Report Industry Investment Rating - Not provided in the given content Core Viewpoints - In July, the year-on-year growth rate of domestic household RMB loans dropped to 2.65%, and the growth rate of household medium - and long - term loans also fell to 3.43%. From January to July, the year-on-year growth rate of fixed - asset investment dropped to 1.60%, about 1.2 percentage points lower than that from January to June. The long - term Treasury bond yield continued to rise, which may reflect the market's expectation of more real - estate support policies [2][10]. - The PPI in the US in July exceeded expectations, with a year - on - year increase of 3.3% (the highest level since February this year) and a month - on - month increase of 0.9% (the largest increase since June 2022). The follow - up pressure transmission needs attention. The Fed's scenario of more than 2 interest rate cuts this year still requires the decline of inflation data as support [2][12]. - The year - on - year decline of the production material price index continued to narrow. From August 11th to 15th, 2025, the average wholesale price of pork decreased by 1.17% month - on - month and 25.69% year - on - year; the Shandong vegetable wholesale price index increased by 7.22% month - on - month and decreased by 26.99% year - on - year. The year - on - year decline of the production material price index narrowed to 5.29% [2]. - From August 1st to 14th, 2025, the average daily trading area of commercial housing in 30 large and medium - sized cities was about 181,000 square meters, while in August 2024, it was about 232,000 square meters per day [2]. Summary According to the Directory High - Frequency Data Panoramic Scan - In July, the growth of domestic household loans and fixed - asset investment slowed down. The long - term Treasury bond yield should have faced downward pressure but continued to rise, which may reflect the market's expectation of real - estate support policies. The new - issued mortgage rate in the second quarter decreased again, and the adjusted new - issued mortgage rate after tax and capital cost continued to decline, but the trend slowed down [2][10][11]. - The PPI in the US in July exceeded expectations. If the upstream price - increase pressure can be transmitted to consumer prices, it may form re - inflation pressure; otherwise, it may affect corporate inventory investment [2][12]. - Various high - frequency data showed different trends. For example, food prices, consumer goods prices, energy prices, and real - estate transaction data all had their own changes in terms of month - on - month and year - on - year comparisons [15][17]. High - Frequency Data and Important Macroeconomic Indicators Trend Comparison - Multiple high - frequency data were compared with important macroeconomic indicators, such as the comparison between the year - on - year change of LME copper spot settlement price and the year - on - year change of industrial added value and PPI, and the comparison between the year - on - year change of crude steel daily output and the year - on - year change of industrial added value [17][33]. Important High - Frequency Indicators in the US and Europe - Some important high - frequency indicators in the US and Europe were presented, including the US weekly economic indicators, initial jobless claims, same - store sales growth, and the Chicago Fed Financial Conditions Index, as well as the implied interest - rate hike/cut prospects of the US Federal Funds Futures and the ECB's overnight index swaps [92][94][103]. Seasonal Trends of High - Frequency Data - The seasonal trends of high - frequency data were analyzed, with indicators such as the monthly average of crude steel daily output and the production material price index showing their respective seasonal changes [105]. High - Frequency Traffic Data in Beijing, Shanghai, Guangzhou, and Shenzhen - The year - on - year changes in subway passenger volume in Beijing, Shanghai, Guangzhou, and Shenzhen were presented [160].

Group 1: Inflation Insights - The July CPI data showed stagnation, while the PPI unexpectedly rose by 0.9% month-on-month, indicating potential inflationary pressures[2] - Trade services were the main driver of the PPI increase, suggesting that traders may be raising prices to enhance profit margins in response to tariff impacts[15] - The transmission of PPI to CPI is expected to have a time lag, with wholesale trade growth contributing more significantly than retail trade[17] Group 2: Federal Reserve Rate Decisions - The decision to lower rates in September is seen as a political issue, while the extent of the cut is viewed as an economic question[3] - Current data trends suggest a strong likelihood of a rate cut in September, with expectations leaning towards two rate cuts within the year[3] - The anticipated rate cut may not be a solution but rather the beginning of new challenges, particularly concerning persistent inflation[26] Group 3: Economic Risks - Risks include aggressive tariff policies leading to stagflation or recession, with dual pressures from debt burdens and monetary tightening[27] - The potential for tariff expansions to exceed expectations could result in a significant slowdown in global economic growth[27] - Geopolitical tensions may increase asset price volatility, exacerbating market fluctuations[27]

Quantitative Models and Construction Methods 1. Factor Name: Beta Factor - **Construction Idea**: The Beta factor measures the sensitivity of a stock's returns to the overall market returns, indicating its systematic risk[29] - **Construction Process**: - Calculate the covariance between the stock's returns and the market returns - Divide this covariance by the variance of the market returns - Formula: $ \beta = \frac{\text{Cov}(R_i, R_m)}{\text{Var}(R_m)} $ where $R_i$ is the return of the stock and $R_m$ is the return of the market[29] - **Evaluation**: The Beta factor is a widely used measure of risk, indicating how much a stock's price is expected to move relative to the market[29] 2. Factor Name: Liquidity Factor - **Construction Idea**: The Liquidity factor assesses the ease with which a stock can be traded without affecting its price, reflecting the market's depth and breadth[29] - **Construction Process**: - Measure the average daily trading volume - Calculate the bid-ask spread - Combine these metrics to form a composite liquidity score - Formula: $ \text{Liquidity} = \frac{\text{Average Daily Volume}}{\text{Bid-Ask Spread}} $[29] - **Evaluation**: The Liquidity factor is crucial for understanding the trading costs and potential price impact of large trades[29] 3. Factor Name: Profitability Quality Factor - **Construction Idea**: The Profitability Quality factor evaluates the financial health and earnings quality of a company, focusing on sustainable and high-quality earnings[29] - **Construction Process**: - Analyze various financial ratios such as return on equity (ROE), return on assets (ROA), and profit margins - Combine these ratios into a composite score - Formula: $ \text{Profitability Quality} = \frac{\text{ROE} + \text{ROA} + \text{Profit Margin}}{3} $[29] - **Evaluation**: This factor helps in identifying companies with strong and sustainable earnings, which are likely to perform well in the long term[29] Factor Backtesting Results 1. Beta Factor - **IR**: 0.45[29] - **Annualized Return**: 8.5%[29] - **Volatility**: 12.3%[29] 2. Liquidity Factor - **IR**: 0.38[29] - **Annualized Return**: 7.8%[29] - **Volatility**: 11.5%[29] 3. Profitability Quality Factor - **IR**: 0.52[29] - **Annualized Return**: 9.2%[29] - **Volatility**: 10.8%[29] Additional Factors and Their Performance 1. Factor Name: Skewness Factor - **Construction Idea**: The Skewness factor measures the asymmetry of the return distribution, indicating the potential for extreme positive or negative returns[33] - **Construction Process**: - Calculate the third moment of the return distribution - Normalize by the cube of the standard deviation - Formula: $ \text{Skewness} = \frac{E[(R - \mu)^3]}{\sigma^3} $ where $R$ is the return, $\mu$ is the mean return, and $\sigma$ is the standard deviation[33] - **Evaluation**: This factor is useful for understanding the tail risks and potential for extreme outcomes in the return distribution[33] 2. Factor Name: Position Change Factor - **Construction Idea**: The Position Change factor tracks changes in the holdings of large institutional investors, indicating their sentiment and market positioning[33] - **Construction Process**: - Monitor the quarterly filings of institutional investors - Calculate the net change in positions for each stock - Formula: $ \text{Position Change} = \frac{\text{Current Quarter Holdings} - \text{Previous Quarter Holdings}}{\text{Previous Quarter Holdings}} $[33] - **Evaluation**: This factor provides insights into the buying and selling activities of major market players, which can influence stock prices[33] Factor Backtesting Results 1. Skewness Factor - **IR**: 0.42[33] - **Annualized Return**: 8.1%[33] - **Volatility**: 11.9%[33] 2. Position Change Factor - **IR**: 0.47[33] - **Annualized Return**: 8.7%[33] - **Volatility**: 11.2%[33]

Investment Rating - The report revises down the full-year 2025/26 forecast of headline PPI inflation to -2.4%/-0.7% yoy from -2.1%/-0.6% yoy previously, indicating a bearish outlook on the industry [10]. Core Insights - China's headline CPI inflation remained unchanged at -0.1% yoy in May, with a decline in goods prices offset by higher services prices [1][3]. - Headline PPI inflation fell to -3.3% yoy in May, down from -2.7% yoy in April, primarily due to falling commodity prices [1][9]. - The report indicates that the weak PPI data suggests more deflationary pressures on China's PPI inflation for 2025 and 2026 than previously anticipated [10]. Summary by Sections CPI Analysis - In May, the CPI was -0.1% yoy, with a month-on-month increase of +0.5% (annualized, seasonally adjusted) [2][3]. - Food inflation decreased to -0.4% yoy in May, primarily due to lower prices of fresh vegetables, while pork prices rose by 3.1% yoy [4]. - Non-food CPI inflation was flat at 0% yoy, with fuel costs falling by 12.9% yoy [5][7]. PPI Analysis - Year-over-year PPI inflation fell to -3.3% yoy in May, with deeper deflation mainly from price declines in upstream sectors like energy and metals [9]. - Month-over-month PPI inflation declined to -5.1% (annualized, seasonally adjusted) in May [9]. - PPI inflation in producer goods fell to -4.0% yoy in May, while consumer goods edged up to -1.4% yoy [9]. Forecast Revisions - The report incorporates weak PPI data, leading to a downward revision of the full-year 2025/26 forecast of headline PPI inflation to -2.4%/-0.7% yoy [10].

Economic Indicators - May 2025 domestic CPI is expected to decrease by 0.4% month-on-month and year-on-year[3] - May 2025 PPI is projected to decline by 0.3% month-on-month and 3.2% year-on-year[3] - Industrial added value is anticipated to slightly drop to 5.5% year-on-year in May 2025[3] - Retail sales of consumer goods are expected to decrease to 5.0% year-on-year in May 2025[3] - Fixed asset investment is forecasted to remain stable at 4.0% year-on-year[3] Trade and Financing - Exports in May 2025 are expected to rise by approximately 8.5% year-on-year[3] - Imports are projected to increase by 4.5% year-on-year[4] - Trade surplus is estimated at $971 million in May 2025[4] - Monthly increase in credit is expected to be 11,000 million yuan[4] - Total social financing is projected to increase by 22,000 million yuan in May 2025[4]

Economic Growth Indicators - The Guosen High-frequency Macro Diffusion Index A remains negative, while Index B continues to decline, indicating weak economic growth momentum[1] - Investment sector sentiment has decreased, while consumption and real estate sectors remain stable[1] - Seasonal analysis shows Index B typically rises by an average of 0.17 weekly after the Spring Festival, but this week it fell by 0.43, underperforming historical averages[1] Price Trends - Food prices have increased, while non-food prices have decreased; May CPI food prices are expected to be around -1.0% month-on-month, and overall CPI is projected to decline to -0.4% year-on-year[2] - The Producer Price Index (PPI) is expected to decrease by approximately 0.2% month-on-month and fall to -3.1% year-on-year[2] Asset Price Predictions - Current domestic interest rates are low, and the Shanghai Composite Index is high; predictions indicate a rise in the ten-year government bond yield and a decline in the Shanghai Composite Index for the week of June 6, 2025[1][19] - The predicted ten-year government bond yield for the week of June 6 is 2.24%, while the Shanghai Composite Index is expected to be 3,101.65[20]

Core Insights - The report highlights a significant increase in the market share of the analyzed sector, with a growth rate of 91% in the last quarter, indicating strong demand and potential for further expansion [2][4]. - The report projects a 24% increase in revenue for the upcoming fiscal year, driven by strategic initiatives and market trends [2][4]. - Inflation rates are expected to stabilize around 2.3%, which may influence consumer spending and investment strategies within the industry [4]. Industry Overview - The industry is experiencing a robust growth trajectory, with key performance indicators showing a consistent upward trend in market demand and profitability [2][4]. - The report notes that the sector's performance is closely tied to global economic conditions, particularly in relation to commodity prices and supply chain dynamics [4][5]. - Emerging technologies and innovations are expected to play a crucial role in enhancing operational efficiencies and driving competitive advantages [4][6]. Financial Performance - The financial metrics indicate a strong balance sheet, with a projected increase in net income by 36% year-over-year, reflecting effective cost management and revenue growth strategies [4][6]. - Key financial ratios, such as return on equity (ROE) and profit margins, are expected to improve, suggesting a healthy financial outlook for the company [4][6]. - The report emphasizes the importance of maintaining liquidity to navigate potential market fluctuations and capitalize on investment opportunities [4][6]. Strategic Initiatives - The company is focusing on expanding its product offerings and entering new markets to diversify revenue streams and mitigate risks [2][4]. - Strategic partnerships and collaborations are being pursued to enhance market reach and leverage complementary strengths [4][6]. - The report outlines plans for increased investment in research and development to foster innovation and maintain a competitive edge [4][6].

Economic Growth - The industrial added value is expected to grow by 5.6% year-on-year in January-February 2025, a decrease of 0.6 percentage points from December 2024[8] - Fixed asset investment is projected to increase by 4.9% year-on-year in January-February 2025, up by 1.7 percentage points from the previous period[9] - Social retail sales are anticipated to rise by 5.3% year-on-year in January-February 2025, an increase of 1.6 percentage points compared to earlier[9] Trade and Inflation - Exports are expected to grow by 4.3% year-on-year in January-February 2025, down by 6.4 percentage points from the previous period[12] - Imports are projected to increase by 2.7% year-on-year in January-February 2025, up by 1.7 percentage points from October 2024[37] - The Consumer Price Index (CPI) is forecasted to decline by 0.5% year-on-year in February 2025, a drop of 1.0 percentage point from the previous period[41] Monetary Policy - New RMB loans are expected to reach 14,800 billion yuan in February 2025, an increase of 300 billion yuan year-on-year[46] - M2 money supply is projected to grow by 7.0% year-on-year by the end of February 2025, remaining stable compared to the previous period[51] - The RMB exchange rate is anticipated to fluctuate between 7.1 and 7.3 in March 2025 due to various external factors[58]

Core Viewpoint - The article emphasizes the complexity of price level formation and regulation in macroeconomic management, advocating for a broader price index system that combines various economic indicators to better reflect the overall economic situation [2][6][7]. Group 1: Price Index System - A comprehensive price index system is necessary to accurately gauge macroeconomic conditions, moving beyond the reliance on CPI as the sole indicator [4][7]. - Current indicators like CPI (0.5%), PPI (-2.3%), and GDP deflator (-0.7%) show discrepancies that suggest a need for a more integrated approach to price measurement [5][10]. - The integration of both stock and flow price indicators, as well as financial and real economy indicators, is essential for effective macroeconomic analysis [6][7]. Group 2: Micro and Macro Price Index Divergence - There exists a divergence between micro and macro price indices, particularly during structural changes or technological innovations, which traditional methods struggle to capture accurately [9][11]. - The introduction of new products and technologies can lead to an underestimation of price increases, complicating the understanding of actual economic conditions [9][10]. - The current economic environment in China, characterized by rapid industrial upgrades and shifts in consumption patterns, necessitates a nuanced understanding of price dynamics [11]. Group 3: Historical Insights and Policy Implications - Historical experiences indicate that managing deflation is more challenging than managing inflation, with different impacts on producers and consumers [13][14]. - Effective price governance requires not only short-term policy measures but also medium-term structural reforms to address underlying market distortions [15][16]. - The importance of restoring corporate vitality and ensuring efficient resource allocation is highlighted as crucial for overcoming economic stagnation and enhancing wage levels [16].