Zhongjin: Short-term market trends are dominated by volatility, with opportunities for upward movement in the medium to long-term.

CICC released a research report, stating that based on statistical analysis of market historical data from 2000-01-01 to 2024-10-31, it was found that after the A-share market experienced a rapid rebound of over 15% within 5 days, there is a high probability of a short-term pullback. The average return in the following month is around -4%, but looking at the medium to long-term, the returns are relatively better, with an average return of nearly 10% in the following year for broad-based indexes. Therefore, CICC believes that in the short term, the overall market trend will mainly be consolidation, with upside opportunities in the medium to long term. Style judgment: Growth potential can be expected, focus on small caps. Firstly, from a quantitative perspective, CICC reviewed the style performance before and after the bottom rebound in the market three times in history. Despite differences in macro and policy environments during the three bottom rebounds, the statistical results from historical data show that styles that were previously weak tended to have larger increases after the market rebounded. Therefore, growth styles that were under pressure previously may perform better than other styles in the future. Secondly, judging from the dimension of the difference between growth and value style profits. a) Macrologically, relevant macro indicators suggest that the Chinese economy may be on the verge of a bottoming out and rebounding, which bodes well for growth style profits in the future. b) From a medium-term perspective, the number of companies in the profit period for growth and value styles is marginally rising. From the perspective of the life cycle of companies, growth styles may have stronger future profit capabilities. c) From a micro perspective, analysts unanimously expect the difference in EPS between growth and value styles to be increasing, indicating that sell-side analysts have stronger confidence in the future profit improvements of growth styles. At the same time, the style study framework of the macro-environment market status and short-term congestion levels indicates: a) During periods of investor sentiment improvement, growth styles tend to perform well, while dividend styles are relatively weak. However, due to the rapid increase in the fundraising amount of stock funds recently, the relative advantage of dividend styles may be under pressure. b) At the micro level, as the market rapidly rises and attracts a large number of investors, the congestion levels of major styles are rapidly increasing. Growth and dividend styles both issued congestion signals on September 27 and October 8. Therefore, the mainstream style of the market, including the overall market, will need some time to consolidate in the short term. Lastly, the wave of mergers and acquisitions may benefit small and medium-sized companies and industries related to new quality productivity: a) CICC found that merger activities are more likely to occur in small and medium-sized companies, and in 2015, when there were more mergers in small caps, small cap stocks performed well overall. Therefore, CICC believes that under the new policy support in 2024, the future M&A market activity may increase, benefiting the performance of small and medium caps. b) In 2024, policies guiding listed companies to transform and upgrade towards new quality productivity, CICC believes that future M&A projects may focus on industries related to new quality productivity. Based on historical data analysis, CICC believes that industries with active M&A activities may have better performance, and in the future, non-banking, new quality productivity industries, and "Dual Innovation" sector companies may have structural opportunities. Quantitative strategy and products Review of 2024: Large cap value demonstrates its advantage, quantitative has an edge during rebounds. 1) Market performance dimension: Large cap and value styles performed well this year, with value factors overall outperforming growth factors; 2) Public offering quantitative products: Public offering index-enhanced products showed some advantages over active management products, especially during the significant rebound in the market in September, their performance was relatively good. Quantitative products: Focus on active quantitative products in a small-cap growth environment. Looking back at historical data in stages where small-cap growth styles had the upper hand in 2010, 2013, 2015, and 2021, active quantitative products overall had good performance. CICC believes that quantitative investment may have an advantage in stocks of small-cap growth styles with low institutional participation, so it may be worth considering focusing on active quantitative products if the future trend leans towards small-cap growth. Quantitative strategy: Alternative data + machine learning still have development potential. CICC believes that the development of quantitative strategies mainly relies on two paths: expanding the boundaries of data and developing new models. On one hand, machine learning techniques like large language models can help explore alternative data sources that were previously underutilized in the finance sector. On the other hand, continuously evolving deep learning models can better extract non-linear information from existing data. The machine learning stock selection factors and alternative data models developed by CICC in the past still achieved robust out-of-sample performance in the high-volatility environment of 2024, indicating that they still have development potential. Risk warning: All analysis is based on historical data, and there is a risk of historical data not being repeated or validated.