Group 1: Market Overview - Global stock markets generally declined during the week of March 20, 2026, with the Hang Seng Index rising against the trend[2] - Major commodity futures, including gold, crude oil, aluminum, and copper, experienced price drops[2] - The US dollar index fell slightly by 0.98%, while the offshore RMB appreciated by 0.02% against the dollar[2] Group 2: Domestic Equity Market - In the domestic equity market, the average daily trading volume was 21,972 billion RMB, down from 24,805 billion RMB[2] - Among the Shenwan primary industries, only 2 sectors rose, while 29 sectors fell, with the most significant declines in non-ferrous metals (-11.82%) and basic chemicals (-10.53%)[2] Group 3: Commodity Supply and Demand - The ongoing Middle East tensions could lead to a global oil supply shortfall exceeding 10 million barrels per day, with natural gas markets also facing vulnerabilities[8] - China's diversified energy supply and transportation channels provide a competitive advantage, potentially leading to premium pricing in the market[8] Group 4: Interest Rates and Exchange Rates - The 1-year Chinese government bond yield decreased by 2.0 basis points to 1.2568%, while the 10-year yield increased by 1.56 basis points to 1.8299%[12] - The 2-year US Treasury yield rose by 15 basis points to 3.88%, and the 10-year yield increased by 11 basis points to 4.39%[12] Group 5: Economic Data and Expectations - The upcoming economic data releases include the S&P PMI and Michigan Consumer Sentiment Index, with expectations of manufacturing contraction in Germany and France[10] - In China, attention will be on February's industrial profit data, while Japan's core inflation rate is expected to decrease from 2% to 1.7%[10]

Investment Rating - The industry investment rating is "Buy" [2] Core Insights - The report highlights that under inflation expectations, broad asset liquidity may contract, and attention should be paid to negative feedback effects [1][14] - The central bank's operations have resulted in a net injection of 215.8 billion CNY, with liquidity in the interbank market remaining ample and funding rates slightly declining [14] - The report emphasizes the potential for liquidity-driven valuation expansion to slow down in the second quarter due to rising inflation expectations and external geopolitical conflicts affecting oil prices [14][16] Summary by Sections 1. Inflation Expectations and Asset Liquidity - The interbank liquidity is currently abundant, with funding rates showing a slight decline. As of March 20, R001 and R007 rates were 1.40% and 1.48%, respectively [14] - The central bank conducted 242.3 billion CNY in 7-day reverse repos, with a maturity of 1,765 billion CNY, and a net injection of 215.8 billion CNY was achieved [14] - The report anticipates that liquidity may face contraction in Q2, influenced by inflation recovery expectations and external factors [14] 2. Central Bank Dynamics and Market Rates - The central bank's operations are characterized by small adjustments, maintaining a stable liquidity environment [15] - The report notes that government bond yields have shown mixed movements, with 1Y and 3Y yields decreasing by 2.0bp and 2.5bp, while longer-term yields have increased [16] - The report suggests that the market should prepare for potential upward pressure on long-term interest rates as economic recovery and inflation expectations evolve [16] 3. Bank Financing Tracking - The report indicates that the issuance of interbank certificates of deposit (NCD) has seen a weighted average issuance rate of 1.53%, down by 2bp from the previous period [19] - The total outstanding amount of interbank certificates of deposit is 18.17 trillion CNY, with a negative net financing of 4.042 billion CNY this period [19] - The report highlights that there were no new issuances of commercial bank bonds during this period, with a total outstanding amount of 3.35 trillion CNY [20]

Market Overview - Global capital markets are focused on the ongoing Middle East conflict, which is expected to persist in the short term, leading to sustained high oil prices[5] - The market's expectation for a Federal Reserve rate cut this year has decreased, with a slight probability of a rate hike emerging, reinforcing global "stagflation" trading consensus[5] - Major global stock markets have largely declined in unison, reflecting these concerns[5] Historical Context - Following the outbreak of the Russia-Ukraine conflict in 2022, oil prices surged, significantly driving inflation and causing substantial volatility in global equity markets[7] - During the initial downturn, all sectors weakened, with coal, real estate, and banking showing the least decline, each with a drop of less than 9%[7] - The subsequent recovery phase saw the new energy sector lead the market, with power equipment, automotive, and non-ferrous metals showing significant gains, particularly power equipment which rebounded over 55%[7] Investment Strategy - Short-term recommendations focus on dividend and stable styles due to ongoing geopolitical tensions and high oil prices, which may lead to volatility in A-shares[29] - Mid-term strategies should target the new energy sector and high-growth HALO industries benefiting from AI expansion, with a focus on sectors like photovoltaic equipment and battery manufacturing, which are expected to see significant profit growth by 2026[3][29] HALO Industry Insights - The HALO (Heavy Assets, Low Obsolescence) concept is gaining traction, characterized by business models based on large physical assets with low technological obsolescence risk[17] - The top ten HALO industries expected to see the highest net profit growth by 2026 include photovoltaic equipment, coking, batteries, and shipping ports[3] Risk Factors - Potential risks include domestic policy implementation falling short of expectations, geopolitical events exceeding forecasts, and overseas liquidity conditions not meeting projections[30]

1. Report Industry Investment Rating - The rating for the stock index is "Oscillating" [4] 2. Core View of the Report - The escalation of the Middle - East situation and concerns about stagflation are suppressing the stock market. The global stock market continues to be under pressure due to geopolitical factors such as the continuous escalation of the US - Iran situation and the substantial blockade of the Strait of Hormuz. The expectation of stagflation has escalated again. In the stagflation trading, "inflation" has been initially priced, while "stagnation" has not been fully traded. For the A - share market, there have been significant recent declines, and risk - aversion trading is dominant. In the short term, as the war situation expands, there are few opportunities for the stock index. It is recommended to take a risk - averse strategy and wait in a low - position until the situation becomes clear [2][10] 3. Summary According to the Directory 3.1 One - Week View and Overview of Macro Key Events - Next week's view: The escalation of the Middle - East situation and concerns about stagflation are suppressing the stock market. The global stock market continues to be under pressure, and the expectation of stagflation has escalated again. For the A - share market, there have been significant declines, and risk - aversion trading is dominant. In the short term, there are few opportunities for the stock index, and a risk - averse strategy is recommended [10] 3.2 One - Week Market Quotes Overview 3.2.1 Global Stock Market Weekly Overview - From March 16th to March 20th, the global stock market denominated in US dollars declined. The MSCI Global Index fell 1.79%. Among them, emerging markets (- 0.42%) > frontier markets (- 1.08%) > developed markets (- 1.97%). The South Korean stock market rose 5.39%, leading the global stock market, while the South African stock market fell 5.62%, performing the worst globally [11] 3.2.2 Chinese Stock Market Weekly Overview - From March 16th to March 20th, Chinese equities declined significantly, with Hong Kong stocks > A - shares > Chinese concept stocks. Among A - share indices, the ChiNext Index rose 1.26% weekly, the only rising index, while the micro - cap stock index performed the worst, with a decline of 6.91%. The average daily trading volume of A - shares this week was 22,113 billion yuan, a decrease of 287.6 billion yuan compared to the previous week [14] 3.2.3 Weekly Overview of GICS Primary Industries in Chinese and Foreign Stock Markets - Most of the global GICS primary industries declined this week. The leading industry was energy (+ 3.05%), and the lagging industry was materials (- 5.81%). In the Chinese market, the financial sector had the smallest decline (- 1.05%), and the materials sector was the worst (- 10.44%) [18] 3.2.4 Weekly Overview of China A - share CITIC Primary Industries - Among China A - share CITIC primary industries this week, 2 industries rose (12 last week), and 28 industries fell (18 last week). The industry with the largest increase was communications (+ 1.71%), and the industry with the largest decline was non - ferrous metals (- 11.91%) [21] 3.2.5 Weekly Overview of China A - share Styles: Large - cap Growth Dominates - This week, growth outperformed value, and the market - capitalization style favored large - cap stocks [25] 3.2.6 Overview of Futures Index Basis - There are relevant data on the annualized basis rate of the current - quarter contracts of IH, IF, IC, and IM (excluding dividends), but specific data is not presented in the summary text [29][31] 3.3 Overview of Index Valuation and Earnings Forecast 3.3.1 Broad - based Index Valuation - Presented the PE and PB data of various broad - based indices such as the Shanghai Composite 50, CSI 100, etc. this week, their eight - year percentile, the values at the beginning of the year, and the changes during the year [33] 3.3.2 Primary Industry Valuation - Presented the PE and PB data of various primary industries such as petroleum and petrochemicals, coal, etc. this week, their eight - year percentile, the values at the beginning of the year, and the changes during the year [34] 3.3.3 Equity Risk Premium of Broad - based Indices - The ERP of the CSI 300, CSI 500, and CSI 1000 increased slightly this week [35][40] 3.3.4 Consensus Earnings Growth Rate of Broad - based Indices - The expected earnings growth rate of the CSI 300 in 2025 was adjusted down to 7.45%, and in 2026 it was adjusted up to 10.46%; the expected earnings growth rate of the CSI 500 in 2025 was adjusted down to 18.57%, and in 2026 it was adjusted up to 24.33%; the expected earnings growth rate of the CSI 1000 in 2025 was adjusted down to 16.60%, and in 2026 it was adjusted up to 25.23% [41] 3.4 Liquidity and Capital Flow Tracking 3.4.1 Interest Rates and Exchange Rates - This week, the 10 - year bond yield decreased, the 1 - year bond yield decreased, and the spread widened. The US dollar index was 99.5, and the offshore RMB was 6.9062 [51] 3.4.2 Tracking of Trading - type Funds - This week, the average daily trading volume of north - bound funds decreased by 17.6 billion yuan compared to last week, and the margin trading balance decreased by 1 billion yuan compared to last week [50] 3.4.3 Tracking of Funds Flowing in through ETFs - There are 30 on - market ETFs tracking the CSI 300, 29 on - market ETFs tracking the CSI 500, 15 on - market ETFs tracking the CSI 1000, and 40 on - market ETFs tracking the CSI A500. This week, the shares of ETFs tracking the CSI 300 increased by 1.4 billion, the shares of ETFs tracking the CSI 500 increased by 0.6 billion, the shares of ETFs tracking the CSI 1000 increased by 0.76 billion, and the shares of ETFs tracking the CSI A500 decreased by 5 billion [54][60] 3.5 Tracking of Domestic Macro High - frequency Data 3.5.1 Supply Side: Tire Operating Rate Recovered after the Spring Festival - There are data on the national blast furnace operating rate, coking enterprise operating rate, domestic crude steel daily output, and tire operating rate, but specific data is not presented in the summary text [63][66] 3.5.2 Consumption Side: Crude Oil Prices Soared - The crude oil price soared to around $103.68 per barrel. The year - on - year growth rate of passenger car wholesale sales rebounded. There are also data on the transaction area of first - hand housing in 30 large and medium - sized cities, the transaction area of second - hand housing in 16 key cities, the land transaction area of 100 large and medium - sized cities, and the listing volume and listing price of second - hand housing nationwide, but specific data is not presented in the summary text [77] 3.5.3 Inflation Observation: Agricultural Product Prices Declined - The prices of agricultural products dropped sharply from a high level. The production material prices have not fully reflected the impact of oil prices [80]

Investment Rating - The report maintains a "Buy" rating for CITIC Bank, indicating a positive outlook for the company's stock performance [6][10]. Core Insights - CITIC Bank's 2025 annual report shows a stable performance with a 3.0% year-on-year increase in net profit attributable to shareholders, despite a slight revenue decline of 0.5% [4][6]. - The bank's non-performing loan (NPL) ratio decreased by 1 basis point to 1.15% in Q4 2025, reflecting improved asset quality [4][10]. - The report highlights a historical high in dividend payout, with a proposed cash dividend of 21.2 billion yuan, representing 31.75% of net profit [6][10]. - The bank's net interest margin for 2025 is projected to be 1.63%, stable compared to the first half of the year, supported by a decrease in funding costs [6][11]. Financial Data and Profit Forecast - Revenue and profit forecasts for CITIC Bank from 2024 to 2028 are as follows: - Total revenue is expected to grow from 212,475 million yuan in 2025 to 239,378 million yuan in 2028, with a compound annual growth rate (CAGR) of approximately 4.94% [5]. - Net profit attributable to shareholders is projected to increase from 70,618 million yuan in 2025 to 82,725 million yuan in 2028, with a CAGR of about 6.66% [5]. - The bank's return on equity (ROE) is expected to remain stable, with a slight decline from 9.49% in 2025 to 9.08% in 2028 [5]. Loan and Credit Trends - The report indicates a continued focus on corporate lending, with a significant increase in loans to the manufacturing sector and retail businesses [9][10]. - In the second half of 2025, corporate loans increased by 676 million yuan, while retail loans showed signs of recovery with an addition of 160 million yuan [6][9]. - The bank's strategy includes reducing reliance on bill financing, which has seen a significant decrease of over 2,400 million yuan year-to-date [6][9]. Asset Quality and Risk Management - The report emphasizes proactive risk management, particularly in the retail and real estate sectors, with a focus on enhancing the bank's resilience against potential risks [10]. - The NPL generation rate for 2025 is estimated at 0.93%, indicating a stable outlook for asset quality [10][12]. - The bank's real estate exposure as a percentage of total assets has decreased to 3.8%, reflecting a cautious approach to managing credit risk in this sector [12].

Group 1 - The report highlights that the A-share market has shown resilience despite a global "quasi-stagflation" trading environment, with the Shanghai Composite Index only down 4.94% since the outbreak of the conflict, compared to larger declines in the S&P 500 and European markets [2][12] - The report indicates that the current economic situation in China is less likely to experience "stagflation" compared to Western countries, as domestic inflation levels are low and the economy is not expected to face the same pressures as seen in the US and Europe [3][40] - The report emphasizes the importance of a balanced asset allocation strategy, suggesting that investors should avoid making unilateral bets and instead focus on combination management to navigate the current market conditions [3][40] Group 2 - The report notes that the energy sector has been the only one to rise amidst the recent market downturn, with oil prices exceeding $100 per barrel, which has led to increased costs for industrial production [9][10] - The report discusses the impact of geopolitical tensions in the Middle East on global oil supply, highlighting that the closure of the Strait of Hormuz has led to a significant loss of global oil capacity, which could have long-term implications for asset pricing [26][55] - The report identifies that sectors with defensive attributes, such as utilities, banks, and resource industries, have performed relatively well during the recent market volatility, while technology and small-cap growth sectors have faced larger declines [32][29]

Strategy Insights - The report emphasizes a bottom-line thinking approach, focusing on mid-term winners in the context of a globally slowing economy and potential stagflation [1] - It highlights the importance of China's new energy system and manufacturing cost advantages, maintaining an optimistic outlook for the Chinese stock market despite external turbulence [1][3] - The report suggests that the current global asset expectations are leaning towards mild stagflation, with specific attention to the performance of various asset classes [1][3] Global Economic Context - The report notes that the Iranian situation introduces significant uncertainty, impacting global energy supply and leading to a mild stagflation scenario reflected in the financial markets [3][8] - It discusses how the U.S. stock market remains relatively stable, with no immediate concerns about recession or severe stagflation, despite external pressures [3][8] Industry Configuration Strategies - Three key strategies for industry allocation are proposed: focusing on energy substitution, low volatility dividends, and industries with certain growth prospects [3][29] - The report identifies specific sectors to watch, including new energy (wind, storage, solar, electric vehicles), coal, natural gas, banking, insurance, optical modules, PCB, storage, optical fiber, semiconductor equipment, and real estate [3][29] Export Dynamics - The report indicates that while global demand may weaken due to overseas stagflation, China's export share could still increase due to rising overseas costs and China's resource advantages [22][29] - It highlights that China's exports in January-February reached 46,178 billion yuan, a year-on-year increase of 19.2%, reflecting a significant recovery in foreign trade [22][27] Asset Pricing and Market Behavior - The report discusses how the U.S. dollar has strengthened due to increased demand for safe-haven assets amid geopolitical tensions, while U.S. Treasury yields have shown volatility due to conflicting economic signals [8][15] - It notes that commodity prices are experiencing divergence, with oil prices rising significantly while industrial metals are under pressure due to weak demand and macroeconomic concerns [20][21] Focus on New Energy - The report underscores the strategic value of the new energy sector, particularly in light of rising oil prices and the need for energy security, suggesting that sectors like solar and wind energy will benefit from increased demand [38]

Investment Rating - The industry rating is "Buy" as of March 22, 2026, consistent with the previous rating [4]. Core Insights - The report highlights that net settlement remains at a high level, with cross-border capital inflow significantly supplementing M2 and base currency [12]. - In February, the arbitrage trading return rate declined rapidly, with the US dollar and RMB showing a strong dual performance. The US dollar index rose by 0.54%, influenced by reduced interest rate expectations and increased demand for safe-haven assets due to geopolitical tensions [13]. - The report indicates that the net cross-border capital inflow in February remained high, with a surplus of 247.3 billion yuan in bank customer foreign exchange payments, a year-on-year increase of 39.1 billion yuan [14]. - The willingness to settle in RMB has significantly increased, with net settlement in February reaching 383.3 billion yuan, a year-on-year increase of 431.1 billion yuan [34]. Summary by Sections Section 1: Current Observation - The report discusses the February data on bank settlement and foreign exchange payments, noting that net settlement remains high and cross-border inflows are providing significant support to M2 and base currency [12]. Section 2: Arbitrage Trading Returns - The arbitrage trading return rate has decreased, with the RMB appreciating against the US dollar by 1.34% in February, driven by strong export performance and overall increased willingness to settle [13][14]. Section 3: SDR Major Economies Tracking - The report includes tracking of major economies, noting a slight seasonal increase in unemployment rates in China and the US, and a marginal appreciation of the Japanese yen against the offshore RMB [8]. Section 4: Historical Data - Historical data on bank foreign exchange payments and settlements is provided, showing trends in surplus and deficits across various categories, including goods and services [17][35].

Investment Rating - The report maintains a "Buy" rating for CITIC Bank [6][10] Core Views - The bank's 2025 annual report shows stable performance with a 3.0% year-on-year increase in net profit attributable to shareholders, despite a slight revenue decline of 0.5% [4][6] - The fourth quarter of 2025 saw a positive revenue growth of 8.6%, indicating an improvement in the bank's operational performance [6][10] - The bank's dividend payout ratio reached a historical high of 31.75%, with a proposed cash dividend of 21.2 billion yuan, enhancing its attractiveness to investors [6][10] Financial Data and Profit Forecast - Total revenue for 2025 was 212.5 billion yuan, with a projected revenue growth of 2.73% for 2026 and 4.51% for 2027 [5] - Net profit attributable to shareholders is expected to grow from 70.6 billion yuan in 2025 to 73.6 billion yuan in 2026, reflecting a 4.19% increase [5] - The bank's return on equity (ROE) is projected to remain stable, with estimates of 9.21% for 2026 and 9.11% for 2027 [5] - The non-performing loan (NPL) ratio is expected to stabilize at around 1.15% for 2026, with a provision coverage ratio of approximately 189.89% [5] Asset Quality and Risk Management - The NPL ratio decreased by 1 basis point to 1.15% in Q4 2025, indicating improved asset quality [4][10] - The bank has proactively increased provisions for asset impairment, with a year-on-year growth of 37% in Q4 2025 [6][10] - The bank's exposure to real estate financing has decreased, with the proportion of related risks in total assets falling to 3.8% [12] Market Position and Competitive Advantage - CITIC Bank's net interest margin for 2025 is reported at 1.63%, with a stable cost of liabilities contributing to this performance [11] - The bank's strategy focuses on corporate banking and wealth management, which has helped in maintaining low-cost funding [6][10] - The bank's stock currently offers a dividend yield of approximately 4.8% for 2026, making it an attractive option for long-term investors [10]

Core Viewpoint - The rise of the US 10-year Treasury yield to 4.37% signifies the end of the era of cheap capital, fundamentally altering the investment landscape and asset pricing dynamics [1][3][14]. Group 1: Impact of Rising Yields - The bond market serves as a reliable indicator of macroeconomic conditions, reflecting true pricing of inflation expectations and capital supply and demand [3][4]. - The increase in the risk-free rate has reset the valuation framework for all assets, leading to a systematic re-evaluation of risk premiums [6][10]. - High-leverage industries, such as real estate and technology, are particularly vulnerable as rising financing costs threaten their operational viability [9][10]. Group 2: Shifts in Investment Behavior - Investors are now compelled to reassess whether the risks they are taking are justified, leading to a preference for safer, cash-generating assets [7][12]. - There is a noticeable shift in asset allocation, with institutional investors increasing bond holdings while reducing equity risk exposure [7][11]. - Cash flow-generating assets, such as those in the energy and financial sectors, are becoming more attractive in a high-interest environment [11][12]. Group 3: Market Dynamics and Valuation - The market is transitioning from a focus on growth narratives to an emphasis on current cash flows and profitability, marking a return to traditional valuation metrics [12][16]. - The disparity in market expectations is evident, with some investors betting on a return to lower rates while others prepare for prolonged high rates, increasing market volatility [13][14]. - The strong dollar and rising US Treasury yields are drawing capital back to the US, creating pressure on emerging markets and potentially leading to sovereign debt crises [13][14]. Group 4: Long-term Implications - The end of the cheap capital era necessitates a focus on asset quality and cash flow generation, as only those assets with real earning potential will thrive in the new environment [14][16]. - The current market conditions highlight the risks of relying on outdated investment strategies, emphasizing the need for adaptability and a return to fundamental analysis [16].