Investment Rating - The report rates the defense and military industry as "Outperforming the Market" [2] Core Views - The global geopolitical situation remains tense, with ongoing conflicts such as the Russia-Ukraine war and rising risks in the Middle East, leading to an intensified arms race and increased focus on military construction [4][38] - The defense industry is expected to see a recovery in demand as the "14th Five-Year Plan" approaches its final year, with long-term growth certainty supported by clear development goals for 2035 and 2050 [4] - The upcoming military parade on September 3 will showcase both traditional main battle equipment and new combat forces, highlighting advancements in military capabilities [3][40] Summary by Sections Market Review - The defense and military index rose by 6.90% last week, outperforming major indices such as the Shanghai Composite and Shenzhen Component [12] - The current PE (TTM) for the defense and military sector is 79.92 times, with sub-sectors showing varied valuations: aerospace equipment at 143.52 times, aviation equipment at 69.14 times, ground weapons at 174.36 times, naval equipment at 50.76 times, and military electronics at 102.36 times [20][21] Key Recommendations - Recommended companies include: 1. Downstream manufacturers: Hongdu Aviation, AVIC Shenyang Aircraft, AVIC Xi'an Aircraft, and AVIC Helicopter [4] 2. Military new technologies: Lianchuang Optoelectronics, Guangqi Technology, and Zhongjian Technology [4] 3. Underwater equipment: Hailanxin, Yaxing Anchor Chain, and Zhongke Haixun [4] 4. Missile industry chain: Feilihua, Guoke Military Industry, and Zhongbing Hongjian [4] 5. Military titanium materials: Western Superconducting [4] 6. Electronic components: Hongyuan Electronics and Aerospace Electronics [4] 7. Military trade direction: Zhongwu Drone [4] Industry Dynamics - Recent policies related to deep-sea technology indicate significant development potential, particularly for specialized equipment like UUVs, supported by top-level planning [3] - The military trade market is expanding, with recent announcements of procurement from Pakistan for Chinese fighter jets, indicating a growing opportunity in military exports [39]

Group 1 - The market performance this week exceeded expectations, driven by factors such as increased interest rate cut expectations from the Federal Reserve, appreciation of the RMB, stabilization of military conflicts in the Middle East, and anticipated visits from Trump to China [1] - Incremental capital sources include a marginal recovery in newly issued active equity public funds, rapid follow-up from leveraged funds, and a potential acceleration of insurance capital entering the market since mid-June [1] - The market's future performance will be dominated by capital and valuation, with a bullish long-term outlook for the index, although short-term fluctuations are expected rather than a continuous surge [1] Group 2 - In terms of industry allocation, a better strategy is to position at low levels and utilize odds thinking, with ongoing high-low switching being a key market signal [2] - The sectors that have shown relative underperformance since March 2020 but have seen marginally improved profit expectations recently are worth attention, including semiconductors, solid-state batteries, power grid equipment, industrial metals, and beer [2] - Caution is advised regarding short-term volatility risks in the banking sector as capital accelerates and the cost-effectiveness of stock-bond spreads decreases [2]

Market Review - The global stock market risk appetite has significantly improved due to the rapid de-escalation of the Middle East situation and the growing expectations of interest rate cuts overseas, with the S&P 500 and Nasdaq indices reaching all-time highs. The A-share index has strengthened, driven by the large financial sector, with the Shanghai Composite Index breaking through its year-to-date high after three consecutive days of gains. Active theme investments have emerged, particularly in military, non-bank financials, and stablecoin concepts. Major A-share indices have generally risen, with the North Star 50, micro-cap indices, ChiNext, and CSI 2000 indices leading the gains, while the dividend index declined. In commodities, international oil prices and gold have significantly retreated, and the US dollar index continues to decline, with a year-to-date drop exceeding 10%, while the offshore RMB to USD exchange rate has risen to around 7.15 [1][2]. Market Outlook - The global space for interest rate cuts has reopened, and the A-share market is expected to continue its "steady improvement." Despite significant internal divisions within the Federal Reserve, the market has begun pricing in rate cuts due to the easing of geopolitical risks and falling oil prices. Domestically, the A-share index has gradually risen due to the continuous inflow of medium- to long-term funds. The recent increase in trading volume and improved profitability in the A-share market have boosted investor risk appetite, reopening the upper range of the market's fluctuation center. Looking ahead, the constraints of exchange rates on China's monetary policy have significantly weakened, and the domestic policy of "stabilizing growth" requires a loose monetary environment. The reopening of domestic and foreign interest rate cut spaces will help elevate A-share valuations. Key areas of focus for the market include: balanced industry allocation with a focus on non-ferrous metals, military industry, AI computing power, and AI applications. Thematic investments should pay attention to solid-state batteries, stablecoins, and self-controllable technologies [2]. Overseas Economic Conditions - The expectation of interest rate cuts by the Federal Reserve has increased, with the probability of three rate cuts in the second half of the year rising. The actual GDP of the US in the first quarter was unexpectedly revised down to -0.5%, with personal consumption expenditure, which accounts for about 70% of the US economy, only growing by 0.5%. This has led to a downward adjustment in its contribution to GDP by approximately 0.3 percentage points, primarily due to a decline in service consumption. Consumer confidence in the US has significantly declined this year, raising concerns about the impact of tariffs on US economic data. Recent dovish signals from Federal Reserve officials suggest that if inflation remains moderate, they may support a rate cut in July. Despite significant internal divisions reflected in the June dot plot, the market has begun to price in rate cuts, leading to declines in the US dollar index and Treasury yields, while US stocks have risen. According to CME FedWatch, market expectations for the number of rate cuts by the Federal Reserve this year have increased from two to three [5]. Domestic Economic Conditions - The weak dollar expectation is conducive to global capital flowing into emerging markets, with A-shares benefiting from domestic and foreign liquidity easing. In early May, the Hong Kong dollar triggered the strong-side Convertibility Undertaking multiple times, but within a month, it transitioned from a strong-side to a weak-side guarantee, indicating tightening liquidity expectations for the Hong Kong dollar, which may exert pressure on the Hong Kong stock market. However, this is expected to be a temporary impact. Looking ahead, the weak dollar driven by expectations of Federal Reserve rate cuts is likely to continue, further reducing the constraints of exchange rates on China's monetary policy. In the second half of the year, the impact of tariffs on domestic exports may gradually become apparent, while the focus of domestic policy remains on "stabilizing growth," necessitating a loose monetary environment. The reopening of domestic and foreign interest rate cut spaces, along with ample liquidity, is expected to directly promote the elevation of A-share valuations [5]. Trading Volume and Market Sentiment - The increase in trading volume and profitability has helped boost risk appetite, with the A-share index center expected to rise in July. Year-to-date, medium- to long-term funds have continuously flowed into A-shares, with net purchases by social security, insurance, and annuity funds exceeding 200 billion yuan, contributing to a virtuous cycle of "reporting increases—funds entering—market stability." This week, the daily trading volume of A-shares has repeatedly exceeded 1.6 trillion yuan, with no significant increase in the issuance of equity funds and ETF subscriptions. Meanwhile, financing funds have net purchased for four consecutive trading days (from June 23 to June 26), and after the Shanghai Composite Index effectively broke through 3,400 points, the financing balance has further increased, reflecting an improvement in market risk appetite, which is conducive to further elevating the A-share index center in July [5]. Fundamental Analysis - From a fundamental perspective, the impact of tariffs on corporate profits is gradually becoming apparent, and the marginal weakening of the real estate market is expected to delay the upward trend in A-share earnings. In May, the year-on-year decline in industrial enterprises above designated size was -9.1%, a significant drop from April's 3%, with declines in volume, price, and profit margins. The PPI in May fell by 3.3% year-on-year, remaining in negative territory for 32 consecutive months. Historical experience shows a strong correlation between PPI and non-financial A-share earnings; if PPI continues to weaken, it may interrupt the brief earnings recovery seen in A-shares in the first quarter. On the other hand, the weak fundamental elasticity of A-shares suggests that they are more likely to experience a gradual elevation of the fluctuation center amid volatility [5]. Valuation and Risk Premium - The overall PE (TTM) of A-shares and the PE (TTM) excluding financials and oil & gas sectors are critical indicators for assessing market valuation. The latest valuation metrics for major A-share industries, including PE (TTM) and PB (LF), provide insights into the current market conditions and potential investment opportunities [38][40].

Investment Rating - The report maintains an "Outperform" rating for the defense and military industry [5]. Core Viewpoints - The upcoming military parade on September 3 is expected to showcase the latest advancements in military capabilities, including traditional and new combat forces, reflecting China's strong ability to adapt to technological developments and evolving warfare [3][46]. - The defense and military index has shown strong performance, with a 6.90% increase from June 23 to June 27, outperforming the Shanghai and Shenzhen 300 index by 4.95 percentage points [3][12]. - The report highlights a strong demand recovery expected in the military industry by 2025, driven by multiple catalysts such as the "14th Five-Year Plan" and the "Centenary of the Army" goals, suggesting significant growth in both domestic and foreign demand [4][47]. Summary by Sections 1. Weekly Market Review - The military industry index (801740) increased by 6.90% during the week of June 23-27, while the Shanghai and Shenzhen 300 index rose by 1.95%, ranking second among 31 first-level industries [12][17]. - The military industry index has risen by 8.28% since 2025, while the Shanghai and Shenzhen 300 index has decreased by 0.33%, indicating a relative outperformance of 8.61 percentage points [19]. - The aviation sector showed the most significant gains, with notable increases in specific stocks such as Zhimin Da and Hangfa Technology, which rose by 19.62% and 18.91%, respectively [23]. 2. Investment Opportunities - The report recommends focusing on three main lines of investment: domestic trade, foreign trade, and self-sufficiency [47]. - For domestic trade, suggested companies include Tianqin Equipment, Bai'ao Intelligent, and Gaode Infrared [47]. - In the foreign trade sector, companies like Guangdong Hongda and Aerospace Rainbow are highlighted [48]. - For self-sufficiency, companies involved in commercial engines and nuclear fusion, such as Hangyu Technology and Guoguang Electric, are recommended [51]. 3. Funding and Valuation - The report notes a slight increase in passive fund sizes and leverage funds, indicating a positive outlook for the military sector's funding environment [30][36]. - As of June 27, the military industry index's price-to-earnings ratio (TTM) stands at 86.67 times, suggesting a high configuration value given the expected recovery in the industry by 2025 [47][37]. - The report emphasizes that most companies in the military sector are expected to have valuations below 30 times by 2026, indicating potential for performance improvement [41].

Core Insights - The recent surge in U.S. stock markets, particularly the NASDAQ and S&P 500 reaching all-time highs, is attributed not only to technology giants but also to broader sector participation, indicating potential for further gains throughout the summer [1][3]. Market Trends - Initially, U.S. stocks faced significant declines due to tariff concerns, with technology stocks leading the downturn. However, as fears of economic recession eased and trade relations improved, a strong rebound occurred, expanding beyond the tech sector to include financial, industrial, and utility sectors [3][4]. - Indicators show an expanding market participation, with the number of S&P 500 stocks closing above their 50-day moving average returning to levels seen during the 2016 election period, suggesting a strengthening technical outlook [3]. - The ratio of advancing to declining stocks reached a new high, further indicating broader market engagement [3]. Investment Strategies - Investors are increasingly diversifying their portfolios beyond technology stocks, with a focus on sectors previously overlooked. This shift is partly driven by concerns of missing out on market gains (FOMO trading) as tech valuations rise [4]. - Some professional investors are strategically reallocating their investments towards defense, finance, and international blue-chip stocks, seeking to reduce reliance on a single sector [4]. Sector Performance - Despite the overall market rally, small-cap stocks continue to lag behind major indices. Analysts suggest that a significant shift in investor risk appetite is necessary for small-cap stocks to catch up [6]. - Optimistic views exist regarding small-cap stocks, particularly local bank stocks, which are expected to benefit from lower financing costs due to potential Federal Reserve rate cuts and less exposure to tariff impacts [6]. Technology Sector Outlook - While other sectors are beginning to catch up, the dominance of technology giants remains strong in the short term, with AI optimism continuing to be a key theme supporting high valuations in the tech sector [5].

Group 1 - Rare earth elements are essential for modern technology, including smartphones, electric vehicles, and military equipment, making them crucial for both economic and national security [1] - China controls approximately 37% of global rare earth reserves and dominates 80% of processing capacity, particularly in heavy rare earth refining technology [2][5] - In April 2025, China announced strict export controls on rare earth elements, transitioning from a quota system to a more stringent licensing requirement for each export batch [2][5] Group 2 - The Chinese government aims to safeguard national security and public interest through these export controls, as rare earth elements are vital for sensitive military and industrial applications [5] - Following the announcement, rare earth prices surged dramatically, with dysprosium oxide reaching $850 per kilogram and terbium exceeding $3000, reflecting a price increase of over 210% [5] - The U.S. defense sector, heavily reliant on rare earths, expressed significant concern over potential supply disruptions affecting high-tech and military industries [5][6] Group 3 - In response to China's actions, the U.S. government declared a "national emergency" regarding its dependence on critical minerals and initiated efforts to boost domestic rare earth mining [6][8] - The U.S. is attempting to form a rare earth alliance with allies like Japan and Australia to reduce reliance on China, but faces significant challenges in matching China's processing capabilities [8][9] - The geopolitical implications of the rare earth situation highlight the ongoing U.S.-China rivalry, with both nations leveraging their resources in the tech and military sectors [9][11] Group 4 - Recent U.S.-China trade talks indicate a desire to avoid a complete breakdown in relations, yet the rare earth issue remains a contentious topic [11] - The long-term outlook suggests that the rare earth dilemma could lead to a reshaping of global supply chains, as countries seek alternative sources to mitigate dependence on China [11]

投资策略 | 定期报告 攻势未歇，蓄力再攀 策略周报 20250629 研究结论 ⚫ 利率未变，心弦已动 美联储主席表态维持"按兵不动"：美联储主席鲍威尔出席国会参众两院的半年度 货币政策听证会，重申在经济数据未明朗前不会贸然降息，暗示政策调整窗口或在 9 月，而 7 月按兵不动旨在争取时间评估风险。 市场降息预期边际升温：虽然鲍威尔表态只是暗示了政策调整的窗口期，但市场已 经开始预计 9 月降息，有交易员预计美联储将于 9 月开始降息，增加了美联储将在 2025 年降息 3 次的押注。另一方面，本周多位美联储官员也释放了鸽派信号，比如 监管副主席鲍曼和美联储理事沃勒。 全球市场对降息升温反应积极：本周全球主要市场普遍上涨，日经上涨 4.55%，纳 斯达克指数上涨 4.25%，恒生指数上涨 3.2%，我们认为全球市场本周上涨是因为风 险偏好受降息预期升温的影响，正在提升。 ⚫ 下周是加仓点：市场短暂整理后有望继续进攻 A 股市场风险偏好回升，但仍有犹豫：本周市场风险偏好明显回升，上证指数涨 1.91%，并突破前期压制许久的 3400 点位，但和海外市场相比，仍然有明显的犹 豫，周四周五回踩明显。我们认为本周一 ...

Core Viewpoint - The article discusses the escalating trade tensions between the United States and China, highlighting China's firm opposition to U.S. tariffs and the broader implications for global trade dynamics [1][3]. Group 1: U.S. Tariff Strategy - Trump's "reciprocal tariffs" are characterized as a gamble, with a sudden increase of 10% tariffs on all trade partners and a 34% tariff on Chinese goods, aiming to reshape global trade rules through unilateral actions [4]. - The U.S. strategy involves a "divide and conquer" approach, attempting to isolate trade partners and force them into unequal agreements, as evidenced by the announcement of potential agreements with select countries while sidelining others [4][6]. - The European Union faces a dilemma, with leaders warning against accepting unequal agreements while preparing for potential high tariffs [4]. Group 2: China’s Response and Strategy - China has established a counter-strategy, including significant price reductions in semiconductor manufacturing and strengthening regional trade agreements, such as the China-ASEAN Free Trade Area [9]. - The Chinese government emphasizes its control over strategic resources, particularly rare earth elements, which are crucial for U.S. military applications, indicating a strategic leverage point in the trade conflict [7][11]. - China's response mechanisms have evolved, with quicker reaction times and a more sophisticated array of countermeasures, including tariffs and legal actions through the WTO [11]. Group 3: Global Trade Dynamics - The article highlights the shifting trade landscape, with ASEAN's trade with China surpassing that with the U.S., indicating a realignment of global trade relationships [9]. - The establishment of a cross-border payment system in RMB and various currency swap agreements signifies China's efforts to enhance its financial influence globally [9]. - The ongoing negotiations and strategic maneuvers reflect a broader struggle for dominance in global trade, with both nations seeking to secure their interests amid rising tensions [3][9].

Market Overview - The average daily trading volume of the entire A-share market reached 1.49 trillion CNY, an increase of over 270 billion CNY compared to the previous week[8] - The Shanghai Composite Index showed a weekly increase of 1.91%[11] Market Style Performance - Small-cap and growth styles outperformed, with the ChiNext Index rising by 5.69% and the CSI 2000 Index increasing by 5.55%[11] - The relative advantage of small-cap stocks has rebounded into positive territory based on a rolling 30-day performance comparison[14] Participant Performance - The market sentiment index rose by 5.94%, indicating strong performance from active funds[22] - The private equity heavy index increased by 4.45%, reflecting a 52.84% rise since September 24, 2024[22] Financing and Market Sentiment - The margin trading balance increased to nearly 1.84 trillion CNY, indicating a growing investor confidence[31] - The number of stocks hitting the daily limit down has decreased to fewer than 10 on most days, suggesting reduced market volatility[31] Sector Trends - Strong sectors included stablecoins and semiconductor chips, with significant developments in solid-state batteries and military technology[42] - The report emphasizes the importance of "self-reliance in technology" and "active domestic circulation" in the current economic context[46]

Core Viewpoint - Norwegian defense companies are profiting significantly from the militarization of Europe, as stated by the Russian ambassador to Norway, Nikolai Korchunov [1] Group 1: Economic Impact - Norway has gained over $115 billion in excess revenue from high natural gas prices in 2022 and 2023 due to some European countries' refusal to purchase Russian energy [1] - The ambassador claims that the Norwegian government is willing to sacrifice the social and economic interests of its citizens for militarization [1] Group 2: Defense Industry - Norwegian defense companies are capitalizing on the so-called "rearmament," which is essentially the militarization of Europe [1]