Core Viewpoint - The A-share market is entering the "semi-annual report period," with nearly 500 listed companies disclosing performance forecasts, and about 60% of these companies reporting positive performance [1] Group 1: Market Performance and Trends - In the first half of the year, technology and new consumption have become the main sources of excess returns, and technology growth is expected to remain the investment focus for the entire year [1][12] - The macroeconomic mild recovery is anticipated to support continuous improvement in A-share performance in the second half of the year [4][15] - Historical data indicates that the correlation between stock price fluctuations and performance growth is significantly higher during the reporting periods [15][16] Group 2: Key Sectors and Investment Opportunities - Key sectors to focus on include large finance, non-ferrous metals, AI, gaming, and innovative pharmaceuticals, with most of these sectors meeting or slightly exceeding expectations [7][25] - The AI computing power industry has significantly outperformed expectations, alleviating market concerns about sustained high capital expenditure [25][31] - The technology growth direction is expected to show strong performance, particularly in sectors benefiting from AI trends [25][29] Group 3: Investment Strategy and Portfolio Management - Portfolio management will involve assessing mid-to-long-term value based on semi-annual report disclosures, focusing on net profit growth, revenue growth, and cash flow indicators [18][19] - Companies with significant profit declines or high valuations will be approached with caution, while sectors with improving fundamentals will be prioritized [22][23] - The focus will be on sectors with high growth potential and those that have shown resilience in performance, particularly in the context of domestic demand and AI development [30][31] Group 4: Recommendations for Investors - Investors are advised to focus on sectors with high performance certainty and those that are at the bottom of their cycles, particularly in domestic core assets [30][31] - It is recommended to consider actively managed equity products with broad market benchmarks to achieve better excess returns while controlling risks [11][35] - Ordinary investors should recognize the long-term development logic of the market and use semi-annual report performance as a verification of mid-to-long-term logic [34][36]

Core Viewpoint - The A-share market is entering the "semi-annual report period," with expectations of continued performance recovery in the second half of the year, particularly in technology growth and new consumption sectors [2][3][5]. Group 1: Market Performance and Trends - Nearly 60% of the approximately 500 listed companies that disclosed performance forecasts reported positive results, including profit increases and recoveries [2][3]. - Technology and new consumption have emerged as the main sources of excess returns in the first half of the year, with expectations that technology growth will remain a key investment theme for the entire year [3][5][15]. Group 2: Sector Focus and Performance - Key sectors to watch include large financials, non-ferrous metals, AI, gaming, and innovative pharmaceuticals, with many companies in these sectors meeting or slightly exceeding expectations [9][35]. - The AI computing industry has significantly outperformed expectations, alleviating market concerns about sustained high capital expenditures [35][41]. Group 3: Investment Strategy and Indicators - Investment decisions will be based on a combination of short-term performance changes and long-term value assessments, with a focus on indicators such as net profit growth, revenue growth, and cash flow metrics [22][24][21]. - The importance of net profit growth as a key indicator for assessing fundamental turning points and trends is emphasized, with many industries showing cyclical variations in profit growth [24][30]. Group 4: Long-term Opportunities and Risks - Long-term opportunities are seen in sectors benefiting from AI development, digital transformation, and domestic consumption, with a focus on companies with strong performance and growth potential [48][50]. - Caution is advised for companies with significant risks or high valuations, particularly in sectors facing increased competition or economic headwinds [30][31][32].

Group 1 - The report highlights a significant surge in overseas AI inference demand, which is expected to drive a positive feedback loop in model iteration, leading to a potential systematic profit upgrade due to market size and capacity reassessment [1][5][6] - The report indicates that the AI inference demand is in its early growth phase, with a notable increase in token volume, which will sustain high capital expenditure (Capex) in AI applications [1][6] - The report emphasizes that the optical module industry, as a foundational component for computing clusters, still possesses high growth potential in the medium to long term [1][6] Group 2 - The report recommends several beneficiaries within the computing power supply chain, including high-speed optical modules and liquid cooling technologies, with specific companies such as NewEase, Zhongji Xuchuang, and Tianfu Communication identified as key players [2][7] - It also lists additional beneficiaries in the computing equipment and data center sectors, recommending companies like China Telecom, China Mobile, and China Unicom, among others [2][9] - The report suggests that the optical network upgrade and edge computing sectors present further investment opportunities, with companies like Guangxun Technology and Huagong Technology highlighted as beneficiaries [9][10]

Group 1: Overview of Major Assets - In Q2 2025, A-shares rebounded to 3400 points, with bond rates declining and commodities experiencing fluctuations after a significant drop [2][10] - The A-share market saw broad index gains, with micro-cap stocks surging, led by financial and growth sectors, particularly in defense, military, and banking industries [3][14] - The bond market experienced a narrow decline in yields, with credit spreads initially widening before stabilizing [30][34] - Commodity markets showed mixed performance, with gold fluctuating at high levels and oil prices experiencing a rise followed by a decline [32][46] - Global stock indices mostly rose, with the Nasdaq leading at a 17.7% increase, while the AH premium index fell to a five-year low [2][10] Group 2: A-share Market Dynamics - The A-share market's fundamentals showed weakness in Q2, with three major economic indicators declining for two consecutive months [3][14] - Macro liquidity indicators indicated a slight decrease in social financing, with a reduction in reserve requirements and interest rates implemented in May [3][14] - Micro-funding trends showed fluctuations in southbound capital and ETF performance, with a notable increase in newly established funds in June [3][14] - The industry landscape highlighted a resurgence in the "lipstick economy" and a growing trend in innovative pharmaceuticals, indicating a competitive edge in global markets [3][14] Group 3: International Market Influences - The tariff situation led to increased global uncertainty, with liquidity risks observed in early April, followed by stabilization in May as tariff negotiations eased [4][19] - The U.S. economy faced rising inflation and potential stagflation risks, with inflation expectations reaching new highs in May [4][20]

Core Viewpoint - The A-share market has shown signs of recovery this week, driven by increased risk appetite and positive market sentiment, with the ChiNext index experiencing the largest gains among major indices [3]. Group 1: Market Performance - The A-share market has rebounded this week, influenced by rising policy expectations and improved market sentiment, with most major indices showing upward trends [3]. - The ChiNext index recorded the highest increase among major indices this week [3]. - Sector performance varied, with real estate, steel, and non-bank financial sectors performing relatively well [3]. Group 2: Industry Earnings Outlook - The upcoming earnings season is expected to favor industries with strong mid-year performance, as these sectors typically see better stock price movements in July and August [4]. - Historical data indicates that industries with strong earnings in July and August have a higher probability of achieving excess returns [4]. - The manufacturing sector is predicted to have the highest earnings growth, with a year-on-year increase of approximately 10.0%, followed by TMT and financial real estate sectors [4]. - The TMT sector is expected to show the most significant improvement, with a projected year-on-year growth increase of 5.8 percentage points [4]. Group 3: Sector-Specific Earnings Predictions - High predicted net profit growth rates are expected in the light industry, non-ferrous metals, non-bank financials, electronics, and social services sectors [5]. - In contrast, sectors such as steel, real estate, coal, oil and petrochemicals, and public utilities may face profit growth pressures [5]. - The construction materials, electronics, communications, retail, and computer sectors are anticipated to show significant improvement compared to the first quarter [5]. - The overall pre-announcement rate for A-share earnings is currently at 72%, with high pre-announcement rates in real estate, agriculture, forestry, animal husbandry, and environmental protection sectors [5]. Group 4: Market Outlook - The market is expected to trend upwards in the second half of the year, potentially reaching new highs, with a shift from policy-driven to fundamentals and liquidity-driven market dynamics [6]. - Short-term focus should be on sectors with favorable mid-year earnings, while long-term attention should be on three main lines: domestic consumption, technological self-reliance, and dividend stocks [6]. - In the domestic consumption sector, attention should be given to subsidy-related and offline service consumption [6]. - The technology sector should focus on AI, robotics, semiconductor supply chains, national defense, and low-altitude economy [6].

Investment Rating - The report maintains a "Recommended" rating for the new materials industry [1]. Core Viewpoints - The new materials sector is a crucial direction for the chemical industry, currently experiencing rapid growth in downstream demand. With policy support and technological breakthroughs, domestic new materials are expected to accelerate their long-term growth. The new materials industry serves as a foundational industry, supporting other sectors such as electronic information, new energy, biotechnology, and environmental protection [4][16]. Summary by Sections 1. New Materials Industry Dynamics 1.1 Electronic Information Sector - On July 10, the State Administration for Market Regulation and the Ministry of Industry and Information Technology issued the "Action Plan for Measurement Support for New Quality Productivity Development (2025-2030)," focusing on integrated circuit measurement technology [23]. 1.2 Aerospace Sector - Key materials to focus on include PI films, precision ceramics, and carbon fibers [10]. 1.3 New Energy Sector - Focus areas include photovoltaic materials, lithium-ion batteries, proton exchange membranes, and hydrogen storage materials [12]. 1.4 Biotechnology Sector - Key focuses are on synthetic biology and scientific services [12]. 1.5 Energy Conservation and Environmental Protection Sector - Key materials include adsorbent resins, membrane materials, and biodegradable plastics [15]. 2. Key Companies and Earnings Forecast - The report highlights several key companies with their earnings forecasts, including: - Ruihua Tai (688323.SH): EPS forecast for 2025E is 0.06, with a PE of 51.28, rated "Buy" [17]. - Guangwei Composite (300699.SZ): EPS forecast for 2025E is 1.08, with a PE of 28.58, rated "Buy" [17]. - Zhongfu Shenying (688295.SH): EPS forecast for 2025E is 0.04, with a PE of 510.00, rated "Buy" [17]. - Wanrun Co., Ltd. (002643.SZ): EPS forecast for 2025E is 0.59, with a PE of 19.29, rated "Buy" [17]. - Juhua Co., Ltd. (600160.SH): EPS forecast for 2025E is 1.30, with a PE of 20.55, rated "Buy" [17]. 3. Industry Rating and Investment Strategy - The new materials sector is expected to gradually enter a prosperous cycle driven by downstream application sectors, maintaining a "Recommended" rating for the new materials industry [16].

Quantitative Models and Construction Methods Models Model Name: Industry Allocation Model - **Model Construction Idea**: This model aims to recommend industry sectors based on medium-term trends and specific market conditions[2][3][10] - **Model Construction Process**: - The model identifies sectors that are likely to benefit from current market trends and conditions. - It recommends sectors such as Hong Kong innovative drugs, Hong Kong securities, and photovoltaic sectors due to their potential for reversal and growth. - The model also suggests focusing on technology sectors, including military and communication, as well as A-share banks and gold stocks[2][3][10] - **Model Evaluation**: The model is effective in identifying sectors with potential growth and aligning with current market trends[2][3][10] Model Name: TWO BETA Model - **Model Construction Idea**: This model focuses on recommending technology sectors based on their beta values and market conditions[2][3][10] - **Model Construction Process**: - The model evaluates the beta values of different sectors to identify those with higher potential for growth. - It recommends technology sectors, particularly military and communication, based on their beta values and current market trends[2][3][10] - **Model Evaluation**: The model is useful for identifying high-potential technology sectors based on their beta values[2][3][10] Model Name: Position Management Model - **Model Construction Idea**: This model aims to manage stock positions based on valuation indicators and short-term trends[3][10] - **Model Construction Process**: - The model uses valuation indicators such as PE and PB ratios to determine the stock positions. - It suggests an 80% stock position for absolute return products based on the current valuation levels of the wind All A index[3][10] - **Model Evaluation**: The model provides a balanced approach to managing stock positions based on valuation and market trends[3][10] Model Backtesting Results 1. **Industry Allocation Model**: - **PE Ratio**: 70th percentile[3][10] - **PB Ratio**: 30th percentile[3][10] - **Position Suggestion**: 80%[3][10] 2. **TWO BETA Model**: - **PE Ratio**: 70th percentile[3][10] - **PB Ratio**: 30th percentile[3][10] - **Position Suggestion**: 80%[3][10] 3. **Position Management Model**: - **PE Ratio**: 70th percentile[3][10] - **PB Ratio**: 30th percentile[3][10] - **Position Suggestion**: 80%[3][10] Quantitative Factors and Construction Methods Factor Name: Moving Average Distance - **Factor Construction Idea**: This factor measures the distance between short-term and long-term moving averages to identify market trends[2][9][14] - **Factor Construction Process**: - Calculate the 20-day moving average and the 120-day moving average of the wind All A index. - Compute the distance between the two moving averages. - The formula is: $$ \text{Distance} = \frac{\text{20-day MA} - \text{120-day MA}}{\text{120-day MA}} $$ - If the distance exceeds 3%, the market is considered to be in an upward trend[2][9][14] - **Factor Evaluation**: The factor is effective in identifying market trend shifts from a volatile to an upward trend[2][9][14] Factor Name: Profitability Effect - **Factor Construction Idea**: This factor measures the market's profitability effect to predict the inflow of incremental funds[2][10][14] - **Factor Construction Process**: - Calculate the profitability effect value based on market data. - The current profitability effect value is 3.50%, indicating a positive market trend[2][10][14] - **Factor Evaluation**: The factor is useful for predicting the inflow of incremental funds based on market profitability[2][10][14] Factor Backtesting Results 1. **Moving Average Distance**: - **Distance**: 3.04%[2][9][14] - **Profitability Effect**: 3.50%[2][10][14] 2. **Profitability Effect**: - **Distance**: 3.04%[2][9][14] - **Profitability Effect**: 3.50%[2][10][14]

Group 1 - The Ministry of Finance issued a notice to guide insurance funds for long-term stable investment and to strengthen long-cycle assessments of state-owned commercial insurance companies. The assessment method for "return on net assets" has been adjusted to include annual, 3-year, and 5-year indicators with respective weights of 30%, 50%, and 20% [1][5][16] - The Ministry of Industry and Information Technology (MIIT) is promoting digital transformation in manufacturing and small and medium-sized enterprises (SMEs) through pilot programs and guidelines, aiming to enhance the digital capabilities of key industries [2][3] - The State-owned Assets Supervision and Administration Commission (SASAC) emphasized the need for state-owned enterprises to focus on strategic emerging industries and enhance their role in technological innovation and industrial control [3] Group 2 - The Ministry of Finance allocated 197 million yuan to support agricultural disaster recovery in seven provinces affected by floods and typhoons, focusing on crop replanting and infrastructure repair [4] - The National Development and Reform Commission and the National Energy Administration announced plans to increase the green power consumption ratio for steel, cement, polysilicon industries, and new data centers by 2025 [2] - The Shanghai Stock Exchange released guidelines for the "Science and Technology Innovation Growth Layer," allowing 32 unprofitable companies to enter this new tier without additional listing thresholds [5] Group 3 - The China Securities Regulatory Commission (CSRC) has initiated investigations into companies suspected of financial misconduct, including Yuandao Communication for false financial reporting and Jiaoda Anlian for information disclosure violations [7][32] - The National Energy Administration reported that the new energy capacity connected to the grid exceeded 203 million kilowatts in the first half of the year, marking a 108.7% year-on-year increase [20] - The automotive industry in China is experiencing stability compared to other countries, with a noted decline of only 12% in the passenger car market from 2018 to 2020, indicating strong macroeconomic support [21]

Group 1 - The A-share market has shown signs of recovery, with major indices mostly rising, particularly the ChiNext Index which increased by 2.4% [13][14][16] - The real estate, steel, and non-bank financial sectors performed relatively well this week, with respective increases of 6.1%, 4.4%, and 4.0% [16][19][34] - The manufacturing sector is predicted to have the highest mid-year report performance growth, with an estimated year-on-year growth rate of approximately 10.0% [33][34] Group 2 - Industries expected to show high mid-year report performance growth include light industry, non-ferrous metals, and non-bank financial sectors, with predicted net profit growth rates of 34.2%, 33.0%, and 19.1% respectively [33][34] - The construction materials, electronics, and telecommunications sectors are anticipated to have significant performance improvement, with expected growth rate improvements of 11.4%, 7.9%, and 6.1% respectively [34][39] - The current mid-year earnings forecast disclosure rate is only 4.1%, indicating limited reference value for investors [39][42] Group 3 - The overall pre-announcement rate for A-share companies is 72%, with many industries showing high pre-announcement rates, particularly in real estate and non-bank financial sectors [39][40] - The environmental protection, transportation, and media sectors are expected to show significant improvement in mid-year earnings forecasts, with respective improvement rates of 139.5pct, 111.0pct, and 96.7pct [41][44] - The market is expected to experience a bullish trend in the second half of the year, with a focus on sectors that are likely to outperform in mid-year reports [57][58]

Group 1 - The market continued its upward trend with the CSI 300 index increasing by 0.82%, the Shanghai Composite Index rising by 1.09%, and the CSI 500 index gaining 1.96% last week, indicating a strong market rally driven by institutional funds [3] - Domestic economic data remains under pressure, with CPI stabilizing and PPI continuing to decline, reflecting ongoing deflationary trends in industrial prices, which are impacting corporate profitability [3] - The U.S. has announced increased tariffs on multiple economies, including traditional allies, which may have a significant impact on the economy despite a temporary stable performance in capital markets [3] Group 2 - Since April 30, there has been a notable increase in institutional fund rotation and accumulation, with a strong buy signal detected last Tuesday, indicating a shift from cautious to aggressive buying behavior among institutional investors [4] - The recent influx of incremental capital has led to a rebound in A-shares, with a significant buy signal emerging last Tuesday, suggesting a bullish outlook for the market [4] - The short-term leading variable is the capital flow, with recommendations to maintain high positions in both the main board and small-cap sectors, while focusing on sectors such as steel, telecommunications, and media [4]