Note: This column publishes historical research reports of companies in chronological order from old to new for readers' retrospective reference. The views and data in this article are based on the original research time, and some information may have changed.

Macro-environmental analysis

1. Economic fundamentals

- Strong fundamentals in the US

• The non-farm payrolls for June, announced on July 5, increased by 147,000, exceeding expectations, but there are concerns about the employment structure.

• In June, the ISM service industry PMI rebounded to 53.2. Inflation stickiness still exists, and it is difficult for the Fed to clearly turn dovish.

-China 's economic recovery slows down

• The official manufacturing PMI in June was 49.9 and the non-manufacturing PMI was 51.0, indicating that the economy has improved marginally but has not yet stabilized in the expansion range.

• Weak exports have added to the deleveraging pressure on the real estate industry, and policies are expected to increase the "loose fiscal policy + stable monetary policy" combination.

2. Important policy issues

- US policy trends

• Trump signed the "Big, Beautiful" bill, which plans to cut taxes by $4 trillion and cut spending by $1.5 trillion in the next 10 years, which will have a great impact on the US fiscal deficit.

• Regulatory relaxation and fiscal expansion go hand in hand. Trump's campaign team proposed a $3.3 trillion tax cut bill and pushed for the relaxation of bank SLR supervision. The market expects that if Trump is elected, a short-term stimulus model of "fiscal + loose credit" will be formed, but it will also increase future debt pressure and the risk of dollar stability.

-China Policy Highlights

• Fiscal policy pre-positioning + credit support expansion: The State Council Executive Meeting proposed "supporting new quality productivity, promoting equipment renewal, and expanding high-tech manufacturing investment", and urged local governments to speed up the issuance of special bonds. The policy focus shifted to "bottom-up growth + efficiency improvement structure".

3. Funding Preference

- Risk appetite of domestic and foreign funds has rebounded.

Investment Tips and Major Asset Class Strategies

1. Interest rate bond market analysis

- Market performance : The structural characteristics of "short-end downward trend dominated and long-end volatility and differentiation". From the yield curve, the 5-year Treasury active bond fell by 1.15bp to 1.47%, and the 10-year Treasury active bond fell by 0.5bp to 1.64%, and the term spread further widened.

- Driving factors: Loose funding and allocation demand push short-term interest rates downward, while long-term interest rates are constrained by supply pressure and policy expectations.

- Outlook: Institutional allocation willingness may pick up in the second half of the year. In the past, interest rates have mostly declined after narrow fluctuations, and interest rates have tended to decline inertially after the July cross-season in three of the past five years. It is expected that the yield may fall further to a new low.

2. Credit bond market analysis

- Market performance: The funding conditions in the domestic primary and secondary credit bond markets became loose after the cross-quarter, and the trading sentiment of credit bonds warmed up. The overall yield trend was mainly downward, especially the short-term and sinking-quality municipal investment bonds, which fell more sharply.

-Core logic: The advancement of the debt-reduction plan will intensify the scarcity of coupon assets. If the subsequent funding interest rate remains at a relatively low level, it is expected that the coupon strategy will continue to gain momentum and the shortage of high-yield assets will continue.

-Offshore debt trends: The secondary market continued to heat up on Monday this week, with various structures concentratedly issued in the primary market. Funding sentiment was also relatively hot, and the 364 regulator has not yet given clear intervention signals.

3. Analysis of A-share and Hong Kong stock market

- A-share market

• This week, the total trading volume of the Shanghai and Shenzhen stock markets was RMB 7.33 trillion, with an average daily trading volume of RMB 1.47 trillion (last week's average daily trading volume was RMB 1.35 trillion), an increase of 8.9% month-on-month, indicating that market trading activity has increased.

• After the previous rally, the market faced some profit-taking pressure this week . At the same time, external factors also had a certain impact on market sentiment.

-Hong Kong Stock Market

• The Hang Seng Index fell 0.64%, and the Hang Seng Tech Index fell 0.43%;

• Some technology stocks and new consumer sectors that had performed strongly in the previous period have seen a significant adjustment. Some individual stocks had a large increase in the previous period, and funds were more willing to take profits this week, resulting in a correction in stock prices.

• Defensive sectors such as telecommunications and public utilities performed steadily. Due to their low valuations and stable cash flow characteristics, they attracted the attention of funds during market adjustments and showed a certain degree of resistance to declines.

4. Convertible bond market analysis

-Index hits new highs: CSI Convertible Bond Index rose 1.06%, continuing to hit a new high since June 2015. CSI 300 rose 1.18%, and Wind Micro Cap Index rose 3.11%.

- Valuation contradiction: the median convertible bond price rose to 124.90 (123.44 last Friday); the median yield to maturity (YTM) was -2.76%; the median pure bond premium rate was 18.13%, and the conversion premium rate was 27.61%, both of which were in the low range of the past four years.

- Beware : Some convertible bonds have shown signs of overpricing due to their continued price increases. Micro-cap stocks have led the gains this year but lack fundamental support. In addition, trading is overcrowded, so adjustments may occur in the future.

5. Commodity market analysis

-Domestic goods: The latest PMI index shows that the manufacturing industry has temporarily recovered. Both new orders and production indexes have returned to the expansion range, reflecting that domestic demand may have recovered in the short term. The macroeconomic atmosphere is bullish for commodities, but the reciprocal tariff exemption is about to expire, increasing uncertainty.

-International commodities: The number of non-farm payrolls in the United States increased by 147,000 in June, significantly higher than the expected 110,000, and expectations for a rate cut in July further declined. On the other hand, the passage of the "big and beautiful" fiscal bill by the United States will further increase the deficit. Although it will help economic growth and reduce the risk of stagnation in the short term, it may intensify expectations of a depreciation of the US dollar in the medium and long term, forming a macro-multiple long and short pattern.

- Policy impact: The Central Financial and Economic Commission meeting emphasized the governance of "involutionary" competition and the orderly withdrawal of backward production capacity. A new round of industry capacity reduction process has started, boosting commodity sentiment. High-capacity industries such as photovoltaics, steel, and cement have begun to reduce production one after another. Pay attention to the pace of implementation of anti-involutionary policies in related industries and the transmission of upstream and downstream industries.

6. Overseas market assets - US bonds and US stocks

- Inflation : If there is no hard inflation data as expected in the next few months, it will also be a pressure on the Federal Reserve itself. The inflation expectations that were previously worried about have been significantly reduced due to Trump's tariff TACO.

-Employment : The latest non-farm payrolls increased by 147,000, higher than the revised 144,000 in May; the unemployment rate unexpectedly fell to 4.1%, while economists had expected a slight increase to 4.3%. The report showed that the labor market remained stable, and the market generally lowered its expectations for the Fed to cut interest rates in July.

The content of this article only represents the analytical views of the team's investment research personnel, and does not represent the authoritative views of any organization. The data does not constitute any investment advice, and the information in this article does not constitute any investment opinions. It is for readers' reference only.

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