Sinolink: The current improvement in domestic fundamentals is expected to continue, with a focus on "tech bull" structurally.

Sinolink released a research report, stating that after the central bank cut interest rates, the fiscal policy was implemented as scheduled, launching a 12 trillion debt-to-equity swap plan. After the policy is implemented, the pressure of local debt will be greatly reduced, which will help localities to lighten their burdens, use more fiscal resources to promote economic growth. In terms of overseas, the results of the U.S. elections have limited impact on the domestic balance sheet within the year; under the Federal Reserve framework, the interest rate reduction cycle remains unchanged, continuing to focus on the trend of the unemployment rate. In the short term, the anchor for market pricing is the substantial improvement in the domestic fundamentals. If M1 sees a rebound, it will enhance the market's upward momentum and increase the upward slope of the market. We are optimistic about the direction of "growth greater than consumption" focusing on mid-cap and undervalued stocks with buyback and M&A expectations, structurally focusing on "technology bull". Sinolink's main points are as follows: The improvement in domestic fundamentals in this round is expected to continue for 3 to 4 months, continuing to support the market rebound. Internally, with the successive implementation of the "comprehensive policies", there are signs of marginal improvement from the macro to micro levels, which are expected to further support the market rebound. From the economic data in October, improvement has begun to show, with M1 in October down by 6.4% year-on-year, turning point from September on a month-on-month basis. Considering that M1 leads PPI by about 6-9 months, it can be expected to see a turning point in PPI in Q3 of 25 years, when the market sees a profitability bottom. The Minister of Finance stated that in 25 years the policy is expected to increase support for the "two new" sectors, and the sustainability of social retail improvement is worth looking forward to; in October, the price index of new residential buildings in Shanghai and Shenzhen was positive on a month-on-month basis, and the price index of second-hand residential buildings in Beijing, Shanghai, and Shenzhen all turned positive that month, showing that stable housing prices play an important role in stabilizing the overall asset price system. Externally, on the one hand, the results of the U.S. elections have limited impact on the domestic balance sheet within the year; on the other hand, under the Federal Reserve framework, the interest rate reduction cycle remains unchanged: indicating potential risks are still present. You need to be aware of the median level of the unemployment rate prediction of 4.4%, once surpassed, it means that overseas risks will heat up again. In the short term, the anchor for market pricing is the substantial improvement in the domestic fundamentals. If M1 rebounds as expected, it will enhance the market's upward momentum and increase the slope of market rise. The maintenance of "loose monetary policy + loose fiscal policy" in the domestic economy focuses on strengthening debtors, with hopes of repairing the cash flow and balance sheets of local, corporate, and household sectors, thus improving domestic demand conditions by Q4 of 2024 and the marginal increase in the growth rate of fiscal expenditures, supporting the fundamentals repair, driving the market to continue to rebound. In terms of continuous cycles, refer to 2013 Q3 and 2019 Q1, one can understand the logic that the recovery of the debtor side brings about the improvement of the fundamentals it often lasts for 3 to 4 months, and it is expected that the fundamentals will improve by the end of this year or even into January next year. Furthermore, the key factor in whether the market can reverse its trend is whether the "profitability bottom" can appear faster, which points to further increases in the total volume of finance and a structural shift towards the "asset side". Considering that the "profitability bottom" has not yet appeared, it is difficult to expect the rotation of major sectors such as "technology-consumer-cycle" to occur. Overall, the trend is showing a "financial stage, growth sings opera" and a "big stage, small and medium-sized sings opera", so attention should be paid to the flexibility of the denominator + the restraint weakness of the numerator, being optimistic about the direction of mid-cap and undervalued stocks with buyback and M&A expectations, focusing structurally on the "technology bull". How to select current theme investment opportunities? Currently, the domestic liquidity has significantly loosened, the fundamentals have shown a turning point but have not yet shown a clear strength, and market sentiment is at a high level, which is a good opportunity to participate in thematic investments. By reviewing the rebound range from February to March of this year, it can be observed that: 1) Leveraged funds have played an important role in thematic investments, with the trend of thematic indices highly correlated with the increase or decrease of leveraged funds, and the inflow of leveraged funds is proportional to the increase in the rise of thematic investments, and there is a strong momentum effect before the market peaks; 2) The greater the retracement from the high point and the newer the theme, the greater the increase in the rise. Based on these characteristics, 10 concept indices have been carefully selected from the 293 popular concept indices in Wind. These indices are as follows: 1) First, screen out the 53 concept indices with a significant increase in leveraged funds and a large decline since the high point; 2) Then, select the 19 concept indices with marginal improvement in performance; 3) Further narrow down to the 10 concept indices with the most recent release, mainly including concepts such as Zhilu AI, Carlu Yun, PEEK material, and SPD. November sector allocation: Focus on the technology theme First choice for growth: TMT, especially electronics, computers; defense industry; pharmaceuticals, biology, etc. Second choice for consumption: social services; medical beauty; liquor; light industry. The bottom allocation remains in gold + innovative drugs. Risk Warning: The acceleration confirmation of a "hard landing" in the U.S. economy exceeds market expectations; the domestic export slowdown is beyond expectations.