Sinolink: "Spring restlessness" is expected to accelerate. Choose specific directions in science and technology to "attack".

Sinolink released a research report stating that they maintain their previous view that the "spring frenzy" has arrived, and in January 2025, it may enter an "acceleration phase" under the expectation of incremental liquidity. Structurally firm: small and medium-sized growth companies, maintaining a positive outlook on the electronics + computer + machinery industries over military industries. Whether the "frenzy market" has come to an end, attention should be paid to the weakening of domestic fundamentals and overseas economic conditions. On one hand, by reducing the cost of debt, it usually takes about 4 months to increase the willingness of residents and businesses to spend money, so it is necessary to continuously observe the sustainability of the current domestic fundamental recovery. On the other hand, the risks of overseas economic conditions should not be underestimated as they are still in an upward channel. Previous report summaries and market focus A review of previous views: emotional trading is difficult to shake the trend of the "spring frenzy" market. Policy expectations should be appropriately cooled down to weaken emotional disturbances; the next round of "broad fiscal + monetary" measures may come as soon as 2025 Q2. The core driver of the "spring frenzy" is fundamental and liquidity, which is highly likely not to be dominated by emotions. Since October, domestic fundamentals have gradually turned around under the influence of "broad money and fiscal policies." The core indicator "M1%-short-term financing %" measuring effective liquidity has also rebounded for two consecutive months, and the degree of improvement continues to expand. The five rules of the "frenzy market" - fundamentals and liquidity are on the rise, with low discount rates, improved risk appetite and reasonable valuations all being met, so Sinolink maintains its positive view on the "spring frenzy". Whether the "frenzy market" has come to an end, it depends on the weakening of domestic fundamentals and overseas economic conditions. Market Focus: 1. How to understand the market's "buy low, sell high" oscillation moving upwards? 2. When will the spring frenzy market enter an acceleration phase? 3. From the current standpoint, how to understand the sustainability of the technology style? Will there be a switch? 4. Which technology sub-industries are still worth considering for the new year? The continued improvement of domestic fundamentals will continue to support market rebounds Policy expectations should be appropriately cooled down to weaken emotional disturbances; the next round of "broad fiscal + monetary" measures may come as soon as 2025 Q2. Important domestic meetings have largely demonstrated the government's determination to boost the domestic economy; looking back, it typically takes about one quarter after the policy is implemented to observe its effects. Therefore, Sinolink believes that the next round of "broad fiscal + monetary" measures may not come until the second quarter of next year. At that time, investment opportunities are expected to lie in three areas: (1) Construction, building materials, and steel with PB breaking net; (2) Mobile phones, maternal and child products, and education that benefit from subsidies; (3) If social security and medical insurance are funded, it will benefit the pharmaceutical industry, especially innovative drugs with high profit margins. The core driver of the "spring frenzy" has always been fundamental and liquidity, which is highly likely not to be dominated by emotions. Since October, domestic fundamentals have gradually turned around under the influence of "broad money and fiscal policies", with improvements in cash flow for residents and businesses leading to increased spending. On the other hand, the core indicator measuring effective liquidity, "M1%-short-term financing %" has also rebounded for two consecutive months, with the degree of improvement continuing to expand. Clearly, the five rules of the "frenzy market" - fundamentals and liquidity are on the rise, with low discount rates, improved risk appetite, and reasonable valuations being met, so Sinolink maintains its positive view on the "spring frenzy". Whether the "frenzy market" has come to an end, attention should be paid to the weakening of domestic fundamentals and overseas economic conditions. On one hand, by reducing the cost of debt, it usually takes about 4 months to increase the willingness of residents and businesses to spend money, so it is necessary to continuously observe the sustainability of the current domestic fundamental recovery. On the other hand, the risks of overseas economic conditions should not be underestimated. Sinolink continues to emphasize the logic of a "hard landing" for the US economy: the global Zhugela cycle combined with a downturn in inventories will likely lead to a decrease in US capacity utilization and job vacancy numbers, with the trend expected to show a trend, accelerating increase in unemployment rates under the impact of the Beveridge curve. In conclusion, Sinolink maintains its previous view that the "spring frenzy" has arrived, and in January 2025, it may enter an "acceleration phase" under the expectation of incremental liquidity, with a firm structure: small and medium-sized growth, maintaining a positive outlook on the electronics + computer + machinery industries over military industries. Which technology sub-industries should be focused on during the spring frenzy? Based on the broad direction of the technology industry, Sinolink selects the following technology sub-industries to focus on: 1) Exclude industries that have already been priced relatively fully in the short term, mainly by using market expectations to remove sub-industries with a 2025 PEG greater than 1. 2) Further select industries with significant improvements in profitability or cash flow. 3) Further prioritize industries favored by funds and with relatively low and reasonable valuations. Summarizing the periods of the spring frenzy in 2023 and 2024, the increase in financing balance in the technology industry is positively correlated with its price fluctuations, so industries with a larger increase in financing balance are selected. 4) Among these industries, Sinolink believes that it is important to focus on industries with current profit expectations being revised upwards, including electronics ( semiconductors, consumer electronics, optoelectronics, components, other electronics ), computers ( IT services ) machinery equipment ( automation equipment) military industry ( military electronics ). Style and industry allocation: Focus on the "spring frenzy," tilted towards mid-cap and small-cap technology growth Behind this round of rebound is the restoration of credit expectations and valuation expansion. Industry and stock selection should focus on: "denominator elasticity," with a preference for mid-cap + oversold + undervalued + buyback + merger expectations, and relatively weak constraints on the "growth > consumption" trend (ROE recovery or cash flow improvement). (I) First choice for growth: 1. TMT, especially electronics and computers; 2. Siasun Robot & Automation, high-end manufacturing such as industrial mother machines; 3. Military industry. (II) Secondary choice for consumption: 1. Social services; 2. Maternal and child care; 3. Grain economy. Structurally, focus on the "technology bull," especially on technology-related equipment, which should be particularly emphasized due to: One of the investment directions of fiscal policy; Many thematic catalysts; Beneficiary industries of the Zhugela cycle.