inflows, suggesting a renewed interest in these sectors despite market volatility [10] - The market is expected to transition from "valuation-driven" to "earnings-driven" as investor focus shifts towards the quality of earnings and cash flow of listed companies [12]

Investment Rating - The report does not explicitly provide an investment rating for the industry, but it suggests a positive outlook based on structural opportunities and market conditions [3]. Core Insights - The North Exchange A-share market experienced a moderate increase, with a trading volume of 18.656 billion yuan on February 25, 2026, up by 2.277 billion yuan from the previous trading day. The North Exchange 50 Index closed at 1,547.201, rising by 0.77%, while the specialized index increased by 1.22% to 2,597.61 [1][8]. - A total of 294 companies were listed on the North Exchange, with 208 stocks rising, 6 remaining flat, and 80 declining. The top five gainers included Tonghui Information (10.3%), Anda Technology (8.2%), and Tianli Composite (6.3%), while the top five losers were Liancheng CNC (-7.1%) and Keli Co., Ltd. (-5.9%) [1][15][16]. - The report highlights structural characteristics within the North Exchange, aligning with the cyclical stock market trends, particularly in rare earths, phosphorus chemicals, and small metals [3]. Summary by Sections Market Review - On February 25, 2026, the North Exchange A-share trading volume reached 18.656 billion yuan, an increase of 2.277 billion yuan from the previous day. The North Exchange 50 Index rose by 0.77% to close at 1,547.201, with a PE_TTM of 65.09. The specialized index also saw a rise of 1.22% [1][8]. Important News - OpenAI's project faced funding issues, shifting its focus to managing internal data center resources rather than owning physical assets. Additionally, OpenAI is behind in custom chip development, with plans to start in 2025 [2][17]. - Murata Manufacturing, a major MLCC manufacturer, is considering raising prices for its passive components [2][18]. Key Company Announcements - Deere Chemical announced a projected revenue of 726 million yuan for 2025, a decrease of 7.21% year-on-year, with a net profit expected to drop by 33.54% [2][19]. - Hongzhi Technology expects a revenue of 47.228 million yuan for 2025, down 1.61% year-on-year, with a net profit decline of 16.96% [2][20][21].

Group 1 - The Invesco Great Wall CSI National New Hong Kong Stock Connect Central Enterprise Dividend ETF (520990) closed down 0.65% with a trading volume of 214 million yuan on February 26 [1] - The fund was established on June 26, 2024, with a management fee of 0.50% and a custody fee of 0.10% [1] - As of February 25, 2025, the fund's latest share count was 5.787 billion shares, with a total size of 6.284 billion yuan, reflecting a 1.87% increase in shares and a 10.61% increase in size year-to-date [1] Group 2 - The current fund managers are Gong Lili and Wang Yang, with returns of 24.16% and 9.85% respectively during their management periods [2] - The latest report indicates that the top holdings of the fund include China National Offshore Oil Corporation, China Shenhua Energy, China Petroleum & Chemical Corporation, and China Mobile, among others [2] Group 3 - The top holdings and their respective weights in the fund are as follows: - China National Offshore Oil Corporation: 10.04% with a market value of 571 million yuan - China Shenhua Energy: 9.99% with a market value of 568 million yuan - China Petroleum & Chemical Corporation: 9.82% with a market value of 558 million yuan - China Mobile: 9.65% with a market value of 548 million yuan - China Petroleum: 8.21% with a market value of 467 million yuan - COSCO Shipping Holdings: 5.74% with a market value of 326 million yuan - China Telecom: 4.76% with a market value of 270 million yuan - China Unicom: 3.14% with a market value of 179 million yuan - China Tower: 2.83% with a market value of 161 million yuan - China Merchants Bank: 2.07% with a market value of 118 million yuan [3]

Market Overview - The three major indices in the A-share market showed mixed results, with trading volume slightly increasing compared to the previous day [6] - The communication sector led the gains among the Shenwan first-level industries, with a rise of 2.84% [6] Currency Impact - The offshore RMB to USD exchange rate broke 6.84, while the onshore rate surpassed 6.87, both reaching new highs since April 2023 [1] - The appreciation of the RMB is attributed to a decline in external USD credit and a weakening USD index, supported by the resilience of China's economic fundamentals [1] - The strong performance of the RMB enhances the attractiveness of RMB-denominated assets, potentially increasing foreign capital inflows and improving overall market risk appetite [1] Real Estate Policy Changes - Shanghai's new real estate policy, known as "沪七条," significantly relaxes purchase restrictions and housing fund policies, including reducing the social security requirement for non-local residents from 3 years to 1 year [2] - The maximum loan amount for first-time homebuyers using housing funds has been raised from 1.6 million to 2.4 million RMB, with potential increases up to 3.24 million RMB [2] - This policy aims to lower the entry barriers for new residents and is expected to boost market sentiment, particularly in the real estate sector, which is crucial for stabilizing fixed asset investment and consumer confidence [2] Nvidia's Financial Performance - Nvidia reported Q4 revenue of $68.127 billion, a 73% year-over-year increase, with net profit rising 94% to $42.96 billion [3][10] - The data center business generated $62 billion in revenue, accounting for 91% of total revenue, and grew 75% year-over-year [10] - CEO Jensen Huang emphasized the "Inference Equals Revenue" concept, indicating that AI capabilities are transitioning from training to inference, which clarifies the business model and addresses concerns about the sustainability of AI capital expenditures [11] Lithium Supply Disruption - Zimbabwe announced a suspension of all lithium ore and concentrate exports, which is expected to exacerbate the short-term supply tightness of lithium for China, as approximately 19% of China's lithium concentrate imports come from Zimbabwe [4][12] - This export ban is likely to increase procurement costs and uncertainty for domestic lithium salt manufacturers, reinforcing the price increase logic in the lithium sector [12]

Market Overview - On February 26, the Shanghai Composite Index fell by 0.01%, the CSI 300 decreased by 0.19%, the STAR Market 50 rose by 0.85%, the CSI 1000 increased by 0.76%, the ChiNext Index dropped by 0.29%, and the Hang Seng Index declined by 1.44% [3][4] - The best-performing sectors on February 26 were telecommunications (+2.84%), electronics (+1.98%), defense and military (+1.52%), machinery and equipment (+1.41%), and steel (+1.33%). The worst-performing sectors were real estate (-2.25%), media (-1.45%), non-bank financials (-1.42%), retail (-1.22%), and food and beverage (-1.2%) [3][4] - The total trading volume for the A-share market on February 26 was 25,566 billion yuan, with a net outflow of 7.366 billion HKD from southbound funds [3][4] Important Insights - The report focuses on the fixed income credit bond market, analyzing the pricing dynamics around the Chinese New Year. Historical trends show a pattern of "rising before the festival, followed by divergence afterward," characterized by three phases: loose trading, expectation adjustments, and the establishment of macro themes [5] - The institutional buying patterns across the festival period indicate that insurance companies maintained stable net purchases, while funds followed market trends. Major banks increased net selling after the festival, and smaller banks and wealth management products are expected to see concentrated allocation windows post-festival [5] - The report highlights that the pricing power in the bond market is shifting from the allocation of institutional investors to trading dynamics as the festival approaches. Notable characteristics include major banks focusing on purchasing 7-10 year government bonds, while smaller banks tend to buy in the first half and sell in the second half of the period [5][6]

Market Analysis - The A-share market exhibited a mixed performance with the Shenzhen Component Index reaching a new high for the year, closing up 0.19% at 14,503.79 points, while the Shanghai Composite Index slightly declined by 0.01% to 4,146.63 points [2] - The overall market saw 2,481 stocks rise and 2,866 stocks fall, indicating a moderate overall profit effect, with total trading volume reaching 2.56 trillion yuan, an increase of 3.1% from the previous day [2] Sector Performance - The technology sector led the market, with the communication sector rising by 2.20%, and notable stocks such as Zhongtian Technology and Hengtong Optic-Electric hitting the daily limit [5] - The real estate sector declined by 2.13%, possibly due to profit-taking after favorable policies in the Shanghai housing market, while the non-bank financial sector fell by 1.46% [5] Currency and Economic Outlook - The report suggests that the trend of the Chinese yuan appreciating against the US dollar is likely to continue, with the offshore yuan reaching around 6.83 [7] - The upcoming National People's Congress in March is expected to raise market expectations regarding policies related to "new productivity," "AI + manufacturing," and "green low-carbon" initiatives [7] Bond Market - The bond futures market continued to adjust, with the 30-year main contract dropping by 0.53% to 112.09 yuan, indicating heavy selling pressure on long-term contracts [10] - The central bank's operations to maintain liquidity are noted, with a net withdrawal of 795 billion yuan impacting market sentiment [10] Commodity Market - The commodity index fell by 0.71%, with lithium carbonate prices surging by 3.47% due to Zimbabwe's announcement to suspend lithium ore and concentrate exports [11] - The report highlights that geopolitical uncertainties remain a significant factor influencing the performance of non-ferrous metals [13] Investment Themes - The report identifies several key investment themes, including the acceleration of AI applications, commercial aerospace development, and advancements in quantum technology [14] - The ongoing support for consumption upgrades and the potential for further stimulus policies are also highlighted as important factors for the consumer sector [14]

Core Viewpoint - The global economic landscape is undergoing a systematic restructuring, driven by unilateralism and protectionism, particularly in emerging industries like semiconductors and artificial intelligence, necessitating a reevaluation of industrial layouts by many countries [1] Group 1: Changes in Spatial Layout - The shift from global integration to regionalization and "1+N" multi-point layout reflects the vulnerabilities of traditional global production networks amid geopolitical conflicts and supply chain disruptions [4] - The share of China in U.S. imports decreased from 21.6% in 2017 to 13.4% in 2024, while Mexico's share increased from 12.3% to 14.4%, and Vietnam's from 2.1% to 4.3%, indicating a clear trend towards regionalization and nearshoring [4] Group 2: Structural Changes - The global industrial value creation is transitioning from traditional manufacturing to service-oriented and green industries, with high-value services becoming integral to the entire industrial value chain [5] - Exports of China's "new three items" (new energy vehicles, lithium batteries, and photovoltaic products) surged from 284.4 billion yuan in 2020 to 1.28 trillion yuan in 2025, marking a 3.5-fold increase over five years [5] Group 3: Technological Changes - The geographical pattern of technological innovation is shifting from a concentrated model to a decentralized one, resulting in a multi-polar innovation landscape [6] - The U.S. leads in AI infrastructure and high-end semiconductor manufacturing, while the EU excels in green technology and industrial software, and China has developed advantages in 5G communication and new energy batteries [6] Group 4: Organizational Changes - The role of state intervention in global industrial organization is intensifying, with national policies increasingly influencing multinational corporations' strategies [7] - The number of global regional trade agreements reached 378 by the end of 2024, up by 102 since 2010, with many focusing on key sectors like semiconductors and new energy, embedding values and standards into trade rules [7]

Market Performance - The Hang Seng Index fell by 384.7 points, a decrease of 1.44%, closing at 26,381.02 points [1] - The H-share Index dropped by 220.46 points, closing at 8,814.29 points, a decline of 2.44% [1] - The Hang Seng Tech Index decreased by 151.17 points, closing at 5,109.33 points, down by 2.87% [1] Blue Chip Stocks - Tencent Holdings decreased by 2.01%, closing at 512 HKD [1] - Hong Kong Exchanges and Clearing rose by 0.78%, closing at 415.4 HKD [1] - China Mobile fell by 0.88%, closing at 78.6 HKD [1] - HSBC Holdings increased by 1.61%, closing at 145 HKD [1] Local Hong Kong Stocks - Cheung Kong Holdings rose by 3.04%, closing at 48.06 HKD [1] - Sun Hung Kai Properties fell by 0.07%, closing at 136.3 HKD [1] - Henderson Land Development decreased by 0.4%, closing at 34.44 HKD [1] Chinese Financial Stocks - Bank of China fell by 0.64%, closing at 4.65 HKD [1] - China Construction Bank decreased by 1.6%, closing at 8 HKD [1] - Industrial and Commercial Bank of China fell by 0.62%, closing at 6.42 HKD [1] - Ping An Insurance dropped by 4.64%, closing at 67.85 HKD [1] - China Life Insurance decreased by 4.1%, closing at 31.38 HKD [1] Oil and Petrochemical Stocks - Sinopec fell by 1.63%, closing at 5.43 HKD [1] - PetroChina decreased by 1.46%, closing at 9.46 HKD [1] - CNOOC dropped by 3.22%, closing at 24.66 HKD [1]