1. Report Industry Investment Rating The document does not provide the industry investment rating. 2. Core Viewpoints of the Report - The report details the development of domestic bond ETFs, liquidity analysis of bond - making varieties in the Shanghai and Shenzhen stock exchanges, and the investment application of bond ETFs [1]. - The scale of bond ETFs has expanded rapidly in the past year, exceeding 40 billion yuan for the first time. As of July 15, 2025, bond ETFs are mainly divided into interest - rate bond ETFs, credit - bond ETFs, and convertible - bond ETFs [1][11]. - Since July 10, 2025, 10 science - innovation bond ETFs have been established. The share of ETFs linked to the CSI Convertible Bond and Exchangeable Bond Index has increased the most, and the trading volume of CSI short - term financing - related ETFs has been the most active [2][17]. - Bond ETFs have asset - allocation and trading attributes. Their trading is more flexible, efficient, and leveraged, with high information transparency. The main strategies include primary - secondary market price arbitrage, intraday T + 0 trading, and pledge - repurchase leveraging [3]. 3. Summary by Relevant Catalogs 3.1 What are Bond ETFs? - **Domestic Bond ETF Overview**: In the past year, the scale of domestic bond ETFs has developed significantly, exceeding 40 billion yuan, but the variety is still single. As of July 15, 2025, there are 16 interest - rate bond ETFs, and 15 bond ETFs have a scale of over 1 billion yuan. The top five in scale are Fuguo Policy Financial Bond ETF, Haifutong Short - term Financing ETF, Boshi Convertible Bond ETF, E Fund Company Bond ETF, and Southern Shanghai Stock Exchange Company Bond ETF. Since July 10, 2025, 10 science - innovation bond ETFs have been established [11][15][16]. - **Recent Performance Tracking of Bond ETFs**: In terms of share changes, the share of ETFs linked to the CSI Convertible Bond and Exchangeable Bond Index has increased the most. In terms of share change rate, the share of ETFs with the Shanghai 30 - year Treasury Bond Index as the underlying index has increased by about 15 million shares (+21.74%). In terms of trading activity, CSI short - term financing - related ETFs have the most active trading volume [17]. 3.2 Exchange Bond Liquidity Analysis - Overall, the trading volume and liquidity of bonds on the Shanghai Stock Exchange are better than those on the Shenzhen Stock Exchange [19]. - **Shanghai Stock Exchange Interest - Rate Bond Market - Making Varieties**: In the past month, among the interest - rate bond market - making varieties on the Shanghai Stock Exchange, those maturing within 3 years have the most active trading volume, followed by those maturing within 3 - 5 years. The liquidity is negatively correlated with the standard term [20]. - **Shanghai Stock Exchange Credit - Bond Market - Making Varieties**: Among the credit - bond market - making varieties on the Shanghai Stock Exchange in the past month, those maturing over 10 years have the most active liquidity, followed by those maturing within 3 years [22]. - **Shenzhen Stock Exchange Interest - Rate Bond Market - Making Varieties**: Among the interest - rate bond market - making varieties on the Shenzhen Stock Exchange in the past month, the average trading volume of varieties maturing within 3 years is the highest, followed by those maturing over 10 years [23]. - **Shenzhen Stock Exchange Credit - Bond Market - Making Varieties**: Among all the credit - bond market - making varieties on the Shenzhen Stock Exchange in the past month, the varieties maturing within 3 - 5 years have the highest turnover rate, followed by those maturing over 10 years [24]. 3.3 Investment Application of Bond ETFs - Bond ETFs have the functions of asset allocation and trend trading. Compared with ordinary over - the - counter bond index funds, they have additional investment strategies [25]. - **Investment Strategies**: Asset allocation (holding strategy), trend (band operation), arbitrage strategy (discount - premium), arbitrage (spot - futures arbitrage), dividend strategy, event - driven strategy, intraday T + 0 strategy, and leverage strategy [27]. - **Advantages**: Primary - secondary market price arbitrage, intraday T + 0 trading, and the ability to use pledge - repurchase to add leverage [28].

Group 1 - The report indicates a positive outlook for equity assets, supported by a stock-bond rotation model showing a marginal decline in private sector financing growth but still in an upward trend, with inflation factors decreasing and economic recovery signals persisting [4][9] - The sentiment index for the A-share market has turned optimistic for the upcoming month, with indicators such as stock investment ratios and net inflows from large orders maintaining a bullish outlook [4][9] - The report recommends maintaining a high allocation to equity assets, with a focus on small-cap and growth styles for July, while suggesting stable fixed-income products for conservative investors [4][10] Group 2 - The report highlights the implementation of consumption policies aimed at enhancing consumer capacity and expanding financial support for consumption, with 19 key measures proposed [5][12] - A high-quality development plan for inclusive finance has been published, emphasizing the establishment of a comprehensive inclusive financial system over the next five years [5][12] - The second quarter monetary policy meeting indicated a more optimistic view of the domestic economy, while maintaining a stance of "moderate easing" in monetary policy [5][12] Group 3 - The report notes that the ETF market has performed well recently, with significant inflows into broad-based ETFs, particularly in the ChiNext index ETF and financial real estate sector ETFs [6][15] - The report mentions that 16 new ETFs were launched in the past two weeks, with a total issuance of 6.621 billion units, indicating growth in the ETF market [6][15] - The performance of thematic ETFs, such as those tracking AI and robotics, has been highlighted, with notable inflows and returns [6][17] Group 4 - The report discusses the wind power sector, forecasting a doubling of global offshore wind installations by 2025, with a compound annual growth rate of 21% expected over the next decade [19][20] - It also mentions the competitive landscape in the energy storage market, with prices for lithium iron phosphate battery systems continuing to decline, reflecting increased competition [20][21] - Investment recommendations include focusing on companies in the offshore wind sector and those involved in energy storage, highlighting specific firms such as Mingyang Smart Energy and Sunshine Power [21][22] Group 5 - The report emphasizes innovation in the liquor industry, with companies like Luzhou Laojiao focusing on low-alcohol and youth-oriented products to meet changing consumer demands [22][23] - It identifies opportunities in the beverage and snack sectors, driven by evolving consumer preferences and the introduction of functional products [22][23]

Group 1: Report Highlights - The report is the first part of the "Local Government Bond Investment Guide" series, observing the investment value of local government bonds from the perspectives of primary market issuance characteristics and secondary market trading characteristics [4]. - In recent years, the issuance rhythm of local government bonds has shown a significant end - of - month rush, with a gradually market - oriented pricing mechanism, anchoring the Treasury bond yield and the interest rate being close to the bidding lower limit, but there are "flying" phenomena in a few regions. - Local government bonds show anti - decline attributes during the adjustment period, and their allocation value is prominent in the interest rate downward cycle. There are obvious floating profit differentiations among regions, with smaller arbitrage spaces in economically developed regions and higher probabilities of floating profits in special refinancing bonds and regions with low "flying" rates [4]. Group 2: Report Industry Investment Rating - No investment rating information is provided in the report. Group 3: Core Views - The issuance rhythm of local government bonds is highly coordinated with policy guidance. From 2018 - 2024, the completion rate of the Ministry of Finance's guidance on the issuance time of special bonds exceeded 95%, and in years with strong policy statements, the end - of - month issuance completion rate was close to 100%. There is a significant end - of - month concentrated issuance pattern, with the average issuance volume in the second half of each month from 2021 - 2024 accounting for 75%, and in most months, the issuance volume in the last five days accounts for over 25% of the monthly total [6]. - The pricing mechanism of local government bonds has evolved over four key stages in the past decade. Currently, 89.5% of the local government bonds issued in 2024 still use the Treasury bond yield as the sole pricing benchmark, and the "Treasury bond + local government bond yield curve" dual - anchor model piloted in Shenzhen provides a practical sample for regional innovation. Most local government bonds are issued at the lower limit of the bidding range, with only a few showing significant "flying" phenomena. The term spread structure is significant, with the issuance spread of bonds over 10 - year terms being 8bp higher on average than that of 2 - 7 - year varieties from December 2024 to January 15, 2025 [7]. - Different types of institutions have different allocation strategies. Commercial banks' comprehensive returns on general and special bonds are slightly lower due to capital occupation for credit risk weighting, while public funds are more competitive without such constraints and enjoying tax preferences. Institutions' operations during adjustment and non - adjustment periods are significantly different, and the post - listing valuations of general and special bonds are still differentiated [8]. - Local government bonds show unique risk - return characteristics in the interest rate cycle. Their defensive attributes were stronger than Treasury bonds from October 2022 to September 2023, but their offensive attributes increased and the volatility was higher than Treasury bonds since September 2023. In 2024, local government bonds had the smallest adjustment range and the strongest anti - decline ability during multiple adjustments, and there were significant differences in floating profits and losses among regions. In 2024, the proportion of coupon income of short - end bonds decreased, and the proportion of riding income increased significantly [9]. Group 4: Summaries by Directory Local Debt Issuance Rhythm Follows Guidance - The issuance progress of new special bonds each year generally meets the requirements of the guidance, and most of the issuance work is completed before the guiding month. In 2018 - 2021, the actual issuance completion rate was mostly higher than 95% by the end of the guiding month. In 2024, the issuance progress of about 290 billion yuan of special bonds was close to 100% by the end of October [18]. - There is a significant end - of - month rush in the issuance of new special bonds. From 2021 - 2024, the issuance volume in the second half of the month was significantly higher than that in the first half. In 2024, the second - half issuance accounted for 79% of the annual total, and for local government bonds in general, there was a peak supply at the end of the month, with the issuance proportion from the 26th to the 31st of each month in 2024 accounting for more than 25% of the monthly total [23]. Gradual Marketization of Local Debt Primary Pricing - The pricing of local government bond issuance has gradually moved away from the fixed spread model and towards a more market - oriented direction, going through four stages: the market exploration stage (2015 - 2018), the administrative spread constraint stage (2018 - 2021), the lower - limit breakthrough pilot stage (2021 - 2022), and the yield curve anchoring stage (2022 - present). Currently, the overall spread has gradually declined to below 10bp [7]. - Most bonds are still anchored to the Treasury bond yield curve, and only Shenzhen bonds use a dual - pricing mechanism. Among the 200 local government bond sub - samples issued in 2024, 89.5% are anchored to a single curve, and the upper - limit expression of most bonds shows a certain concentration, with the proportion of bonds with an upper limit of 30% above the Treasury bond yield average being the largest [30]. - In 2024, the range of the arithmetic mean of primary spreads among regions could exceed 7bp. The "flying" degree varies among regions, with some regions having a high average "flying" index and some economically developed regions having no "flying" phenomenon. There have also been cases of postponed bond issuances [40]. - China's local government bonds mainly use Dutch auctions. High - flying - index bonds generally have weak demand but may have extreme heat due to liquidity premiums, low - flying - index bonds have stable demand, and medium - flying - index bonds have highly volatile demand due to divided subscription expectations [45]. - From December 2024 to January 15, 2025, the issuance spreads of local government bonds over 10 - year terms increased significantly, while those of 2 - 7 - year bonds decreased slightly. The primary spread of local government bonds is related to the Treasury bond yield and its own liquidity premium [52]. Differentiated Institutional Behaviors and Market Liquidity Structure - Commercial banks need to account for capital occupation costs when investing in bonds, resulting in lower comprehensive returns on general and special bonds. Public funds are more competitive without such constraints and enjoying tax preferences [67]. - In the local government bond market, insurance companies continuously increase their holdings during non - adjustment periods and increase their holdings counter - cyclically during adjustment periods. Banks, funds, and securities companies have different trading behaviors during adjustment and non - adjustment periods, and the net purchases of each institution during adjustment periods are significantly differentiated [71]. - Theoretically, the yield of special bonds should be higher than that of general bonds. After listing, the valuations of general and special bonds are still differentiated, indicating that the market has implicit pricing differences for factors such as liquidity [79]. Evolution of Risk - Return Characteristics and Strategy Selection - From 2022 - 2023, local government bonds showed stronger defensive attributes than Treasury bonds in the first bull - bear market but stronger offensive attributes in the second one. In 2024, local government bonds had a smaller adjustment range and stronger anti - decline ability during multiple adjustments, and there were significant differences in floating profits and losses among regions [9]. - In 2024, the proportion of coupon income of short - end bonds decreased, and the proportion of riding income increased significantly, reflecting the decline in interest rates and the magnification of the duration effect [9].

Group 1: Banking Sector Insights - The quantitative backtest results indicate that undervalued strategies contribute to excess returns while effectively reducing drawdowns [1] - High ROE and the strategy based on "provision coverage ratio - non-performing loan ratio - attention ratio" show superior performance, while short-term improvement strategies underperform [1] - The combined strategy of high ROE/PB and high "provision coverage ratio - non-performing loan ratio - attention ratio" × dividend yield has achieved over 300% cumulative excess returns since 2011, highlighting the importance of quality and value in bank stock investments [1] Group 2: Dividend Strategy Analysis - Current dividend strategies exhibit significant bottom characteristics, with a rare "negative return - high volatility" feature over the past three months, indicating potential for recovery [2] - The 40-day excess return of dividends is nearly -10% below the annual average, suggesting a high probability of excess return reversion based on historical patterns [2] - The dividend ETF is in a net subscription state with reduced trading volume, typically corresponding to a bottom phase for the strategy [2] Group 3: Copper Industry Outlook - The expectation of increased tariffs on imported copper in the U.S. is likely to push copper prices back to peak levels, with COMEX copper prices reaching new highs compared to LME prices [3] - The tariff impact on domestic demand in China is expected to be limited, but it may restrict imports of refined copper and scrap copper [3] - Positive policy developments and market dynamics are expected to accelerate the convergence of trading and fundamental factors, leading to a bullish outlook for copper prices [3] Group 4: Quantitative Strategy Improvements - The traditional asset rotation framework has been improved to address issues such as low flexibility and fixed scoring standards, enhancing the model's comprehensiveness and adaptability [4] - The industry rotation model constructed from 26 indicators achieved a 32% annualized absolute return during the backtest period from 2017 to January 2025, outperforming the Shanghai and Shenzhen 300 index [5] Group 5: U.S. Stock Market Strategy - U.S. stock markets are experiencing downward pressure due to uncertainties surrounding Trump's policies and tariffs, with major indices giving back all gains since the Fed's rate cuts in September 2023 [7] - Economic indicators from the U.S. have underperformed expectations, and trade tensions may further weaken the economic fundamentals, leading to capital rotation out of U.S. equities [7] - The outlook for U.S. stocks is expected to remain volatile until late March or early April, with recommendations to focus on healthcare, consumer services, traditional telecommunications, and utilities sectors [7] Group 6: Bond Market Insights - The demand for bond ETFs is increasing due to heightened market volatility, offering investors a more convenient and diversified investment tool compared to traditional bond allocations [8] - Local government bond ETFs are noted for their potential yield enhancement and better drawdown control compared to other bond ETF types [8] Group 7: Magnesium Alloy Market Potential - The demand for magnesium alloys in China is expected to grow due to rich domestic magnesium production and the lightweighting needs in automotive and robotics sectors [10] - The semi-solid magnesium alloy forming technology is anticipated to open new growth avenues for leading companies in the industry [10] Group 8: Dairy Industry Forecast - The potential implementation of child-rearing subsidies by 2025 may improve birth rates, positively impacting the demand for infant formula and cheese products [11] - The expected increase in the population of children aged 0-6 years is likely to boost the market outlook for children's cheese products [11]