Report Industry Investment Rating - No industry investment rating information is provided in the report [1] Core Viewpoints of the Report - Last week (from March 16 to March 20, 2026), the median weekly return of equity ETFs was -3.11%. Among broad-based ETFs, the median return of ChiNext ETFs was 1.26%, the highest. By sector, the median return of consumer ETFs was -2.16%, the smallest decline. By theme, the median return of bank ETFs was 0.30%, the highest [1][12][16] - Last week, equity ETFs had a net redemption of 6.963 billion yuan, and the overall scale decreased by 107.687 billion yuan. Among broad-based ETFs, CSI 300 ETF had the largest net subscription of 6.526 billion yuan. By sector, large financial ETFs had the largest net subscription of 1.479 billion yuan. By theme, dividend ETFs had the largest net subscription of 1.717 billion yuan [2][27][31] - As of last Friday, the valuation quantiles of ChiNext ETFs were relatively low among broad-based ETFs; by sector, the valuation quantiles of consumer and large financial ETFs were relatively moderate; by sub-theme, the valuation quantiles of liquor and securities ETFs were relatively low. Compared with the previous week, the valuation quantiles of CSI 300 and consumer ETFs decreased significantly [3][34][43] - From Monday to Thursday last week, the margin trading balance of equity ETFs increased from 47.22 billion yuan in the previous week to 48.78 billion yuan, and the short selling volume decreased from 2.492 billion shares in the previous week to 2.417 billion shares. Among the top 10 ETFs with the highest average daily margin trading purchases and short selling volumes, securities ETFs and STAR Market ETFs had higher average daily margin trading purchases, and CSI 1000 ETFs and CSI 500 ETFs had higher average daily short selling volumes [4][44][50] - As of last Friday, Huaxia, E Fund, and Huatai-PineBridge ranked top three in the total scale of listed non-monetary ETFs. This week, 5 ETFs will be issued, including Huaxia CSI All-Share Home Appliance ETF, Penghua Hang Seng Hong Kong Stock Connect Automobile Theme ETF, Penghua CSI Hong Kong Stock Connect Information Technology Comprehensive ETF, Huabao China Securities Oil and Gas ETF, and Huatai-PineBridge CSI Hong Kong Stock Connect Medical Theme ETF [5][52][55] Summary by Relevant Catalog ETF Performance - The median weekly return of equity ETFs last week was -3.11%. The median returns of ChiNext, CSI 300, SSE 50, A500, STAR Market, CSI 1000, and CSI 500 ETFs were 1.26%, -2.17%, -2.46%, -3.16%, -3.69%, -5.21%, and -5.78% respectively. The median returns of bond, money market, cross-border, and commodity ETFs were 0.06%, 0.02%, -1.02%, and -7.93% respectively [12] - By sector, the median returns of consumer, large financial, technology, and cyclical sector ETFs among equity ETFs last week were -2.16%, -2.67%, -2.86%, and -5.39% respectively. By theme, the median returns of bank, AI, and pharmaceutical ETFs were 0.30%, -0.20%, and -1.79% respectively, showing relatively strong performance, while the median returns of resource, military, and robot ETFs were -10.41%, -6.23%, and -5.99% respectively, showing relatively weak performance [16] ETF Scale Changes and Net Subscriptions/Redeemptions - As of last Friday, the scales of equity, cross-border, and bond ETFs were 2.9042 trillion yuan, 961.9 billion yuan, and 725.3 billion yuan respectively. The scales of commodity and money market ETFs were relatively small, at 332.4 billion yuan and 173.9 billion yuan respectively. Among broad-based ETFs, the scales of CSI 300 and A500 ETFs were relatively large, at 565.4 billion yuan and 228.9 billion yuan respectively, while the scales of STAR Market, CSI 500, ChiNext, SSE 50, and CSI 1000 ETFs were relatively small, at 169.4 billion yuan, 117.1 billion yuan, 114.8 billion yuan, 77 billion yuan, and 43.6 billion yuan respectively [20] - By sector, the scale of technology sector ETFs was 490.9 billion yuan as of last Friday, followed by cyclical sector ETFs at 350.8 billion yuan. The scales of consumer and large financial ETFs were relatively small, at 195.5 billion yuan and 189.7 billion yuan respectively. By theme, the scales of chip, securities, and resource ETFs were the highest as of last Friday, at 179.4 billion yuan, 134.7 billion yuan, and 117 billion yuan respectively [25] - Last week, equity ETFs had a net redemption of 6.963 billion yuan, and the overall scale decreased by 107.687 billion yuan; money market ETFs had a net subscription of 3.018 billion yuan, and the overall scale increased by 3.033 billion yuan. Among broad-based ETFs, CSI 300 ETF had the largest net subscription of 6.526 billion yuan, and its scale decreased by 6.027 billion yuan; A500 ETF had the largest net redemption of 6.229 billion yuan, and its scale decreased by 13.825 billion yuan [27] - By sector, large financial ETFs had the largest net subscription of 1.479 billion yuan last week, and its scale decreased by 3.088 billion yuan; cyclical ETFs had the largest net redemption of 19.832 billion yuan, and its scale decreased by 51.704 billion yuan. By theme, dividend ETFs had the largest net subscription of 1.717 billion yuan last week, and its scale increased by 440 million yuan; resource ETFs had the largest net redemption of 11.516 billion yuan, and its scale decreased by 25.163 billion yuan [31] ETF Benchmark Index Valuation - As of last Friday, the price-to-earnings ratios of SSE 50, CSI 300, CSI 500, CSI 1000, ChiNext, and A500 ETFs were at the 79.52%, 84.31%, 95.87%, 93.89%, 63.09%, and 86.85% quantiles respectively, and the price-to-book ratios were at the 50.45%, 70.69%, 96.12%, 71.26%, 65.15%, and 86.38% quantiles respectively. Since December 31, 2019, the price-to-earnings and price-to-book ratios of STAR Market ETFs are currently at the 74.81% and 76.14% quantiles respectively. Compared with the previous week, the valuation quantiles of CSI 300 ETF decreased significantly [34][35] - As of last Friday, the price-to-earnings ratios of cyclical, large financial, consumer, and technology sector ETFs were at the 84.31%, 23.20%, 14.95%, and 90.50% quantiles respectively, and their price-to-book ratios were at the 91.41%, 37.74%, 16.89%, and 77.37% quantiles respectively. Compared with the previous week, the valuation quantiles of consumer ETFs decreased significantly [36] - As of last Friday, the price-to-earnings quantiles of dividend, photovoltaic, and military ETFs were relatively high, at 100.00%, 99.75%, and 95.62% respectively; the price-to-book quantiles of dividend, AI, and robot ETFs were relatively high, at 99.67%, 95.71%, and 85.55% respectively [40] ETF Margin Trading - Overall, the margin trading balance and short selling volume of equity ETFs have both increased in the past year. As of last Thursday, the margin trading balance of equity ETFs increased from 47.22 billion yuan in the previous week to 48.78 billion yuan, and the short selling volume decreased from 2.492 billion shares in the previous week to 2.417 billion shares [44] - The following table shows the top 10 equity ETFs with the highest average daily margin trading purchases from Monday to Thursday last week, among which securities ETFs and STAR Market ETFs had higher average daily margin trading purchases [45] | Fund Code | Fund Name | Type, Secondary | Average Daily Margin Trading Purchase, Billion Yuan | | --- | --- | --- | --- | | 588000.SH | STAR 50 | Scale Index | 4.54 | | 159915.SZ | ChiNext ETF E Fund | Scale Index | 3.71 | | 512880.SH | Securities ETF | Industry Index | 3.61 | | 510500.SH | 500ETF | Scale Index | 2.42 | | 510300.SH | 300ETF | Scale Index | 2.19 | | 512000.SH | Brokerage ETF | Industry Index | 2.16 | | 512170.SH | Medical ETF | Theme Index | 2.11 | | 588200.SH | STAR Chip | Theme Index | 1.55 | | 512480.SH | Semiconductor | Industry Index | 1.47 | | 512010.SH | Pharmaceutical ETF | Industry Index | 1.45 | - The following table shows the top 10 equity ETFs with the highest average daily short selling volumes from Monday to Thursday last week, among which CSI 1000 ETFs and CSI 500 ETFs had higher average daily short selling volumes [50] | Fund Code | Fund Name | Type, Secondary | Average Daily Short Selling Volume, 10,000 Lots | | --- | --- | --- | --- | | 510500.SH | 500ETF | Scale Index | 6.85 | | 512100.SH | 1000ETF | Scale Index | 6.05 | | 510300.SH | 300ETF | Scale Index | 4.82 | | 510050.SH | 50ETF | Scale Index | 3.69 | | 588000.SH | STAR 50 | Scale Index | 2.24 | | 512010.SH | Pharmaceutical ETF | Industry Index | 1.41 | | 512880.SH | Securities ETF | Industry Index | 1.31 | | 512800.SH | Bank ETF | Industry Index | 1.29 | | 563360.SH | A500 Fund | Scale Index | 1.25 | | 560010.SH | 1000 Fund | Scale Index | 1.23 | ETF Managers - As of last Friday, Huaxia Fund ranked first in the total scale of listed non-monetary ETFs, and had a relatively high management scale in multiple sub-fields such as scale index ETFs, theme, style, and strategy index ETFs, and cross-border ETFs; E Fund ranked second in the total scale of listed non-monetary ETFs, and had a relatively high management scale in scale index ETFs and cross-border ETFs; Huatai-PineBridge Fund ranked third in the total scale of listed non-monetary ETFs, and had a relatively high management scale in scale index ETFs and theme, style, and strategy index ETFs [52] - Last week, 10 ETFs were newly established, including ICBC CSI Hong Kong Stock Connect Internet ETF, Southern CSI Hong Kong Stock Connect Automobile Industry Theme ETF, Puyin ASSET Management SSE STAR Market Chip Design Theme ETF, Penghua CSI Construction Machinery Theme ETF, Industrial Securities CSI Hong Kong Stock Connect Internet ETF, Tianhong ChiNext New Energy ETF, GF CSI Animal Husbandry and Aquaculture Industry ETF, Dongcai CSI Battery Theme ETF, E Fund China Securities Hong Kong Stock Connect Technology ETF, and Huaan China Securities Oil and Gas ETF. This week, 5 ETFs will be issued, including Huaxia CSI All-Share Home Appliance ETF, Penghua Hang Seng Hong Kong Stock Connect Automobile Theme ETF, Penghua CSI Hong Kong Stock Connect Information Technology Comprehensive ETF, Huabao China Securities Oil and Gas ETF, and Huatai-PineBridge CSI Hong Kong Stock Connect Medical Theme ETF [55]

Market Review - The global stock markets mostly declined this week, with A-shares and European markets experiencing the largest drops. The geopolitical situation between the US and Iran remains uncertain, leading to increased risks of economic stagflation and volatility in oil prices and inflation. The Federal Reserve's decision to maintain interest rates in March, coupled with a hawkish statement, has raised concerns about a tightening dollar, suppressing market risk appetite. Consequently, A-shares have seen a general pullback, with trading volumes continuing to shrink, indicating a cooling of investor sentiment in a rapidly rotating sector environment. Defensive sectors such as food and beverage, banking, and high-growth areas like storage and AI computing have performed relatively better [1][2][3]. Market Outlook - The report suggests focusing on banking and other defensive sectors while awaiting more "stabilizing market" policies. The ongoing US-Iran conflict and delayed expectations for overseas interest rate cuts are likely to continue suppressing global risk appetite. In contrast, the domestic policy environment appears more certain, with regulators signaling a commitment to stabilize the capital market. Anticipated policies include the establishment of a "stabilization fund," optimization of structural tools for the capital market, and measures to encourage medium- to long-term capital inflows [2][4]. Geopolitical Risks - The trajectory of geopolitical events remains highly uncertain, and the market must remain vigilant regarding extreme tail risks associated with oil supply disruptions. The recent three-week period of the US-Iran conflict has seen global stock indices decline, but the drops have been less than 10%, indicating a more optimistic pricing of the conflict compared to the significant declines seen during the 2022 Russia-Ukraine conflict. If oil shipping disruptions persist or the conflict spreads, there could be further spikes in oil prices and supply chain interruptions, reminiscent of the oil crises in the 1970s [3][4]. Domestic Policy Environment - The domestic regulatory framework continues to emphasize stabilizing the capital market and promoting medium- to long-term capital inflows. The People's Bank of China has indicated a commitment to maintaining the stability of financial markets, with potential policies including a "stabilization fund" mechanism supported by liquidity from the central bank, optimization of structural monetary policy tools, and enhancements to the A-share investment environment [4][5]. Monetary Policy and Economic Outlook - Input-driven inflation is expected to have limited constraints on China's monetary policy, with a continued focus on maintaining a loose liquidity environment. The central bank aims to promote stable economic growth and reasonable price recovery, with a commitment to using various monetary policy tools to ensure ample liquidity. Fiscal policies are also expected to become more proactive, focusing on improving public services and increasing government investment in livelihood projects, which could help enhance consumer expectations and create a positive inflation-wage cycle [5][6]. Sector Allocation - The report recommends a defensive strategy, focusing on sectors such as banking, public utilities, and essential consumer goods. Additionally, there is an emphasis on energy independence through investments in new energy and electricity sectors, as well as high-growth areas like AI computing and energy storage [5][6].

Core Viewpoint - The ongoing geopolitical conflicts create significant uncertainty regarding their duration and evolution, leading to persistent disturbances in global risk assets, with expectations of high volatility in global equity markets. However, the A-share market is likely to experience limited downside, with a probable oscillation and structural rotation to absorb external pressures [1]. Group 1: A-share Market Performance - During the week of March 16-20, 2026, the A-share market experienced a volatile adjustment, with the overall A-index declining by 4.13%. Only the ChiNext index saw an increase of 1.26%, while the North Star 50 and CSI 1000 indices fell by over 5%, and other indices dropped by more than 2% [2]. - In terms of market style, large-cap stocks outperformed, while all five major style indices retreated, with the cyclical style dropping over 7% and stability, growth, and consumer styles declining by more than 2% [2]. - Most primary industry sectors saw declines, with only the communication and banking sectors rising, while non-ferrous metals, basic chemicals, and steel experienced the largest drops [2]. Group 2: Fund Flows - The A-share market's trading activity slightly cooled, with an average daily turnover of 22,111 billion yuan, down by 2,875.9 billion yuan from the previous week [3]. - The margin financing balance stood at 26,501.11 billion yuan, a decrease of 15.89 billion yuan compared to the previous week [3]. - A total of 30 new equity funds were established, with an issuance volume of 21.388 billion units, an increase of 1.564 billion units from the previous week [3]. - From March 12 to 18, global funds saw a net outflow of 12.78 million USD, improving from a previous outflow of 36.15 million USD, while overseas funds had a net outflow of 5.32 million USD, down from 10.35 million USD [3]. Group 3: Valuation Changes - The PE (TTM) valuation of the overall A-index decreased by 3.16% to 22.59 times, placing it at the 91.20 percentile since 2010. The PB (LF) valuation fell by 3.39% to 1.86 times, at the 51.45 percentile since 2010 [4]. - The bond-equity spread for the overall A-share market is 2.5959%, situated near the three-year rolling average (3.316%) minus 1.39 standard deviations, at the 45.88 percentile since 2010 [4]. Group 4: Investment Outlook - The ongoing escalation of the US-Iran conflict is expected to drive strong demand for energy and alternatives, with a focus on sectors such as coal chemical, coal, shipping ports, and oil and gas. The recent significant pullback in non-ferrous metals warrants attention for valuation recovery and cost-effectiveness [6]. - The market is shifting towards defensive assets, with a focus on financials, public utilities, and transportation [6]. - The technology innovation sector is highlighted, particularly in areas such as power equipment, new energy, energy storage, storage, semiconductors, computing power, and communication devices. Additionally, the consumer sector is noted for its historically low valuations, with certain sub-sectors like agriculture, food and beverage, and home appliances showing potential for recovery [6].

Group 1 - The report highlights that the intensity of AI investment in the US is high, but the sustainability of marginal returns is questionable. There is a possibility of external pressure being transferred to maintain the expansion path until a systemic correction occurs in the related bubble [2][3] - The process of maintaining AI valuations in the US may create a siphoning effect on global sovereign wealth, exacerbating the fragility of the global financial system. If energy prices continue to rise, the probability of the Federal Reserve restarting the interest rate hike cycle may increase [3] - In the context of rising global fragility, RMB assets may have relatively outstanding allocation value. It is suggested to focus on the two main lines of the RMB's phase appreciation and rising energy prices, and to conduct structural adjustments in the Chinese market on an annual basis [3] Group 2 - The report expresses a mid-term positive outlook on coal, new energy, agriculture, electricity, oil, and US capital goods related to inflation [3] - For the long term, the report favors insurance, central state-owned enterprises, anti-involution, and Chinese internet companies [3] Group 3 - The report indicates that the Federal Reserve maintains a positive outlook on the resilience of the US economy, raising the GDP growth forecast for 2026 from 2.3% to 2.4%. However, inflation concerns have significantly increased, with the overall PCE inflation forecast for 2026 raised from 2.4% to 2.7% [8][10] - The report notes that the US AI infrastructure expansion is driving capital expenditure growth, but the commercialization process is relatively lagging, raising doubts about the sustainability of marginal capital returns [9]

Core Insights - The report indicates that the current market adjustment is considered a healthy one, with expectations for a transition into a profit-driven bull market in the second phase after the adjustment period [3][6][30]. Market Perspectives - The ongoing geopolitical tensions, particularly the unresolved US-Iran conflict, continue to exert pressure on market sentiment, with the March FOMC meeting signaling a hawkish stance from the Federal Reserve due to inflation concerns [4][16]. - Economic data for January and February showed better-than-expected performance, with retail sales and fixed asset investment rebounding, but the growth is attributed to seasonal effects from the late Spring Festival [5][18][21]. Industry Allocation - During the healthy adjustment period, sectors benefiting from price increases and dividend assets are expected to outperform. Key sectors include banking, utilities, and industries with price catalysts such as chemicals and machinery [3][39]. - The report outlines a framework for identifying when the second phase of growth for the growth style will begin, emphasizing the need for a reduction in external risk factors and a confirmation of high performance in growth sectors [6][28][30]. Configuration Hotspots - The report suggests that the growth style is currently in its first healthy adjustment phase, with expectations for a second phase to begin around mid-April, contingent on specific market indicators being met [6][29][31]. - Recent strong performances in the communication sector and representative growth stocks are viewed as part of a rebound process within the adjustment phase, with the potential for a final dip before a new upward trend [7][34][35].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In late Q1, institutional behavior in the bond market has changed. The allocation disk has strong buying power, while funds and wealth management products are relatively weak. The "fixed - income +" products are facing significant redemption pressure, and the bond market strategy focuses on short - term 3 - 5y term spread compression and long - term opportunities after over - decline [1][3][4]. 3. Summary by Directory 3.1 First Quarter: Characteristics of Bond Buying by Various Institutions 3.1.1 Overall Bond Buying by Institutions in Q1: Strong Allocation Disk, Weak Funds and Wealth Management - **Allocation Disk**: Large banks significantly increased net purchases of government bonds over 5y. Small and medium - sized banks increased net purchases of 30y government bonds and 20y local bonds. Insurance companies, driven by dividend - paying insurance, included 3 - 5y Tier 2 and perpetual bonds in their top five holdings [13]. - **Trading Disk**: Securities firms' net purchases were in line with seasonality, with a significant reduction in duration, more allocation to 1y interest rates and Tier 2 and perpetual bonds, and reduction of ultra - long bonds. Funds still focused on credit coupons, increasing the proportion of 1 - 5y credit and Tier 2 and perpetual bonds [13]. - **Bank Wealth Management**: In Q1, due to the priority of "deposit rush" tasks in the banking system, the scale growth of bank wealth management was weak, and the net purchases of direct investment and entrusted investment in the secondary market both increased less. In terms of structure, direct investment shortened the term, and entrusted investment increased the exploration of spreads in policy - financial bonds [14]. 3.1.2 By Institution: Insurance Enters the Allocation Window at the End of the Quarter, and Wealth Management Will Follow in Q2 - **Banks**: They have a strong demand for long - term bonds. At the end of the quarter, the pressure to realize profits is not large, and there is still a need for bond allocation in the future [18]. - **Insurance**: The "good start" funds entered the allocation window in March, and the bond - allocation progress is slower than last year, with potential for further allocation. Attention should be paid to the spread compression opportunities of ultra - long local bonds in Q2 [23]. - **Funds**: From the end of Q1 to Q2, there is usually a seasonal recovery in bond - buying power. In Q2, it is conducive to the spread compression of policy - financial bonds [25][28]. - **Wealth Management**: It is expected to see scale growth and a peak season for bond allocation in Q2. Attention can be paid to the spread compression opportunities of Tier 2 and perpetual bonds [29]. - **Securities Firms**: They continue to short - sell 30y government bonds and start to buy 50y government bonds [30]. 3.2 "Fixed - Income +" Redemption: How Big Is the Pressure? 3.2.1 Recent "Fixed - Income +" Redemption: Greater Pressure than in November 2025 and January 2026, Close to the Russia - Ukraine Conflict Period - In March, the equity market declined, and the Shanghai Composite Index fell below 4000 points, leading to a significant increase in the redemption pressure of "fixed - income +" funds. The redemption pressure is stronger than in the previous two rounds and is close to that during the Russia - Ukraine conflict [34][41]. 3.2.2 When Will the Redemption Ease? Pay Attention to the Policy - making Layer's Expectations for Market Stability and the Use of Tools - The central bank recently held a party committee meeting, showing an earlier demand to maintain the stable operation of the stock market. Looking back at the situation after the Russia - Ukraine conflict in 2022, relevant meetings and policies helped stabilize the market. The central bank has innovated a series of financial policies to support the stable operation of the capital market. In the future, attention should be paid to the changes in the "claims on other financial corporations" item [43][44][47]. 3.3 Bond Market Strategy: Focus on 3 - 5y Term Spread Compression in the Short - Term and Seize Opportunities after Over - Decline in the Long - Term 3.3.1 This Week: α Spread Compression for Bonds within 5y - This week, the short - term bonds performed well. The certificate of deposit (CD) yield dropped close to 1.5%, driving the α spread compression of bonds within 5y [48]. 3.3.2 Short - Term: Limited Downward Space for 1y Bonds, Potential for Continuous Compression of 3 - 5y Spreads - The space for 1y short - term leverage to capture interest rate spreads has been extremely compressed, and the focus of bond selection may shift to 3 - 5y bonds. CDs may fluctuate at a low level of 1.5 - 1.55% in the short term, and attention should be paid to the marginal changes in funds at the end of the quarter [51][56]. 3.3.3 Long - Term: 10y Government Bonds to Fluctuate between 1.8% - 1.85%, 30y Government Bonds' Sentiment to Stabilize, Pay Attention to Over - Decline Recovery - **10y Government Bonds**: It is expected to fluctuate in a narrow range of 1.8% - 1.85%. It is recommended to hold existing assets and gradually increase positions for incremental funds if the yield continues to rise. - **30y Government Bonds**: The core fluctuation range of the 30 - 10y active bond spread may be 40 - 50bp. Traders can pay attention to trading opportunities when the spread widens to over 50bp, and allocators can gradually enter the market when the 30y government bond yield rises above 2.3%. Attention can also be paid to the spread - mining value of 4 - 5y China Development Bank bonds, 10y China Development Bank bonds, and 20y local bonds [57][60][61]. 3.4 Interest - Rate Bond Market Review: CDs Hit a New Low, and the Yield Curve Steepened - **Funding**: The central bank's open - market operations (OMO) had a net injection, and the funding situation was balanced and loose [76]. - **Primary Issuance**: The net financing of government bonds and local bonds increased, while that of policy - financial bonds and inter - bank CDs decreased [80]. - **Benchmark Changes**: The term spreads of government bonds and China Development Bank bonds both widened [86].

Group 1: Currency and Market Trends - As of the end of January 2026, Hong Kong's RMB deposits reached 993.88 billion CNY, a year-on-year increase of 0.7% and a month-on-month increase of 3.5%[5] - The average USD index for February was 97.44, down 0.79% from January, while it rose 0.54% by the end of February[8] - The USDCNY and USDCNH rates at the end of February were 6.8559 and 6.8612, respectively, reflecting increases of 1.33% and 1.40% compared to the end of January[10] Group 2: Interest Rates and Monetary Policy - The average CNH HIBOR for February was 1.37%, 1.65%, and 1.72% for overnight, 1-month, and 3-month rates, respectively, showing declines of 25.7 BP, 16.1 BP, and 10.2 BP from January[18] - The SHIBOR rates for February averaged 1.33%, 1.55%, and 1.58%, with slight decreases of 0.8 BP, 1.0 BP, and 1.7 BP from January[20] - The People's Bank of China announced a reduction in the foreign exchange risk reserve ratio for forward sales from 20% to 0% starting March 2, 2026, supporting the RMB's strength[10] Group 3: Bond Market Activity - In February, the issuance of offshore RMB bonds totaled 943.6 billion CNY, an increase of 48.1% month-on-month and 21.4% year-on-year, despite a decrease in the number of bonds issued[32] - The total custody scale of foreign institutions in the interbank bond market was 3.35 trillion CNY, a decrease of 3.11% from the previous month[36] - The "Northbound Bond Connect" trading volume in January was 9.425 trillion CNY, reflecting a significant increase of 47.4% month-on-month[36]

Group 1: Global Asset Pricing Assumptions - The report identifies that global assets reflect liquidity shocks, with the Russell 2000 and CSI 200 indices showing declines of 8.2% and 8.3% respectively since the first trading day of March[12] - Concerns about long-term high oil prices are evident, with Brent crude oil futures rising 8.77% to $112.19 per barrel, prompting fears of sustained high pricing[19] - The U.S. PPI data for February exceeded expectations, with a core PPI month-on-month increase of 0.5% and a year-on-year increase of 3.9%, reinforcing constraints on interest rate cuts[12] Group 2: Economic Indicators and Forecasts - The report estimates March's actual GDP year-on-year growth at 4.78% and nominal GDP at 5.99%, with first-quarter actual and nominal GDP expected at 5.06% and 5.48% respectively[12] - The CPI is projected to show slight positive month-on-month growth, while the PPI is expected to exceed 0.6% month-on-month[12] - The report highlights a significant increase in the probability of a 25 basis point rate hike in September to 6.1% as of March 20, indicating a shift in market expectations[22] Group 3: Market Trends and Performance - The MSCI developed markets index fell by 2.1%, while emerging markets saw a slight decline of 0.1%[17] - The S&P 500, NASDAQ, and Dow Jones indices recorded declines of 2.07%, 2.11%, and 1.90% respectively, reflecting a cautious market sentiment amid geopolitical tensions[17] - The report notes that the A-share market showed resilience, with the ChiNext index rising against the trend of declines in other markets[16] Group 4: Commodity and Currency Movements - Gold prices fell by 9.56% to approximately $4,562.55 per ounce, while silver dropped 13.53% to $72.37 per ounce, indicating a significant market reaction to rising interest rates[19] - The U.S. dollar index fluctuated, closing at 99.51, while the euro and pound showed signs of appreciation against the dollar[22] - The report indicates that the copper price fell by 7.1%, averaging $11,834.50 per ton, reflecting a broader trend of declining industrial metals[21]

Investment Rating - The investment rating for Ping An Bank is "Neutral" [6] Core Views - The company's revenue and profit both declined in 2025, with operating income at 131.4 billion yuan, down 10.4% year-on-year, and net profit attributable to shareholders at 42.6 billion yuan, down 4.2% year-on-year [1][2] - The average return on equity (ROE) for 2025 was 9.2%, a decrease of 0.9 percentage points compared to the previous year [1] - Total assets grew by 2.7% year-on-year to 5.93 trillion yuan, with retail assets under management (AUM) increasing by 1.1% to 4.24 trillion yuan [1][3] - The non-performing loan (NPL) ratio improved slightly to 1.05%, down 0.01 percentage points from the beginning of the year, indicating reduced asset quality pressure [3] Financial Performance Summary - In 2025, the average net interest margin was 1.78%, a decrease of 9 basis points year-on-year, primarily due to falling market interest rates and loan structure adjustments [2] - Non-interest income also saw a decline, with net fee income down 0.9% and other non-interest income down 33.0% due to market fluctuations affecting investment returns [2] - The company maintained a stable dividend payout ratio of 27% [1] Asset Quality Indicators - The NPL generation rate for 2025 was 2.19%, down 0.18 percentage points year-on-year, marking a continuous decline for two years [3] - The provision coverage ratio was 221%, a decrease of 30 percentage points from the beginning of the year, indicating some pressure on provisioning despite improved asset quality [3] Earnings Forecast - The earnings forecast for 2026-2027 projects net profit attributable to shareholders at 42.9 billion yuan and 43.1 billion yuan, respectively, with a slight growth rate of 0.6% for 2028 [3][7] - The diluted earnings per share (EPS) are expected to be 2.08 yuan for 2026, 2.09 yuan for 2027, and 2.11 yuan for 2028 [3][7] - The current price-to-earnings (PE) ratio is projected at 5.2 for 2026 and 5.1 for 2027 and 2028, while the price-to-book (PB) ratio is expected to be 0.44 for 2026 and decrease to 0.39 by 2028 [3][7]

Investment Rating - The investment rating for the company is "Outperform the Market" [5] Core Views - The company's 2025 revenue slightly decreased by 0.5% year-on-year to 212.5 billion yuan, while net profit increased by 3.0% year-on-year to 70.6 billion yuan, indicating stable performance despite a decline in net interest margin [1][3] - The total assets of the company reached 10.13 trillion yuan at the end of 2025, growing by 6.3% year-on-year, with a stable growth rate in loans and deposits [1] - The average net interest margin for 2025 was 1.63%, down 14 basis points year-on-year, primarily due to lower loan rates [2] - The company's asset quality remained stable, with a non-performing loan ratio of 1.15% at the end of 2025, slightly improved from the beginning of the year [2] Financial Performance Summary - Revenue for 2025 was 212.5 billion yuan, a decrease of 0.5% from 2024, while net profit was 70.6 billion yuan, an increase of 3.0% [4] - The diluted EPS for 2026-2028 is projected to be 1.24, 1.28, and 1.31 yuan respectively, with corresponding PE ratios of 6.4, 6.2, and 6.1 [3][4] - The dividend payout ratio for 2025 increased to 32%, up by 1.25 percentage points from the previous year [1] Asset Quality and Capital Adequacy - The company maintained a core Tier 1 capital adequacy ratio of 9.48% at the end of 2025, indicating manageable capital pressure [1] - The provision coverage ratio was 204% at the end of 2025, down 5 percentage points from the beginning of the year, reflecting a stable asset quality [2][6]