Core Insights - As of November 7, the latest market financing balance is 24,755.28 billion yuan, showing a decrease of 50.22 billion yuan compared to the previous trading day [1] - Among the 10 primary industries, the power equipment sector saw the largest increase in financing balance, rising by 4.031 billion yuan [1] - A total of 21 industries experienced a decrease in financing balance, with non-bank financials, computers, and electronics showing the most significant declines of 12.70 billion yuan, 12.11 billion yuan, and 11.09 billion yuan respectively [1][2] Industry Financing Balance Changes - The power equipment industry has a latest financing balance of 2,176.74 billion yuan, with an increase of 4.031 billion yuan, reflecting a growth rate of 1.89% [1] - The communication sector's financing balance increased by 0.246 billion yuan to 1,102.77 billion yuan, with a growth rate of 0.22% [1] - The basic chemical industry saw a slight increase of 0.201 billion yuan, bringing its financing balance to 978.68 billion yuan, with a growth rate of 0.21% [1] - The defense and military industry increased by 0.190 billion yuan to 791.43 billion yuan, with a growth rate of 0.24% [1] - The construction materials sector experienced a decrease of 1.98 billion yuan, resulting in a financing balance of 136.63 billion yuan, with a decline rate of 1.43% [1] - The coal industry saw a decrease of 1.43 billion yuan, bringing its financing balance to 146.12 billion yuan, with a decline rate of 0.97% [1] - The real estate sector's financing balance decreased by 3.42 billion yuan to 352.02 billion yuan, with a decline rate of 0.96% [2] - The electronic industry experienced a significant decrease of 11.09 billion yuan, resulting in a financing balance of 3,635.80 billion yuan, with a decline rate of 0.30% [2]

Group 1 - Fund advisors are adopting a cautious investment approach in Q4, reducing allocations to active equity funds while increasing investments in index-enhanced products and sectors that hedge against volatility, such as non-ferrous metals and non-bank financials [1] - In October, the equity fund index fell by 2.21%, and the ordinary stock fund index decreased by 2.04%, indicating a challenging investment environment [1] - The overall allocation to the pharmaceutical and biological industry decreased, while the non-ferrous metals and non-bank financial sectors saw the highest increases in allocation by 0.52 and 0.39 percentage points, respectively [1] Group 2 - Non-bank financials are viewed as a sector that shares market beta, with recent market sentiment stabilizing, presenting potential trading opportunities [2] - After a rapid decline, gold has regained some interest from fund advisors, with specific funds increasing their positions in gold ETFs [2] - The new tax regulations on gold trading have introduced additional costs for physical gold delivery, impacting consumer prices, but have not significantly affected financial market transactions like gold ETFs [2]

Core Viewpoint - The A-share market is expected to continue its bull market into 2026, with a forecast of a fluctuating upward trend but slower growth, leading investors to focus more on fundamental improvements and economic verification [1] Industry Insights - The technology sector may face structural and phase-based pullback risks, while resource products are likely to emerge as a new main direction for A-shares following the technology theme [1] - The ongoing comprehensive competition between China and the U.S. could significantly impact A-share investments, suggesting a focus on future industries and key resources, particularly in military industry sectors [1] Key Industry Focus - Key industries to watch include: - New energy - Non-ferrous metals - Basic chemicals - Oil and petrochemicals - Non-bank financials - Military industry - Machinery and equipment - Computers [1] Thematic Focus - Thematic areas of interest include: - New materials - Solid-state batteries - Commercial aerospace - Nuclear power - Cross-strait integration [1]

Investment Rating - The industry rating is "Recommended" [5] Core Insights - The A-share market saw a significant increase in new accounts, with a total of 22.45 million new accounts opened in the first ten months of 2025, representing a year-on-year growth of 10.57% [3][13] - The implementation of new regulatory guidelines for non-auto insurance is expected to shift the industry focus from scale to value, promoting rational competition and enhancing profitability in the long term [7][15] Market and Sector Performance - The non-bank financial index decreased by 0.17%, underperforming the CSI 300 index by 0.99 percentage points, ranking 23rd among all primary industries [2][12] - The securities sector fell by 0.72%, while the insurance sector rose by 1.25% during the same period [2][12] - The average daily trading volume in the A-share market was 20.123 billion yuan, down 13.5% month-on-month and 21.1% year-on-year [18] New Account Openings - In October 2025, the Shanghai Stock Exchange recorded 2.3099 million new accounts, a sharp decline from 6.8468 million in October 2024, primarily due to the previous year's market surge [3][13] - Institutional accounts have been increasing, with 83,800 new institutional accounts opened in the first ten months of 2025, bringing the total to 1.2366 million [3][13] Insurance Regulatory Changes - The new guidelines for non-auto insurance, which include specific rules for premium payments and policy issuance, have been officially implemented, marking a significant regulatory shift [7][15] - The guidelines aim to enhance the operational efficiency of the non-auto insurance sector and are expected to lead to a more competitive and innovative market environment [7][15] Financial Performance - The securities industry reported a revenue of 419.561 billion yuan in the first three quarters of 2025, a year-on-year increase of 17.02%, with net profits rising by 62.48% to 169.291 billion yuan [14]

Report Summary 1. Report Industry Investment Rating - Not mentioned in the provided content 2. Core View of the Report - As of October 26, 2025, the model recommends non-bank finance, communication, real estate, building materials, media, and banking, with marginal increases in media and real estate investments [1] - The non-bank finance, communication, and real estate sectors are mainly driven by fundamentals, building materials and media are mainly influenced by sentiment, and banking is driven by both quantitative and fundamental factors [1] - The industry rotation model analyzes the market from three dimensions: fundamentals, volume-price, and sentiment, aiming to capture industry opportunities [1] 3. Summary by Relevant Catalogs Industry Rotation Model - The model backtests original factors on a bi-weekly basis and expands volume-price factors from dimensions such as momentum and trend, capital flow and sentiment, and market structure and volatility [1] - Six relatively effective factors are selected to construct the industry rotation strategy [1] Industry ETF Portfolio - The current industry ETF portfolio includes six ETFs: E Fund CSI 300 Non-Bank Finance ETF, Guotai CSI All-Index Communication Equipment ETF, Southern CSI All-Index Real Estate ETF, Guotai CSI All-Index Building Materials ETF, GF CSI Media ETF, and Huabao CSI Bank ETF [3] Performance of the Industry Rotation Strategy - In the past two weeks, the strategy rose 0.25%, with an excess return of 0.64% compared to the industry equal-weighted index [4][6] - Since the beginning of the year, the strategy has risen 34.89%, with a Sharpe ratio of 1.77 and a Calmar ratio of 2.88 in the past year [4] Strategy/Composite Factor Backtesting Results - Different factors have different IC means, IC standard deviations, ICIRs, frequencies of IC>0, and p-Values. For example, the成交均价因子 has an IC mean of 6.19%, an IC standard deviation of 27.11%, and an ICIR of 22.83% [10]

Core Insights - Since October, value style has begun to outperform growth style, marking a significant shift compared to the dominance of growth represented by TMT in Q2-Q3 [2][10] - The cyclical rotation between growth and value styles typically occurs over a 2-3 year period, primarily driven by changes in profit trends [2][11] - The fourth quarter is prone to style changes, particularly in December, as investor allocation strategies shift based on economic and profit outlooks [2][16] Summary by Sections Strategy Viewpoint - The current growth style has been dominant since September 2024, lasting about one year, and is expected to continue due to the upward trend in AI and high-end manufacturing [3][11] - Q4 is historically a high-frequency period for style changes, especially in December, as investors focus on stability and valuation safety margins [3][16] - Historical examples of style shifts include the strong switch to blue-chip stocks in late 2014 and a more balanced style shift in late 2019 [3][17] Market Changes - The report indicates that the probability of value style outperforming in December significantly increases, with historical data supporting this trend [7][20] - The report highlights that in 2014, the non-bank financial sector saw a substantial rise, with the Shanghai Composite Index showing a rapid increase in excess returns [17][21] - In 2019, a valuation repair shift occurred, leading to a more balanced market style, with previously weak sectors rebounding [23][24] Industry and Sector Recommendations - The report suggests focusing on low-valuation sectors, particularly in finance, as they may benefit from the anticipated style shift [32][33] - Specific sectors recommended for investment include non-bank financials, electric equipment, steel, and chemicals, with an emphasis on their potential for recovery and growth [35][36] - The report notes that the financial sector's valuation remains attractive, with expectations of recovery driven by regulatory support and market conditions [35][36]

Core Viewpoint - The A-share bull market is expected to continue into 2026, with indices likely to experience a volatile upward trend but with slower growth rates, leading investors to focus more on fundamental improvements and verification of economic conditions [1] Industry Insights - The technology sector may face structural and phase-specific pullback risks, while resource commodities are likely to emerge as a new main investment direction following the technology sector [1] - The ongoing comprehensive competition between China and the U.S. could significantly impact A-share investments, suggesting a strategic focus on future industries and key resources, particularly in military-related sectors [1] Key Industry Focus - Key industries to watch include: - New Energy - Non-ferrous Metals - Basic Chemicals - Oil and Petrochemicals - Non-bank Financials - Military Industry - Machinery Equipment - Computers [1] Thematic Focus - Important themes to consider are: - New Materials - Solid-state Batteries - Commercial Aerospace - Nuclear Power - Cross-Strait Integration [1]

Core Viewpoint - The A-share bull market is expected to continue into 2026, with the index likely to experience a volatile upward trend but with slower growth, leading investors to focus more on fundamental improvements and economic verification [1] Industry Insights - There is a caution regarding structural and phase-based pullback risks in the technology sector, while resource products may emerge as a new main direction for A-shares following the technology theme [1] - The ongoing comprehensive competition between China and the U.S. could significantly impact A-share investments, suggesting a strategic focus on future industries and key resources, particularly in military and defense sectors [1] Key Industry Focus - Key industries to watch include: - New energy - Non-ferrous metals - Basic chemicals - Oil and petrochemicals - Non-bank financials - Military industry - Machinery and equipment - Computers [1] Thematic Focus - Thematic areas of interest include: - New materials - Solid-state batteries - Commercial aerospace - Nuclear power - Cross-strait integration [1]

Quantitative Models and Construction - **Model Name**: Industry Allocation Model Based on Profit Growth Rate **Model Construction Idea**: The model uses profit growth rate as the primary criterion for industry selection, supplemented by valuation and trading crowding metrics as risk indicators[7][27][29] **Model Construction Process**: 1. **Profit Growth Metrics**: - Single-quarter net profit year-on-year growth rate - Marginal change in single-quarter net profit year-on-year growth rate Formula for marginal change: $ \text{Marginal Change} = \text{2025 Q3 Single-quarter YoY Growth} - \text{2024 Q3 Single-quarter YoY Growth} $[15][29] 2. **Valuation Metric**: - Historical PE_TTM percentile (2020 to present) is used to measure valuation levels across industries[18][21][29] 3. **Trading Crowding Metric**: - Standard deviation of turnover rate over the past three months is calculated to assess trading crowding[6][24][29] 4. **Comprehensive Scoring**: - Each metric is ranked, and weights are assigned: - Profit growth metrics: 0.3 each - Risk metrics (valuation and trading crowding): 0.2 each Formula for comprehensive scoring: $ \text{Comprehensive Score} = 0.3 \times \text{Net Profit YoY Growth} + 0.3 \times \text{Marginal Change} + 0.2 \times \text{Valuation Percentile} + 0.2 \times \text{Turnover Rate Std Dev} $[31][32] **Model Evaluation**: The model effectively identifies industries with high profit growth and moderate risk levels, providing actionable allocation recommendations[7][27][32] Model Backtesting Results - **Industry Allocation Model**: - Portfolio return: 2.38% - Benchmark (Wind All A Index) return: 0.63% - Excess return: 1.75%[7][32] Quantitative Factors and Construction - **Factor Name**: Profit Growth Rate **Factor Construction Idea**: Measures industry profitability through single-quarter net profit growth and marginal changes in growth rates[7][29] **Factor Construction Process**: 1. Single-quarter net profit year-on-year growth rate 2. Marginal change in single-quarter net profit year-on-year growth rate Formula: $ \text{Marginal Change} = \text{2025 Q3 Single-quarter YoY Growth} - \text{2024 Q3 Single-quarter YoY Growth} $[15][29] **Factor Evaluation**: Effectively captures industries with strong profitability and growth momentum[7][29] - **Factor Name**: Valuation Percentile **Factor Construction Idea**: Uses historical PE_TTM percentiles to compare valuation levels across industries[18][21] **Factor Construction Process**: 1. Calculate PE_TTM for each industry 2. Determine historical percentile (2020 to present) for PE_TTM values[18][21] **Factor Evaluation**: Provides a standardized comparison of valuation levels across industries, mitigating biases from absolute PE differences[21][29] - **Factor Name**: Turnover Rate Standard Deviation **Factor Construction Idea**: Measures trading crowding by assessing the volatility of turnover rates over the past three months[6][24] **Factor Construction Process**: 1. Calculate daily turnover rates for each industry over the past three months 2. Compute standard deviation of turnover rates[6][24] **Factor Evaluation**: Identifies industries with extreme trading behaviors, serving as a risk indicator[6][24] Factor Backtesting Results - **Profit Growth Rate Factor**: - Steel: 203.31% YoY growth, 380.75% marginal change[10][15] - Electronics: 57.42% YoY growth, 59.99% marginal change[10][15] - Media: 58.63% YoY growth, 82.75% marginal change[10][15] - Defense: 29.52% YoY growth, 83.60% marginal change[10][15] - Utilities: 17.77% YoY growth, 19.81% marginal change[10][15] - **Valuation Percentile Factor**: - Steel: 99.72%[21][29] - Electronics: 98.94%[21][29] - Media: 90.40%[21][29] - Defense: 97.10%[21][29] - Utilities: 55.31%[21][29] - **Turnover Rate Standard Deviation Factor**: - Steel: 50.48%[6][29] - Electronics: 96.51%[6][29] - Media: 84.50%[6][29] - Defense: 82.79%[6][29] - Utilities: 25.21%[6][29]

Market Overview - The A-share market experienced an overall decline on November 7, with the Shanghai Composite Index closing at 3997.56 points, down 0.25%, the Shenzhen Component Index at 13404.06 points, down 0.36%, and the ChiNext Index at 3208.21 points, down 0.51% [1] - The total trading volume for both markets was 19990.53 billion, a decrease of 561.94 billion compared to the previous trading day [1] Capital Flow - The net outflow of main funds from the Shanghai and Shenzhen markets reached nearly 300 billion, with a net outflow of 185.42 billion at the opening and 44.36 billion at the close, totaling 297.4 billion for the day [2][3] - In the last five trading days, the main funds have consistently shown a net outflow trend, particularly in the ChiNext, which saw a net outflow of 127.46 billion on November 7 [2][4] Sector Performance - The basic chemical industry saw a net inflow of 63.07 billion, with a growth of 1.53%, making it the top sector for capital inflow [5][6] - Other sectors with net inflows included building materials (13.39 billion, up 0.86%) and petroleum and petrochemicals (8.33 billion, up 0.67%) [6] - Conversely, the computer sector experienced the largest net outflow of 154.80 billion, down 1.34%, followed by the electronics sector with a net outflow of 153.61 billion, down 0.70% [6] Top Stocks by Fund Flow - The top stocks with significant net inflows included Duofluor (43.83 million), Huasheng Lithium (24.64 million), and Shengxin Lithium Energy (21.90 million) [7][9] - Notable stocks with net outflows included Zhongke Electric (25.93 million) and Yunnan Mingye (12.19 million) [7][9] Institutional Focus - Institutions have shown interest in stocks such as China Nuclear Power, Great Wall Motors, and Sifang Co., with target prices indicating potential upside [10]