Report Summary 1. Investment Rating of the Industry The report does not mention the investment rating of the industry. 2. Core Viewpoints - The core contradiction has switched, and the balance of asset allocation continues. Bonds have entered a "sell on every rally" time window, and the interest rate curve is steepening [39][43]. - Pay attention to the potential impact of supply - demand pattern changes on the credit bond market. In the second quarter, focus on the potential incremental demand for credit bonds [3][45]. - Currently, the valuation of credit bonds may not be highly cost - effective, but the potential adjustment pressure is relatively controllable. Credit bonds will follow the adjustment rather than over - adjust [4][162]. - The credit strategy is to shift from reducing duration to controlling duration and from a defensive to an offensive stance [4][193]. 3. Summary by Directory 2026 Market Review - **Primary Market**: In 2026Q1 (as of March 15), the issuance and net supply of traditional credit bonds decreased quarter - on - quarter. Bank secondary perpetual bonds had no new issuance, and net financing turned negative. For traditional credit bonds, the issuance and net financing were 2428.1 billion yuan and 773.5 billion yuan respectively, with a slight decrease in net supply. For bank secondary perpetual bonds, there was no new issuance, 4.76 billion yuan of maturities, and negative net financing [8][15][31]. - **Secondary Market**: In Q1, credit bond yields declined across the board, and credit spreads mostly narrowed. In January, credit bonds strengthened; in February, the market oscillated; since March, the bond market has weakened, but credit bonds have shown resilience. Yields of various maturities decreased, and credit spreads mostly narrowed, with short - term secondary perpetual bonds having the largest narrowing amplitude [18][19][31]. 2026 March - May Market Outlook - **Bond Market Transition**: The core contradiction in the bond market has switched. Bonds have entered a "sell on every rally" time window, and the interest rate curve is steepening. The 10 - year Treasury yield may range from 1.77% to 1.95%, with a possibility of breaking above 1.9%. It is recommended to be cautious about long - term and ultra - long - term assets [39][43]. - **Supply - Demand Pattern**: - **Supply**: For general credit bonds, urban investment bonds have net inflows, and industrial bond supply remains strong. For financial bonds, there has been no new issuance of secondary perpetual bonds this year, and the supply of ordinary securities firm bonds has increased, but these extreme structural features are not sustainable [67][76][224]. - **Demand**: - **Wealth Management**: The scale was stable in Q1, with seasonal balance - sheet return pressure in March. The scale is expected to grow seasonally in Q2, and the demand is mainly for medium - and short - term bonds [82]. - **Funds**: The scale and structure of amortized cost bond funds are changing. Pay attention to the potential increment of "fixed - income +" funds, and credit bond ETFs may still have an impulse to increase volume at the end of the quarter [86][101][129]. - **Insurance**: The proportion of dividend - paying insurance in the insurance liability side has increased, and the demand for long - term bonds has decreased. The direct investment in credit bonds is strong, but the buying power has weakened marginally [138][141]. - **Other Potential Changes**: The credit spreads of ultra - long - term credit bonds with maturities over 5 years have declined, but the trading desks are still cautious. The optimization of inter - bank rules promotes the launch of science and technology innovation bond indices and index products, and there are potential opportunities in inter - bank science and technology innovation bonds [144][148][159]. - **Valuation and Adjustment Pressure**: Currently, the valuation of credit bonds may not be highly cost - effective, but the potential adjustment pressure is relatively controllable. Historically, when long - term interest rates rise and the 10 - 1Y term spread widens, credit spreads do not necessarily widen. In March, spreads may oscillate weakly, and there may be market opportunities from April to May [162][178][185]. - **Credit Strategy**: - **General Strategy**: In March, gradually switch from medium - term (3 - 5 years) to medium - and short - term (around 3 years) bonds, and from high - elasticity, low - safety - cushion varieties to low - elasticity, certain - safety - cushion varieties. Actively seize potential credit market opportunities from April to May while keeping the duration in check [193]. - **Urban Investment Bonds**: For bonds with a maturity of less than 3 years, increase returns through credit enhancement; for bonds with a maturity of more than 3 years, increase positions on dips [197][201][203]. - **Industrial Bonds**: Control the duration and focus on carry trades [207][212][213]. - **Bank Secondary Perpetual Bonds**: Generally, be cautious and wait and see. Pay attention to the participation opportunities of medium - and short - term secondary perpetual bonds of small and medium - sized banks [220][223].

Group 1 - The report indicates that the geopolitical disturbances and the upcoming earnings season are expected to keep the risk appetite low in the market, with a potential rebound window anticipated after the release of quarterly reports [7][8]. - The North Exchange 50 index has decreased by 2.15%, with a significant drop in average daily trading volume by 16.7% compared to the previous week [4][14]. - The report highlights that sectors such as coal and electric equipment have shown strong performance, while military, oil, non-ferrous metals, and media sectors have faced declines [7][8]. Group 2 - The report notes that the North Exchange has seen 1 new stock listing this week, with the company MiRui Technology debuting and experiencing a first-day price increase of 91.91% [24]. - The North Exchange's overall PE (TTM) average is reported at 89.37 times, with a median of 44.65 times, indicating a decrease in valuation metrics [22][19]. - The report identifies key stocks to watch, including Tongli Co., Suzhou Axis, and others in the energy, military, and technology sectors, suggesting a focus on undervalued high-performance stocks [10][32]. Group 3 - The report mentions that the North Exchange has a stock rise-to-fall ratio of 0.23, with notable gainers including Dapeng Industry and Wuhan Blue Electric [32]. - The new three-board market has seen 5 new listings and 5 delistings, with a total of 5932 companies currently listed [42][44]. - The report provides insights into the financing activities, noting a planned financing of 0.63 billion and completed financing of 0.28 billion this week [44][45].

Group 1 - Market sentiment has improved slightly, with the sentiment index rising to 1.55 as of March 13, up from 1.40 the previous week, indicating a neutral model perspective despite ongoing external political risks [7][11]. - The industry trend indicators have rebounded sharply, suggesting a reduction in divergence among funds' industry views, with increased consistency in market sector performance [27][43]. - The average daily trading volume for the entire A-share market decreased by 18.33% week-on-week, with an average daily turnover of 16,158.69 billion yuan, indicating a decline in market activity [17][20]. Group 2 - The short-term scores for banks have increased significantly, with coal and public utilities leading the short-term score rankings at 98.31, indicating strong upward trends in these sectors [43][44]. - The highest average crowding levels are observed in public utilities, basic chemicals, construction decoration, environmental protection, and electric equipment, while the lowest are in commercial retail, textiles, social services, food and beverage, and real estate [46][48]. - The correlation between industry crowding and weekly price changes is relatively low at 0.40, suggesting that sectors with high crowding, such as public utilities and coal, may experience significant price movements, while sectors with low crowding, like defense and retail, may offer better long-term value [49].

- The report discusses the "HALO trading" strategy, which is linked to cyclical and resource sectors, suggesting that these sectors are likely still in the "residual phase" with macroeconomic and trading factors providing support[1][9][10] - The report highlights that cyclical sectors experienced a slight decrease in crowding due to significant crude oil price fluctuations, while advanced manufacturing sectors, such as new energy, saw an increase in crowding[9] - The "Four-Wheel Drive Industry Rotation Model" is mentioned, which tracks industry signals like "low golden cross" and "profit effect anomalies" to identify potential opportunities in sectors such as non-bank finance, communication, and power equipment[18]

Group 1: Oil Price Impact - Recent geopolitical conflicts have led to a significant increase in oil prices, with a 10% rise in oil prices potentially increasing PPI by approximately 0.3-0.4 percentage points[3] - The utility sector is most affected by rising oil prices, with a high dependence on upstream materials and limited ability to pass on costs due to regulatory price controls[3][6] - The gas industry experiences the most significant profit impact, with a 10% increase in oil prices corresponding to a 114% decrease in total profits for 2025[3] Group 2: Industry Comparisons - Historical inflation cycles show that upstream sectors benefit the most, with gross margins expanding by 5-10 percentage points, while manufacturing and consumer sectors face pressure[4][5] - The chemical industry is significantly impacted by rising oil prices, with rubber and plastic products facing a profit decline of 14%[3] - The equipment manufacturing sector experiences indirect pressure from metal prices, with automotive and machinery sectors facing a 10% profit impact due to rising costs[3] Group 3: Cost Dependency Analysis - The utility sector has a complete consumption coefficient of 59% for gas, indicating high reliance on oil and gas extraction[6][9] - The chemical sector has a complete consumption coefficient of around 15% for oil, with downstream products like plastics and rubber having coefficients exceeding 50%[6][9] - Metal products, particularly in equipment manufacturing, show a complete consumption coefficient of 38% for electrical machinery, indicating significant cost transmission from upstream[6][9]

Investment Rating - The report maintains a "Positive" outlook on the utility sector, indicating it is a worthwhile asset for investment [6][3]. Core Insights - The "14th Five-Year Plan" emphasizes specific targets for the energy sector, including a 17% reduction in carbon emissions and a 25% share of non-fossil energy consumption by the end of the plan [6][3]. - The report highlights the ongoing reform of the electricity market, aiming for a unified national electricity market by 2030 and a multi-dimensional pricing system that reflects various values of electricity [6][3]. - The utility sector has shown a recovery post-Chinese New Year, with the Shenwan Utility Index rising by 3.1%, outperforming the CSI 300 Index by 2.9 percentage points [6][3]. Summary by Sections Investment Recommendations and Targets - The report suggests a positive outlook for the utility sector, driven by the restructuring of international order and the need for further market reforms to accommodate high proportions of renewable energy [6][3]. - Specific recommendations include: - Thermal Power: Expected improvement in dividend capacity and willingness, with recommended stocks including Jiantou Energy, Huadian International, Guodian Power, Huaneng International, and Waneng Power [6][3]. - Gas: Beneficiaries of high global gas prices include Shouhua Gas and Xintian Gas [6][3]. - Hydropower: Recommendations for high-quality hydropower stocks such as Yangtze Power and Guotou Power [6][3]. - Nuclear Power: Strong long-term growth potential with recommended stock China General Nuclear Power [6][3]. - Wind and Solar: Focus on leading companies with high wind power ratios, awaiting profitability recovery [6][3]. Industry Dynamics Tracking - Electricity prices in Guangdong and Shanxi have seen significant year-on-year declines, with Guangdong's average price down by 13.8% and Shanxi's by 25.0% [9][10]. - Domestic coal prices have decreased, with the Qinhuangdao Q5500 coal price at 729 RMB/ton, down 1.9% week-on-week [13][14]. - International gas prices remain high, with the Dutch TTF gas price at 50.1 EUR/MWh, down 6.1% week-on-week but up 19.1% year-on-year [25][26]. - The Three Gorges Reservoir's outflow has increased, with a weekly average outflow of 8793 cubic meters/second, up 4.0% week-on-week [30][31]. Market Performance - The utility sector outperformed the broader market, with a 3.1% increase in the Shenwan Utility Index compared to a 0.2% increase in the CSI 300 Index [38][39]. - Sub-sector performance showed wind power leading with an 8.5% increase, followed by solar power at 5.3% [40][41].

Investment Rating - The report maintains a "Positive" outlook on the utility sector, indicating it is a worthwhile asset for investment [6][3]. Core Insights - The "14th Five-Year Plan" emphasizes specific targets for the energy sector, including a 17% reduction in carbon emissions and a 25% share of non-fossil energy consumption by the end of the plan [6][3]. - The report highlights the ongoing reform of the electricity market, aiming for a unified national electricity market by 2030 and a market-based pricing mechanism for various energy sources [6][3]. - The utility sector has shown a recovery, with the Shenwan Utility Index rising by 3.1%, outperforming the CSI 300 Index by 2.9 percentage points [6][3]. Summary by Sections Investment Recommendations and Targets - The report suggests a positive outlook for the utility sector, driven by the restructuring of international order and the need for further market reforms to accommodate high proportions of renewable energy [6][3]. - Specific recommendations include: - Thermal Power: Expected improvement in dividend capacity and willingness, with suggested stocks including Jiantou Energy, Huadian International, Guodian Power, Huaneng International, and Waneng Power [6][3]. - Gas: Beneficiaries of high global gas prices include upstream gas assets, with related stocks being Shouhua Gas and Xintian Gas [6][3]. - Hydropower: Recommended to invest in quality hydropower assets, with stocks like Yangtze Power and Guotou Power [6][3]. - Nuclear Power: Strong long-term growth potential, with China General Nuclear Power as a related stock [6][3]. - Wind and Solar: Anticipated growth under carbon neutrality expectations, with a focus on leading companies in the sector [6][3]. Industry Dynamics - Electricity prices in Guangdong and Shanxi have seen significant year-on-year declines, with Guangdong's average price down by 13.8% and Shanxi's by 25.0% [9][10]. - Domestic coal prices have decreased, while port inventories have increased, indicating a shift in supply dynamics [13][22]. - International gas prices remain high, influenced by geopolitical tensions, with LNG prices in China rising significantly [25][27]. Market Performance - The utility sector has outperformed the broader market indices, with notable weekly gains across various sub-sectors, particularly wind and solar [38][40]. - Individual stock performances show significant increases for companies like Huadian Energy and Xiexin Energy, while some companies faced declines [44].

Core Insights - The report indicates that the geopolitical situation in the Middle East has reached a dramatic turning point, with oil prices fluctuating at high levels, leading to continued volatility in global financial markets. It is anticipated that the current geopolitical conflict has peaked, but disturbances are not entirely over. The report suggests that A and H shares may experience range-bound fluctuations and narrow oscillations in the near future, with a positive outlook for a "systematic slow bull" market in the longer term [1][3][47]. Market Overview - The major indices have shown mixed performance, with the Shanghai Composite Index and the Shanghai 50 Index declining by 0.70% and 1.20% respectively, while the CSI 300 Index saw a slight increase of 0.19% due to support from new energy and optical module leaders. Growth indices such as the CSI 500 and CSI 1000 experienced declines of 1.44% and 0.42% respectively, while the ChiNext Index rose by 2.51% supported by heavyweight stocks [9][44]. - The energy sector has shown resilience, with the report highlighting that the "new and old energy" sectors performed well, with electricity equipment rising by 4.55%, coal increasing by 5.03%, and public utilities up by 3.07%. Conversely, sectors like military, non-ferrous metals, media, and machinery saw declines due to ongoing geopolitical tensions [12][46]. Investment Strategy - The report recommends maintaining strategic discipline in timing investments, avoiding excessive pessimism or blind optimism until the market stabilizes. It emphasizes optimizing industry structure to achieve a balanced offensive and defensive strategy. The "new and old energy" combination is suggested as a key focus, with new energy (electricity) and old energy (power) serving as the offensive spearhead. Additionally, it is advised to hold relatively low-positioned securities and to enhance defensive positions by adding agriculture and transportation sectors to mitigate risks [1][48][47]. - The report also points out that certain state-owned enterprises with low positions and dividend attributes could act as stabilizers during escalated geopolitical conflicts, while stocks related to infrastructure, oil transportation, shipping, and ports may directly benefit from the situation [1][48].

Market Overview - The A-share market exhibited a fluctuating and differentiated pattern this week, with the Shanghai Composite Index continuing to adjust slightly while the Shenzhen indices, representing growth stocks, rebounded, indicating a phase of recovery for growth styles [3][4][8]. - The overall trading volume decreased slightly, with main funds remaining cautious, although margin trading funds showed a mild increase, reflecting a moderate recovery in risk appetite [3][4][25]. Index Performance - The major indices continued their oscillating trend, with the Shanghai Composite Index and the Shanghai 50 experiencing slight declines, while the Shenzhen Component Index and certain growth indices showed significant rebounds, suggesting a phase of recovery after previous adjustments [4][8]. - The small and mid-cap indices saw a notable reduction in their decline compared to the previous week but remained in a weak consolidation range, indicating a lack of a unified market trend [4][8]. Industry Performance - The utilities sector led the market with a weekly increase of approximately 3.01%, while the consumer staples sector also recorded a slight rise, indicating a preference for defensive industries amid market fluctuations [11]. - In contrast, technology sectors such as communication services and information technology, which had previously seen significant gains, experienced declines of approximately -2.59% and -1.17%, respectively, highlighting a notable internal differentiation within the market [11][12]. Trading Volume and Activity - The total trading volume for the week was approximately 7,685.94 billion shares, with a total transaction value of about 12.49 trillion yuan, representing declines of approximately 4.7% and 5.5% from the previous week [23][25]. - Daily trading patterns showed a "high open followed by gradual volume reduction" characteristic, with the highest transaction amount reaching about 2.67 trillion yuan on Monday, subsequently decreasing to around 2.42 trillion yuan by Friday [23][25]. Fund Flow - The main funds in the A-share market exhibited a net outflow of approximately 112.36 billion yuan this week, with only Tuesday showing a slight net inflow [34][35]. - The technology growth and certain manufacturing sectors were the primary areas for fund reduction, while funds continued to concentrate on leading companies within industries, indicating a trend towards core enterprises [34][39]. Market Sentiment - The number of stocks hitting the daily limit rose to an average of about 64 this week, indicating sustained short-term trading activity, although the number of stocks hitting the lower limit increased significantly by Friday, suggesting a shift in market sentiment from a previously consistent bullish phase to a more divergent stage [45][48]. - Margin trading funds showed a slight increase of approximately 19 billion yuan over the first four trading days, indicating a gradual shift in market sentiment from cautious to a more optimistic but still tentative stance [49]. Upcoming Focus - The market will be closely watching the release of macroeconomic data and the pressure from stock unlocks in the coming week, which may influence trading dynamics [52].

Market Overview - The market shows a trend of simultaneous reduction in positions by both institutional and retail investors in the Sci-Tech Innovation Index, with a noticeable convergence in the outflow speed of institutional funds from the ChiNext Index and the entire A-share market since March 4 [6][7] - Institutional funds exhibited strong outflow momentum before March 4, which weakened afterward, indicating a volatile outflow pattern [6][7] - Retail investors displayed a gradual outflow from the Sci-Tech Innovation Index, maintaining a wait-and-see attitude [6][7] Fund Flow by Market Capitalization and Valuation Style - Institutional funds accelerated their outflow from high-valuation indices, while retail funds continued to flow into these indices, indicating a lack of style preference switch [16][17] - The divergence in net inflow rates between retail and institutional investors remains positive across various style indices, suggesting a more cautious approach from institutional investors [16][17] Fund Flow by Major Industry Style - Institutional funds are slowly returning to the cyclical manufacturing sector, with a shift from outflow to slow inflow observed after March 4 [22][23] - The market displays significant volatility in fund inflow acceleration for both technology and cyclical manufacturing sectors, reflecting strong market competition [22][23] Fund Flow by Primary Industry Upstream Resources - Institutional funds are experiencing significant outflows from non-ferrous metals, while the outflow from basic chemicals is stabilizing [28][29] - Retail funds are heavily flowing into non-ferrous metals, indicating a strong speculative interest [28][29] Midstream Materials & Manufacturing - The electric power equipment sector has seen cumulative net inflows from institutional funds, while defense and machinery sectors are experiencing fluctuating outflows [30][31] - Retail buying power has shown a phase of increase, with net inflow rates indicating stronger retail interest compared to institutional [30][31] Downstream Essential Consumption - Institutional funds have shown a slight net inflow into agriculture, forestry, animal husbandry, and fishery, while other sectors lack significant buying momentum [34][35] Downstream Discretionary Consumption - There is no significant inflow momentum from institutional funds in this sector, with notable outflows particularly in household appliances [37] TMT Sector - The TMT sector is characterized by strong small-order buying power, while institutional funds are showing fluctuating outflows in communication and electronics [40][41] Large Financials - Retail investors are favoring banks for defensive positioning, with significant net inflows, while institutional funds continue to show outflows in non-bank financials [48][49] Support Services - The public utilities sector is a trading hotspot, with institutional funds showing alternating net inflows and outflows, indicating significant volatility [54][55] Leverage Fund Situation - The growth rate of margin financing and securities lending balances has slowed, with the market average guarantee ratio showing adjustments, indicating manageable leverage risks [60][61] - As of March 12, the total margin financing and securities lending balance is approximately 2.66 trillion yuan, maintaining ample liquidity [60][61] - The overall trading activity in margin financing has declined, with the proportion of margin trading transactions decreasing to 9.67% [61][62]