Investment Rating - The report suggests a positive investment outlook for the communication sector, particularly focusing on sub-sectors like optical communication and smart cards, which have shown better performance recently [1][10]. Core Insights - The communication industry is experiencing a downturn, with the overall index down by 0.78%, while specific sub-sectors like smart cards and optical devices have seen gains of 3.88% and 3.51% respectively [1][10]. - The integration of 5G and AI is expected to enhance profitability, with approximately 70% of the constituents in the 5G communication theme index having business related to 5G and about 76% related to AI [2][43]. - The report highlights a significant growth in revenue and net profit for the 5G communication theme index constituents, projecting a compound annual growth rate (CAGR) for revenue in the range of 10% to 30% over the next three years [2][45]. Summary by Sections 1. Weekly Market Performance - The communication sector index declined by 0.78%, while the overall market indices showed mixed results, with the Shanghai Composite down by 0.25% and the ChiNext up by 0.22% [1][10]. - Sub-sectors such as smart cards and optical devices performed well, with respective gains of 3.88% and 3.51% [1][10]. 2. Industry Development and Key Events - The global data center market is driven by AI, digitalization, and policy support, with the top ten data center service providers holding 59.5% of the total global resource capacity [24][26]. - The report notes a rapid increase in the proportion of large and super-large data centers in China, which are expected to dominate new constructions [26][30]. 3. 5G and AI Integration - The report emphasizes the high correlation between 5G and AI businesses, with a stable recovery in profitability observed [2][43]. - The constituents of the 5G communication theme index are projected to achieve a total revenue of CNY 1,788.51 billion in 2024, reflecting a year-on-year growth of 16.4% [2][45]. 4. Investment Recommendations - The report recommends focusing on high-quality stocks in sub-sectors with improving market conditions, particularly in optical communication and data centers [3][41]. - Specific companies to watch include Zhongji Xuchuang, New Yisheng, and Tianfu Communication, among others [3][41].

Group 1: Market Outlook - The overall market outlook remains optimistic despite external uncertainties, with the belief that the upward trend in the Chinese stock market is not yet over [1][2] - Investors' understanding of the economic and international situation is comprehensive, and new technologies and consumer opportunities are emerging, indicating a structural positive shift [1][2] - The reduction in risk-free interest rates has lowered the opportunity cost of investing in stocks, marking a historical turning point for long-term and retail investors [1][3] Group 2: Economic and Investment Trends - Economic expectations are undergoing a positive transformation, which is not a short-term phenomenon, with the stock market's expectations reflecting a range rather than a single point [2] - The focus on supply-side innovation is driving demand creation, with capital expenditure in both new and old economies expected to recover and enter a phase of differentiated growth by 2025 [2][3] Group 3: Currency and Asset Valuation - The stability of the RMB is expected to play a significant role in the revaluation of Chinese assets, as the global economic order is being reshaped and the dollar's credibility is declining [3] - The decline in discount rates is leading to a market environment where emerging technologies are the main focus, with financial sectors and high-dividend stocks benefiting from the lower risk-free rates [3] Group 4: Sector Recommendations - Recommendations include financial and high-dividend sectors such as banks, brokers, and highway operators, which are expected to benefit from the domestic decline in risk-free rates [3] - Emerging technology sectors, particularly in internet, media, innovative pharmaceuticals, and military technology, are highlighted as key growth areas due to intensified competition between China and the US [3] - The cyclical consumption sector is also expected to see a revival, with a focus on domestic supply-demand tightness in cyclical products and new consumption driven by supply [3] Group 5: AI and Market Dynamics - The current macroeconomic environment and industry trends are reminiscent of the 2012-2014 period, where technology drove market performance, particularly in Hong Kong stocks [5][6] - The rapid development of AI applications is expected to accelerate commercialization, with Chinese companies poised to benefit significantly from this trend [6][7] - Hong Kong's tech sector, particularly in software applications, is expected to outperform due to its higher market capitalization in this area compared to A-shares [7]

Group 1: Report Industry Investment Rating - Not provided in the given content Group 2: Core Viewpoints of the Report - This week, the market first declined and then rose, showing a sideways and narrow - fluctuating trend with an unclear main line. In the equity market, sectors such as non - ferrous metals, petrochemicals, and agriculture, forestry, animal husbandry, and fisheries led the gains, and the large - cap style was dominant. Positive feedback in the equity market may be gradually forming. From May 29th to June 12th, the bond market had a relatively high - amplitude upward trend since April 7th, with the 30 - year Treasury bond futures recording a maximum increase of 2 points. The short - term upward momentum of the bond market may be limited, and it is more likely to show a volatile trend [1][7]. - Positive feedback in the equity market may be gradually forming. Since April 7th, institutions such as Central Huijin have been bullish on the equity market and entered the market to buy, which has played a crucial role in supporting the equity market. As the resilience of the equity market gradually strengthens, the decline is limited and often accompanied by rebounds, which further enhances investors' confidence. Since May, the Shanghai Composite Index has faced relatively large profit - taking pressure when approaching the annual high, but the market adjustment has been generally controllable, indicating the gradual enhancement of investors' confidence. In terms of allocation, it is recommended to focus on the dividend style, which continues to be highly allocated, and gradually layout sub - sectors in the technology growth sector with potential for recovery [2][8]. - The convertible bond market resonates with the equity market, and structural opportunities dominate the trading rhythm. Currently, the convertible bond market maintains a pattern of high - valuation shock repair. The index is short - term limited by the height of the underlying stocks and the supply rhythm, while the medium - term structural allocation logic continues. The allocation strategy suggests focusing on three main lines: controlling positions, preferentially allocating large - cap blue - chip stocks with high ratings and good liquidity; paying attention to small and medium - cap low - parity, high - elasticity varieties; and closely monitoring the clause game rhythm and credit rating changes to adjust positions [2][9]. Group 3: Summary by Relevant Catalogs 1 Market Observation - From June 9th to June 13th, the broad - based indexes and convertible bond indexes first declined and then rose. The convertible bond financial index, AAA index, convertible bond low - price index, and large - cap index led the gains. In terms of valuation, the valuations of balanced and equity - like convertible bonds were compressed. The short - term upward momentum of the bond market may be limited, and it is more likely to show a volatile trend [7]. - Positive feedback in the equity market may be gradually forming. The market is currently in a stage of structural switching with high volatility and rotation, and the main line is in a dynamic balance among AI technology, new consumption, and dividend value. In terms of market value, large - cap dividends and mid - cap growth are favored by funds. In terms of style, the growth main line is gathering strength, and the dividend logic is stable. In terms of allocation, it is recommended to focus on the dividend style and technology growth sectors [8]. - The convertible bond market resonates with the equity market, and structural opportunities dominate the trading rhythm. The overall strategy should focus on structural optimization, risk control, and theme rotation, and the dumbbell strategy is still preferred. It is recommended to use a neutral position to deal with fluctuations, improve strategy flexibility through careful bond selection, and continuously pay attention to changes in the supply rhythm and capital structure [9]. 2 Convertible Bond Market Tracking 2.1 Convertible Bond Market Conditions - The report provides the performance data of various convertible bond indexes in different time periods, including the recent week, two weeks, since March, one month, two months, half - year, and one - year. For example, the Wind Convertible Bond Energy Index had a 0.41% increase in the recent week, 1.28% in the recent two weeks, etc. [10]. 2.2 Convertible Bond Individual Bonds - Not provided in the given content 2.3 Convertible Bond Valuations - Not provided in the given content 2.4 Convertible Bond Prices - Not provided in the given content

Summary of Key Points from Conference Call Industry Overview - The conference call primarily discusses the AI industry, public cloud services, and the renewable energy sector, with a focus on companies like Huoshan Engine, Guoneng Rixin, and Zhongji Xuchuang [2][9][13]. Core Insights and Arguments AI Industry - Huoshan Engine leads the domestic public cloud large model invocation market with a 46.4% market share [2][3]. - Daily invocation of Huoshan Engine's Daobao model increased from 4 trillion tokens in December 2024 to over 16.4 trillion tokens by May 2025, indicating rapid growth [3]. - AI tool token consumption has surged, with programming tools increasing by 8.4 times and general tools by 10 times [2][3]. - Visual understanding models in K12 education have seen a 12-fold increase in token consumption [2][3]. - Daily token consumption for intelligent inspection videos and video retrieval has surpassed 10 billion [4]. Pricing Strategy - Huoshan Engine's Daobao 1.6 pricing strategy varies by input range, significantly reducing costs for enterprises, especially for requests within the 0-32K range, where costs can drop by 63% [5]. Demand for Computing Power - The AI era is driving a shift from BI to multi-modal data processing, increasing demand for computing power [6]. - Domestic computing power is currently in short supply, with potential price increases expected in the second half of the year [21]. - Despite NVIDIA's potential return to the Chinese market, domestic computing power still has significant growth potential [21]. Renewable Energy Sector - The National Development and Reform Commission's green electricity direct supply policy benefits Guoneng Rixin and Langxin, enhancing their competitive edge in renewable energy generation efficiency [9]. - Guoneng Rixin's products and services are expected to help reduce waste in wind and solar energy generation [9]. Optical Module Market - The demand for optical modules is rapidly increasing, with expectations of 15-17 million units of 800G products needed by 2025 and optimistic projections of 25-30 million units by 2026 [13]. - Zhongji Xuchuang is highlighted as a leading player in the optical module market, with significant potential for rebound and sustained growth [13]. International Expansion and Market Dynamics - Companies like Changfei Fiber have improved their performance, with revenue and profit growth returning to levels seen in 2021 and 2022 [15][16]. - The international market is opening new opportunities, with overseas revenue exceeding 30% [16]. - The hollow fiber technology is identified as a key growth driver for Changfei Fiber, with significant investments from major players like Microsoft [17]. Other Important Insights - The AI industry is expected to see a new wave of growth if major models are upgraded in the coming months [6]. - The consumer electronics sector is anticipated to benefit from innovations in foldable screens and wearable devices, with significant sales expected [23][24]. - The electronic sector is currently facing challenges but may see valuation recovery opportunities, particularly in the consumer electronics segment [19]. This summary encapsulates the key points discussed in the conference call, highlighting the trends, opportunities, and challenges within the AI and renewable energy sectors, as well as the performance of specific companies.

1. Report Industry Investment Rating - Not provided in the given content 2. Core Viewpoints of the Report - The market fluctuated upward this week, with major broad - based indices and convertible bond indices showing a mild recovery. The market's main line is still unclear, and it is waiting for incremental information. The convertible bond market resonated with the equity market, with increased trading activity and a continued differentiation in the valuation structure. The focus of capital allocation has shifted from extreme elasticity to high certainty, and a "stable allocation + selective elasticity" dual - wheel drive strategy is maintained. In the bond market, the pressure of maturing inter - bank certificates of deposit in the next three weeks is still large, and the pressure on cross - quarter liquidity cannot be ignored. It is difficult to see a smooth decline in interest rates in June [1][2]. - In the equity market, under the dual background of the adjustment of the public fund assessment mechanism and the phased easing of Sino - US tariffs, the main line is still unclear, and the style is differentiated. The dividend style has attracted wide attention, and the growth style is gradually recovering. The market value structure is biased towards small - cap growth. In terms of strategy, it is necessary to optimize strategies by combining new productive forces, institutional dividends, and the dynamic evolution of the valuation system. In terms of allocation, attention should be paid to the dividend, technology growth, and large - consumption sectors [8]. - For the convertible bond market, it is recommended to use a framework of "neutral position, bond selection as the foundation". The dumbbell strategy will still be dominant. In terms of allocation, focus on three directions: concentrating positions on high - rating, low - premium blue - chip convertible bonds; selecting medium - and high - priced thematic growth bonds; and conducting refined management in combination with clause events and credit marginal changes [2][9]. 3. Summary by Relevant Catalogs 3.1 Market Observation - In the past week (from June 2nd to June 6th), major broad - based indices and convertible bond indices fluctuated upward, but the market style was still differentiated. The convertible bond information technology index, AA - and below index, convertible bond high - price index, and small - cap convertible bond index led the gains. In the bond market, the pressure of maturing inter - bank certificates of deposit in the next three weeks is large, and it is difficult to see a smooth decline in interest rates in June [7]. - In the equity market, the main line is unclear, and the style is differentiated. The dividend style is popular, and the growth style is recovering. The market value structure is biased towards small - cap growth. Attention should be paid to the dividend, technology growth, and large - consumption sectors [8]. - The convertible bond market resonated with the equity market, showing a mild recovery, with increased trading activity and a continued differentiation in the valuation structure. A "stable allocation + selective elasticity" strategy is maintained, and a "neutral position, bond selection as the foundation" framework is recommended [9]. 3.2 Convertible Bond Market Tracking 3.2.1 Convertible Bond Market Conditions - The report provides the performance data of various convertible bond indices in different time periods, such as the one - week, two - week, 3 - month - since, one - month, two - month, half - year, and one - year changes of the Wind Convertible Bond Energy Index, Wind Convertible Bond Materials Index, etc. [10] 3.2.2 Convertible Bond Individual Bonds - The report shows the top five and bottom five individual bonds in terms of weekly price changes and the top five and bottom five underlying stocks of individual bonds in terms of weekly price changes, but specific bond names are not provided [13][25] 3.2.3 Convertible Bond Valuation - The report presents the valuation trends of bond - type, balanced, and equity - type convertible bonds, as well as the conversion premium rate valuation trends of convertible bonds with par values in different ranges (90 - 100, 100 - 110, 110 - 120) [19][21][31] 3.2.4 Convertible Bond Prices - The report shows the trends of the proportion of high - price bonds, low - price bonds, the proportion of bonds falling below the bond floor, and the median price of the convertible bond market [29][33]

Group 1 - The Hong Kong stock market has seen strong trading activity this year, with southbound capital actively entering the market despite adjustments, leading to a recovery in the Hang Seng Index, which has risen 17.21% year-to-date as of June 3 [1] - Public funds are launching Hong Kong stock ETFs, with significant inflows into innovative drug ETFs, technology ETFs, and dividend ETFs, indicating a strong interest from investors [2] - Analysts suggest that the current market environment favors a structural "barbell strategy," with technology and dividend sectors expected to contribute to excess returns in a rotating manner [3] Group 2 - The number of shares in various Hong Kong stock ETFs has surged, with the ICBC Innovative Drug ETF increasing from under 1.3 billion shares to nearly 3.7 billion shares, a growth of 192% [2] - The market quality of Hong Kong stocks is expected to improve as high-competitiveness technology giants are listed, and policies encourage quality companies to list in Hong Kong [3] - Analysts recommend focusing on leading stocks in cloud computing, new consumption, and pharmaceuticals, as well as opportunities in newly listed companies, which have shown impressive performance [3]

Investment Rating - The report maintains an "Outperform" rating for the Hong Kong stock market [2][4]. Core Viewpoints - The hot IPO market provides more investment options for Hong Kong stocks, supported by upward revisions in earnings, increasing southbound capital, and a weakening US dollar index [2][64]. - The report suggests holding positions in Hong Kong stocks, with no further accumulation above 22,500 points [2]. - The report emphasizes a shift from sentiment-driven to earnings-driven market dynamics in A-shares, indicating a correlation between performance and earnings revisions [2][50][53]. Summary by Sections US Market Outlook - The report predicts a rapid rise in US core inflation to around 3.8% in the second half of the year, driven by tariff-induced price increases [2][10]. - It highlights significant volatility expected in US stock and bond markets in Q3, advising investors to prepare for uncertainty [2][10]. A-Share Market Insights - Following Q1 earnings reports, there is a notable performance divergence among sectors, with earnings-driven and undervalued stocks becoming the main focus [2][50]. - Analysts have revised earnings forecasts for various indices, with significant downward adjustments for the STAR 50 index and upward revisions for dividend, CSI 500, Shenzhen Component, and CSI 1000 indices [2][50]. Hong Kong Stock Market Analysis - The report identifies key sectors for investment: cloud computing (Tencent and Alibaba), new consumption and pharmaceuticals, dividend stocks (telecoms, banks, public utilities), and opportunities in new IPOs [2][64]. - The report notes that the median increase in share price for new IPOs with a market cap over 30 billion HKD has reached 128% this year [2][72]. - It emphasizes the strong correlation between the performance of Hong Kong stocks and earnings revisions, suggesting a focus on stocks with upward earnings revisions [2][75].

Investment Rating - The report maintains a rating of "Add" for the industry [3] Core Viewpoints - The rapid development of AI is driving operators to optimize their capital expenditures, with a clear trend towards structural optimization. Despite a decline in overall capital expenditures, investments in computing power are expected to grow or remain stable, indicating the operators' commitment to AI [1][21] - Cloud computing is experiencing a new growth curve catalyzed by AI, significantly enhancing its application potential. The roles of the three major operators in cloud infrastructure are being redefined as they deepen their investments in cloud construction [2][23] Summary by Sections Investment Strategy - The report suggests focusing on the computing power sector, particularly in optical communication and related companies such as Zhongji Xuchuang and Xinyi Sheng. It also highlights the importance of operators like China Mobile, China Telecom, and China Unicom in this space [8][14][31] Industry Trends - The report notes a significant slowdown in 5G user growth across the three major operators, with a total of approximately 1.2 billion 5G users. The average revenue per user (ARPU) is also declining, indicating intensified competition among operators [7][26] Operator Capital Expenditure - China Mobile plans to invest CNY 37.3 billion in computing power for 2025, accounting for 25% of its capital expenditures. China Telecom's computing power investment is projected to reach CNY 22 billion, a 22% increase year-on-year. China Unicom expects a 28% increase in computing power investment, exceeding CNY 18 billion [23][24][25] Market Performance - The report highlights that the optical communication index outperformed other segments within the communication sector, with a notable increase in stock prices for key players in the computing power industry [17][20] Key Recommendations - The report recommends focusing on companies within the computing power supply chain, including optical communication leaders and related technology firms, as they are expected to benefit from the ongoing AI wave [8][31]

Group 1 - A recent incident involving a visually impaired individual highlights the conflict between technological implementation and human-centered service, raising questions about the adherence to the principle of being "people-oriented" in institutional practices [1][2] - The incident illustrates how rigid execution of regulations can lead to the alienation of users, as technology intended to enhance user experience, such as facial recognition, becomes a barrier instead [2][3] - The lack of market competition contributes to service inertia, resulting in a failure to innovate and adapt services to meet the needs of special groups, emphasizing the need for a balance between commercial and social value in institutional frameworks [3] Group 2 - Institutions should design flexible regulations that accommodate the needs of special groups, ensuring that they are not excluded by cold processes [3] - There is a call for companies and institutions to reassess their evaluation mechanisms, incorporating a sense of humanistic responsibility while pursuing business objectives [3]

Investment Rating - The report maintains an "Outperform" rating for the communication sector [1] Core Insights - The heavy stock position in the communication sector has declined, with a weighted market value of 838.59 billion yuan, down 24.27% quarter-on-quarter, representing 2.77% of total fund holdings [3][9] - The AI wave continues to evolve, creating investment opportunities across the entire computing power-related industry chain, driven by high demand for computing power and the expansion of 5G application scenarios [3][20] Summary by Sections Communication Sector Heavy Stock Position - As of Q1 2025, the communication sector's heavy stock position has decreased to 2.77%, ranking 13th among industries, down 0.97 percentage points from the previous quarter [3][8] - The total market value of heavy stocks in the communication sector is 838.59 billion yuan, reflecting a quarter-on-quarter decline of 24.27% [9] Subsector Analysis - The operator and IDC sectors have seen a continuous increase in market value share, while other sectors have experienced varying degrees of decline. As of Q1 2025, the operator sector's heavy stock market value share is 0.48%, up 0.01 percentage points; the IDC sector's share is 0.11%, up 0.05 percentage points [3][16] - The heavy stock market value share for the equipment sector is 0.17%, down 0.09 percentage points; for the optical module sector, it is 0.39%, down 0.36 percentage points [3][16] AI and Computing Power - The ongoing AI wave is expected to drive the development of infrastructure, IDC, and supporting facilities, with significant growth in demand for optical modules, IDC, and servers due to the rapid advancement of AI and the maturation of 5G applications [3][20] - The report highlights the potential for sustained performance improvement in related companies due to the rich and maturing application scenarios in AI, industrial internet, vehicle/internet of things, and AR/VR [3][20] Top Heavy Stocks in Communication Sector - The top ten heavy stocks in the communication sector as of Q1 2025 include China Mobile, NewEase, and Zhongji Xuchuang, with total market values of 136.93 billion yuan, 120.33 billion yuan, and 103.64 billion yuan, respectively [14][15] IDC Sector Performance - The IDC sector's total market value of heavy stocks is approximately 74.79 billion yuan, reflecting a quarter-on-quarter increase of 91.46% [37]