Valuation Summary - The overall PE of the CSI A-shares is 19.7 times, positioned at the historical 78th percentile [2][5] - The PE of the Shanghai 50 Index is 11.4 times, at the historical 59th percentile [2][5] - The PE of the CSI 500 Index is 29.5 times, at the historical 51st percentile [2][5] - The PE of the ChiNext Index is 33.1 times, at the historical 16th percentile [2][5] - The PE of the CSI 1000 Index is 39.7 times, at the historical 55th percentile [2][5] - The PE of the National CSI 2000 Index is 52.1 times, at the historical 69th percentile [2][5] - The PE of the Sci-Tech 50 Index is 137.8 times, at the historical 98th percentile [2][5] - The PE of the North Exchange 50 Index is 67.5 times, at the historical 94th percentile [2][5] - The ChiNext Index PE relative to the CSI 300 is 2.5 times, at the historical 7th percentile [2][5] Industry Valuation Comparison - Industries with PE valuations above the historical 85th percentile include Real Estate, Steel, Electric Equipment (Photovoltaic Equipment), National Defense and Military Industry, Aviation and Airports, Light Industry Manufacturing, Chemical Pharmaceuticals, and Computer (IT Services, Software Development) [2][6] - The Passenger Vehicle industry has a PB valuation above the historical 85th percentile [2][6] - No industries have both PE and PB valuations below the historical 15th percentile [2][6] Industry Midstream Prosperity Tracking New Energy - In the photovoltaic sector, upstream prices continue to rebound due to expectations of "anti-involution" policies, with polysilicon futures prices rising by 15.5% and spot prices by 17.1% [2][3] - In the battery sector, cobalt and nickel prices decreased by 1.7% and 1.0% respectively, while lithium carbonate prices increased by 3.1% [2][3] - In June 2025, the retail sales of narrow passenger vehicles in China increased by 18.1% year-on-year, with new energy vehicles seeing a 29.7% increase [2][3] Real Estate Chain - The spot price of rebar increased by 1.7%, while iron ore prices rose by 2.8% [2][3] - The national cement price index decreased by 1.6% due to slow inventory digestion [2][3] - Glass prices saw a slight increase, with spot prices up by 0.5% [2][3] Consumption - The average price of live pigs decreased by 3.5%, while wholesale pork prices increased by 0.1% [2][3] - The wholesale price index for liquor increased slightly by 0.04% [2][3] - Corn prices fell by 0.7%, while wheat prices decreased by 0.2% [2][3] Technology TMT - China's semiconductor sales increased by 13.0% year-on-year in May 2025, although the growth rate slowed compared to April [2][3] Cyclicals - Brent crude oil futures prices rose by 3.1% to $70.63 per barrel, driven by summer travel and power generation demand [2][3] - The price of thermal coal increased by 1.4% due to rising consumption during the summer peak [2][3]

Group 1 - The core viewpoint is that the current strong resonance between Chinese and American stock markets reflects optimistic expectations for future corporate capital returns, with A-shares stabilizing from historical lows and U.S. stocks maintaining high ROE levels [1][2] - The three main catalysts for stabilizing and recovering capital returns in A-shares are: (1) anti-involution leading to stabilization in industries previously constrained by excessive capital expansion, (2) overseas manufacturing demand exceeding service sector demand, and (3) the end of debt contraction cycles [2][3] - The current market pricing indicates that short-term stock prices are ahead of ROE, which aligns with historical bottoming characteristics, and while the absolute level of PB is not extreme, the low absolute level of ROE affects the elasticity and pace of PB recovery [3][4] Group 2 - The future state of capital returns is expected to shift, with domestic capital returns stabilizing and overseas capital returns potentially declining due to the combination of anti-involution, cessation of debt contraction, and the development of overseas manufacturing [4][5] - The relative advantage of the "barbell strategy" may diminish as ROE gradually recovers, with traditional industries such as coal, oil, steel, and utilities showing a higher proportion of low PB stocks compared to TMT and high-end manufacturing sectors [3][4] - Recommendations for asset allocation include focusing on upstream resource products and capital goods benefiting from increased overseas demand and domestic anti-involution policies, as well as exploring opportunities in new consumption sectors like hospitality and retail [5]

Investment Rating - The report maintains a positive outlook on the non-ferrous metals industry, indicating a "look good" investment rating [2]. Core Insights - The report emphasizes the impact of the "anti-involution" policy on various cyclical sub-industries, particularly highlighting the steel industry, which is currently facing weak demand and declining prices and profit levels. The policy aims to prevent vicious competition and promote high-quality development [4][62]. - The steel industry is expected to undergo a transformation towards high-end differentiated competition, with potential recovery in profitability and valuation levels [19][51]. - The transportation industry, particularly the express delivery and aviation sectors, is anticipated to benefit from the government's focus on balancing supply and demand and promoting high-quality development [5][52]. - The construction materials industry is also set to experience a new balance due to the implementation of the "anti-involution" policy, which will accelerate the optimization of supply [7][66]. - The chemical industry, including silicon-based products and pesticides, is expected to see improvements in supply dynamics, leading to a potential recovery in profitability [68][74]. Summary by Sections 1. Metal Industry - The steel industry is currently facing weak demand, with both supply and demand weakening compared to 2015, but the degree of oversupply has lessened [24][25]. - The report notes that the profitability of the steel industry has declined to levels seen in 2015, with profits shifting towards the upstream iron ore sector [33][46]. - The "anti-involution" policy is expected to enhance the industry's supply-demand structure and profitability, with a median P/E ratio of 35.51X indicating room for valuation recovery [4][48]. 2. Transportation Industry - The express delivery and aviation sectors are highlighted as areas that will benefit from the government's anti-involution measures, which aim to improve supply-demand balance and service quality [5][60]. - The aviation sector has already seen improvements in passenger load factors due to supply-side controls, which are expected to enhance pricing power during peak seasons [55][56]. 3. Construction Materials Industry - The report discusses the gradual implementation of the "anti-involution" policy in the construction materials sector, particularly in cement, which is expected to lead to better supply-side optimization [62][64]. - The focus on eliminating excess capacity and promoting high-quality development is anticipated to solidify the growth of leading companies in the industry [66]. 4. Chemical Industry - The silicon-based products and pesticide sectors are projected to benefit from improved supply dynamics due to regulatory measures aimed at curbing low-price competition [68][74]. - The report indicates that self-discipline within the pesticide industry, particularly in the glyphosate sector, will help improve market conditions and profitability [75].

Report Summary 1. Industry Investment Rating No industry investment rating is provided in the report. 2. Core Views - The market interprets the "anti - involution" policy as a price rebound rather than a reversal. Stocks in coal, transportation, and steel industries led the decline, while those in electronics, power equipment, and pharmaceutical biology industries led the rise. The semi - annual report pre - increase theme is a visible investment line until mid - July. In the high - level oscillation period, it is advisable to focus on arbitrage opportunities by going long on far - month contracts and short on near - month contracts in the stock index futures market [1][6]. - In the stock index options market, due to low trading liquidity and volatility, and the potential ineffectiveness of sentiment indicators, it is recommended to adopt a covered defense strategy [2][6]. - In the treasury bond futures market, the short - end performed better than the long - end. The long - end bullish sentiment weakened marginally. In the short term, the bond market is expected to continue to oscillate due to factors such as the central bank's cautious liquidity injection, high local bond supply in July, and potential tariff disturbances [2][7][8]. 3. Summary by Directory 3.1 Market Views - **Stock Index Futures** - **Data**: IF, IH, IC, IM's current - month basis points were - 21.47, - 16.95, - 48.66, - 63.24 respectively, with changes of 1.22, 2.6, - 12.31, - 15.95 points compared to the previous trading day; the current - month to next - month spreads were 18.6, 4.6, 54.2, 71.8 points respectively, with changes of 0.8, - 0.8, 3.8, - 1.6 points; the positions changed by - 481, - 1877, 1566, 2566 lots respectively [6]. - **Logic**: The market interprets the "anti - involution" policy as a price rebound. After excluding inflation - chain investment opportunities, funds rotate among scattered hot industries. There is a lack of a main line to boost trading volume during the high - level oscillation period [6]. - **Operation Suggestion**: Hold a wait - and - see attitude [6]. - **Stock Index Options** - **Data**: The trading volume of the options market rebounded slightly, but the overall trading liquidity remained low. The implied volatility of CSI 1000 index options dropped by 0.39%, and that of SSE 500 ETF options decreased by 0.18% [2][6]. - **Logic**: The double - low situation of liquidity and volatility, combined with the ineffective sentiment indicators, indicates that the index has resistance above and the market will continue to oscillate [2][6]. - **Operation Suggestion**: Adopt a covered defense strategy [2][6]. - **Treasury Bond Futures** - **Data**: The trading volumes of T, TF, TS, TL's current - quarter contracts were 64924, 51486, 24843, 72609 lots respectively, with 1 - day changes of 6969, 5555, - 101, 3741 lots; the positions were 206020, 156476, 115715, 117980 lots respectively, with 1 - day changes of - 499, - 1347, 120, - 1737 lots. Other spread and basis data are also provided [7]. - **Logic**: The long - end bullish sentiment weakened marginally due to the stock - bond seesaw effect and the profit - taking motivation of long - end futures. The central bank may be cautious in liquidity injection, and the local bond supply in July may be high, limiting the downward space of interest rates. Tariff disturbances may increase after July 9 [2][7][8]. - **Operation Suggestion**: Maintain an oscillating trend strategy; pay attention to short - hedging at low basis levels; appropriately focus on basis widening; the mid - term strategy of steepening the yield curve has higher odds [8]. 3.2 Economic Calendar - The official manufacturing PMI in China in June was 49.7, up from 49.5 in the previous month. The final value of the US Markit manufacturing PMI in June was 52.9, higher than the expected and previous values. The US unemployment rate in June was 4.1%, lower than the expected 4.3% and the previous 4.2%, and the non - farm payrolls increased by 14.7 million, higher than the expected 10.6 million [9]. 3.3 Important Information and News Tracking - **Domestic Macro**: On July 3, the Minister of the Ministry of Industry and Information Technology hosted a manufacturing enterprise symposium, where 14 photovoltaic enterprises and industry association representatives exchanged views on various aspects and put forward policy suggestions [9]. - **Overseas Macro**: The US non - farm payrolls increased by 14.7 million in June, higher than expected, and the unemployment rate dropped to 4.1%. The private - sector employment increased by only 7.4 million, the lowest since last October, mainly driven by the healthcare industry [10]. 3.4 Derivatives Market Monitoring - The report mentions the monitoring of stock index futures, stock index options, and treasury bond futures data, but specific data details are not fully presented in the provided content [11][15][27].

Group 1 - A-shares are expected to show a "first oscillation, then upward" pattern in the second half of the year, with structural opportunities highlighted in technology growth (such as AI and innovative pharmaceuticals) and dividend assets [1][2] - The weak dollar trend, supportive capital market policies, and overall improvement in liquidity are anticipated to drive the upward movement of A-shares [1] - Analysts predict that A-shares will maintain a stable and upward trend, with a focus on technology and emerging consumption sectors as key investment highlights [1][2] Group 2 - Investment themes for the second half of the year are expected to focus on stable assets and growth-oriented technology assets, with high ROE and stable dividend rates in sectors like transportation, consumption, publishing, gaming, and non-ferrous metals [2] - The current market liquidity is favorable for technology and growth style investments, particularly in companies with core technological barriers and overseas channel capabilities [2] - Key opportunities include domestic consumption, technology growth in areas like AI and robotics, industries benefiting from cost improvements, sectors with structural opportunities from overseas expansion, and stable dividend stocks suitable for long-term holdings [2]

Core Viewpoint - A-shares are expected to experience a "first oscillation, then upward" trend in the second half of the year, with structural opportunities highlighted in technology growth and dividend assets [1][2][3] Market Outlook - Analysts predict that the A-share market will see a continuous upward adjustment in the second half, driven by a weak dollar trend, supportive capital market policies, and improved liquidity [2] - The market is expected to present a "stable index, structural bull" scenario, with significant opportunities for value re-evaluation in technology and emerging consumption sectors [2] - The overall liquidity environment is anticipated to improve, supporting a gradual recovery in the market's fundamentals [3] Investment Opportunities - Key sectors expected to perform well include stable assets and growth-oriented technology assets, with a focus on transportation, consumer goods, publishing, gaming, and high ROE sectors [4] - Growth assets are likely to center around military industry, pharmaceuticals, communications, gaming, and AI technologies [4] - Specific investment opportunities include domestic consumption sectors, technology growth in AI and robotics, and industries benefiting from cost improvements [5] Analyst Recommendations - Analysts suggest focusing on five areas: domestic consumption, technology growth, cost-improved industries, structural opportunities from overseas expansion, and stable dividend-paying assets [5] - Emphasis is placed on technology sectors marked by innovation and strategic significance, as well as consumer services and new consumption trends [5]

1. Report Industry Investment Rating - No specific industry investment rating is provided in the report. 2. Core Views of the Report - The stock market sentiment is warm, and the bond market continues to fluctuate. For stock index futures, sentiment is positive with healthy long - short position changes; for stock index options, a covered defense strategy is recommended; for treasury bond futures, the bond market is expected to continue to fluctuate in the short term [1]. 3. Summary by Relevant Catalogs 3.1 Market Views 3.1.1 Stock Index Futures - **Market Conditions**: IF, IH, IC, and IM's current - month basis, inter - period spreads, and positions changed. The Shanghai Composite Index fluctuated higher on Monday, with small - cap sentiment remaining active. Large - cap stocks retreated after capital congestion, and funds flowed to small - cap stocks. IM saw healthy long - short position changes, with a significant decrease in positions and wider intraday discounts [7]. - **Logic**: Geopolitical risks eased, the tariff deadline was postponed, and the market shifted its focus to internal profit improvement as the interim report announcements approached. - **Operation Suggestion**: Continue to allocate long IM contracts [7]. - **Outlook**: Oscillating upward 3.1.2 Stock Index Options - **Market Conditions**: The equity market oscillated upward with sectoral divergence. Although sentiment indicators rose with the underlying assets, the trading volume in the options market declined significantly, and trading liquidity was lower than expected [7]. - **Logic**: In a low - liquidity derivatives market, sentiment indicators showed synchronicity but no guiding effect. Implied volatility only corresponded to daily market fluctuations, and all varieties showed a decline in volatility in the morning. - **Operation Suggestion**: Adopt a covered defense strategy [7]. - **Outlook**: Oscillating 3.1.3 Treasury Bond Futures - **Market Conditions**: Treasury bond futures closed down across the board. T, TF, TS, and TL's main contracts changed by - 0.16%, - 0.10%, - 0.05%, and - 0.43% respectively. Trading volume, positions, inter - period spreads, cross - variety spreads, and basis all had corresponding changes [3][8][9]. - **Logic**: The central bank's second - quarter policy statement was positive, the end - of - month capital tightened, the June PMI was better than expected, and the stock - bond seesaw effect was evident. At the beginning of the month, the capital may seasonally loosen, but the central bank may be cautious in liquidity injection, and the supply of new local bonds in July may remain high [3][9][10]. - **Operation Suggestion**: For trend strategies, maintain an oscillating view; for hedging strategies, focus on short - hedging at low basis levels; for basis strategies, appropriately focus on basis widening; for curve strategies, steepening the curve in the medium term has higher odds [10]. - **Outlook**: Oscillating 3.2 Economic Calendar - The official manufacturing PMI in China in June was 49.7, better than the previous value of 49.5. The US will release the June ISM manufacturing index on July 1st, the June unemployment rate and non - farm payrolls change on July 3rd [11]. 3.3 Important Information and News Tracking - **Domestic Bond Market**: As of the end of May, overseas institutions' custodial balance in the Chinese bond market was 4.4 trillion yuan, accounting for 2.3% of the total. In the inter - bank bond market, the balance was 4.3 trillion yuan. Overseas institutions held 2.1 trillion yuan of treasury bonds, 1.2 trillion yuan of negotiable certificates of deposit, and 0.8 trillion yuan of policy - bank bonds [11]. - **Overseas Macroeconomy**: The US Senate procedurally voted to pass the "Great Beauty" tax and spending bill pushed by President Trump. The bill is estimated to increase the US federal government's debt by about $3.8 trillion in the next 10 years [12]. 3.4 Derivatives Market Monitoring - The report mentions data on stock index futures, stock index options, and treasury bond futures, but specific data details are not fully presented in the provided text.

Group 1: Overall Market Outlook - The current market situation is similar to 2013 and 2019, with a high probability of evolving into a comprehensive bull market, although tactical breakthroughs may take time [6][12] - The market is characterized by low valuation levels, weak corporate earnings, positive policy tone, and active thematic opportunities, indicating potential for a bull market [12][14] - A possible market pullback in July is expected, but the extent is manageable, with a return to bull market conditions likely in Q3 or Q4 if earnings or policies turn optimistic [12][14] Group 2: Industry Allocation Insights - The report suggests a value-oriented approach in the current quarter, with plans to increase exposure to more elastic sectors in Q3 [12][14] - Key sectors for investment include: - New Consumption: Benefiting from domestic demand stability and potential supportive policies [14] - Media: Attractive valuation with a focus on AI application changes [14] - Military Industry: Likely to see continuous thematic events due to unique demand cycles [14] - Banking and Non-Banking: Low sensitivity to overseas economic fluctuations and high sensitivity to domestic policies [14] - Non-ferrous Metals: Strong capacity structure with resilience to economic fluctuations [14] - Real Estate: Positioned for new policy initiatives with low valuation levels [14] Group 3: Top Stock Picks - The top stock picks for July 2025 include: - 分众传媒 (002027.SZ) in Media and Internet - 顺丰控股 (002352.SZ) in Transportation - 药师帮 (9885.HK) in Pharmaceuticals - 万辰集团 (300972.SZ) in Food and Beverage - 青岛银行 (002948.SZ) in Banking - 新集能源 (601918.SH) in Utilities - 豆神教育 (300010.SZ) in Education - 兖矿能源 (600188.SH) in Energy - 江淮汽车 (600418.SH) in Automotive - 卓易信息 (688258.SH) in Computing [3][15] Group 4: Company-Specific Insights - 分众传媒 (002027.SZ) is focusing on offline advertising with a significant share of daily consumer goods advertisers [16] - 顺丰控股 (002352.SZ) has shown remarkable growth in logistics volume, outperforming industry growth rates, driven by customer penetration and operational optimizations [19][21] - 药师帮 (9885.HK) is expected to achieve a compound annual growth rate of approximately 164% in net profit from 2024 to 2027, benefiting from its deep market penetration and strong cash flow [25][27] - 万辰集团 (300972.SZ) maintains a competitive edge in the snack retail sector, with a focus on operational quality and profitability improvements [28][29] - 青岛银行 (002948.SZ) is expanding its business in a robust economic environment, with significant growth in deposits and loans, supported by a strong financial foundation [31][33]

Valuation Summary - The overall PE of the A-share market is 19.2 times, positioned at the historical 74th percentile [2][5] - The PE of the Shanghai 50 Index is 11.2 times, at the historical 57th percentile [2][5] - The PE of the ChiNext Index is 31.9 times, at the historical 13th percentile, indicating a relatively low valuation compared to historical levels [2][5] - The PE of the Science and Technology Innovation 50 Index is 136.8 times, at the historical 98th percentile, suggesting a high valuation [2][5] Industry Valuation Comparison - Industries with PE valuations above the historical 85th percentile include Real Estate, Steel, Electric Equipment (Photovoltaic Equipment), National Defense, Aviation, Chemical Pharmaceuticals, and IT Services [2][6] - No industries have PB valuations above the historical 85th percentile [2][6] - Industries with both PE and PB valuations below the historical 15th percentile include Agriculture, Forestry, Animal Husbandry, Fishery, and Medical Services [2][6] Industry Midstream Prosperity Tracking New Energy - In the photovoltaic sector, the spot price of the photovoltaic industry chain continues to decline, while the futures price of polysilicon has increased by 5.8% [2] - The price of silicon wafers has decreased by 1.4%, and the price of battery cells has remained stable [2] - The cumulative year-on-year growth rate of newly installed wind power from January to May 2025 has increased by 134.2% [2] Financial Sector - Insurance companies' premium income from January to May 2025 has increased by 3.8% year-on-year, with a growth rate improvement of 1.5 percentage points compared to the first three months [3] Real Estate Chain - The price of rebar has remained stable, while the price of cement has decreased by 1.6% due to weak demand from real estate and traditional infrastructure projects [3] Consumer Sector - The average price of live pigs has increased by 3.5%, while the wholesale price of pork has decreased by 0.5% [3] - The wholesale price index of liquor has decreased by 0.11% [3] Midstream Manufacturing - The cumulative year-on-year growth rate of foreign contracted engineering business from January to May 2025 has increased by 5.4% [3] Cyclical Industries - The price of Brent crude oil has decreased by 12.9%, closing at $67.31 per barrel [3] - The price of thermal coal has increased by 1.8%, closing at 620 yuan per ton [3]

Market Insights - The small-cap crowding index has decreased from 65% to 62.4%, indicating a significant drop in market congestion, approaching levels seen in April 2025 [1][10] - Previous market adjustments occurred when the trading volume decreased alongside rising small-cap crowding, while the current market shows stable inventory levels [1][10] - The current trading volume has remained relatively low, averaging around 1.2 trillion, without signs of overheating during the recovery phase [1][11] Domestic Industry Analysis - In May, industrial enterprise profits reported a year-on-year decline of 9.10%, with cumulative profits from January to May down to -1.10% from a previous 1.40% [3][20] - The inventory of finished goods for large industrial enterprises stood at 6.65 trillion yuan, with a year-on-year growth of 3.50% [3][20] - The People's Bank of China indicated a need for moderately loose monetary policy to support economic recovery amid challenges like insufficient domestic demand [3][31] International Economic Indicators - The U.S. core PCE index rose by 2.68% year-on-year in May, slightly above expectations, indicating inflationary pressures [4][11] Industry Allocation Recommendations - Investment strategies should focus on three main areas: breakthroughs in AI technology, valuation recovery in consumer stocks, and the rise of undervalued dividends [5][11] - The consumer sector is expected to recover due to low valuations, declining interest rates, and policy catalysts, despite a cautious macro narrative [5][11]