Sinolink: The fundamentals are expected to continue improving this year, constructing a theme selection framework and recommending directions such as intelligent spectrum AI.

Sinolink released a research report stating that the improvement in domestic fundamentals in this round is expected to continue for 3-4 months, which will continue to support the market rebound. Domestically, with the gradual implementation of the "comprehensive policy," there are signs of marginal improvement at the macro, meso, and micro levels, which is expected to further support the market rebound. On the overseas front, the impact of the U.S. election results on domestic balance sheets is limited for the year, and under the framework of the Federal Reserve, there has been no change in the rate cut cycle, with a continued focus on the trend of the unemployment rate. In the short term, the anchor for market pricing is the tangible improvement in domestic fundamentals, with a positive outlook for mid-cap + oversold + low valuation + buyback + M&A expectations in the "growth > consumption" direction, structurally focusing on "technology bulls." Sinolink's main points are as follows: Domestically, with the gradual implementation of the "comprehensive policy," there are signs of marginal improvement at the macro, meso, and micro levels, which are expected to further support the market rebound. From the economic data in October, improvements have begun to show, with the M1 year-on-year in October at -6.4% and a turning point compared to September. Considering that M1 leads the PPI by about 6-9 months, it can be expected that the market will see a turning point in profits in Q3 2025. The Minister of Finance stated that in 2025 policies are expected to increase support for the "new economy," and the sustainability of social zero improvement is worth looking forward to; in October, the Shanghai and Shenzhen new residential price index increased compared to the previous month, and the second-hand residential price indexes in Beijing, Shanghai, and Shenzhen all turned positive, indicating that the stabilization of housing prices is important for the overall stability of the asset price system in the country. On the overseas front, potential risks remain. On one hand, the impact of the U.S. election results on domestic balance sheets is limited for the year, and on the other hand, under the Federal Reserve framework, there has been no change in the rate cut cycle. It is necessary to monitor the median level of unemployment rate forecast of 4.4%, and once surpassed, it means that overseas risks will rise again. In the short term, the anchor for market pricing is the tangible improvement in domestic fundamentals, and as M1 rebounds as expected, it will strengthen the upward momentum of the market and increase in rising market slope. Maintaining "loose monetary policy + loose fiscal policy" to exert force on the debt side of the domestic economy is expected to repair the cash flow and balance sheets of local, corporate, and household sectors, thereby driving marginal improvements in domestic demand conditions by the fourth quarter of 2024 and accompanying with the marginal increase in the growth rate of fiscal expenditure, it will support the repair of fundamentals and drive the market to continue to rebound. In terms of continuous cycles, referring to the logic of the improvement in fundamentals brought by the repair of the debt side in Q3 2013 and Q1 2019 often lasting for 3-4 months. It is expected that the fundamentals will improve by the end of this year or even by January of next year. Furthermore, the key factor determining whether the market can reverse is whether the "bottom line" of profits can appear quickly, and this points to further efforts in the fiscal total quantity and a structural shift towards the "asset side." Considering that the "bottom line" of profits has not been reached, it is expected that the rotation of sectors such as "technology-consumption-cyclical" categories will be difficult to appear. The trend overall tends to be "financial leading, growth performing" and "large cap leading, mid and small cap performing". Therefore, it is important to focus on the elasticity of the "denominator end" + the constraints of the "numerator end," and have a positive outlook for mid-cap + oversold + low valuation + buyback + M&A expectations in the "growth > consumption" direction, structurally focusing on "technology bulls." Currently, domestic liquidity is significantly loose, the fundamentals are showing signs of turning but have not yet shown clear strength, and market sentiment is at a high level, providing a good opportunity for thematic investments. By reviewing the rebound range from February to March this year, it can be observed that: 1) Leverage funds play an important role in thematic investments. On one hand, the trend of thematic indices is highly related to the increase and decrease of leverage funds. On the other hand, the inflow of leverage funds is directly proportional to the increase in thematic investment, and has a strong momentum effect before the market peaks; 2) The larger the retracement from the high point, and the newer the theme, the greater the increase. Based on these characteristics, 10 thematic indices were selected from 293 popular Wind concept indices according to the following logic for investment reference: 1) First, select 53 concept indices that have seen a significant increase in leverage funds and have experienced a significant decline since their peak; 2) Then select 19 concept indices with marginal performance improvement; 3) Further select the 10 most recently released concept indices, including concepts such as Zhilu AI, Chelu Yun, PEEK materials, SPD, among others. Industry allocation in November: Focus on the technology theme (1) First choose growth: 1. TMT, especially electronics and computers; 2. National defense industry; 3. Pharmaceuticals and biotechnology, etc. (2) Second choice consumption: 1. Social services; 2. Medical beauty; 3. Liquor; 4. Light industry. (3) Bottom allocation remains gold + innovative drugs. Risk Warning: The acceleration of the confirmation of a "hard landing" of the U.S. economy beyond market expectations; a slowdown in domestic exports beyond expectations.