Guosen Strategy: How do fund managers view the top ten focus issues?

One, how to judge investment opportunities in 2025? Xie Zhiyu (CICC Global Fund): With the change in domestic macroeconomic policy expressions at the end of September, the liquidity and risk appetite of the stock market have improved significantly. In the fourth quarter, with the gradual introduction of macro control policies and subsidies for consumer goods upgrades, the fundamentals of related domestic demand industries have stabilized. On the other hand, uncertainties are faced in export trade policies, and companies in the export chain are expected to be under pressure. In terms of technological innovation, AI applications are driving the expectations of the technology industry's prosperity, with industries like electronics and computers with AI applications leading the gains in the fourth quarter. Liu Yanchun (Invesco Great Wall Fund): The time and extent of this round of economic adjustments have exceeded expectations. The risks and structural problems accumulated during China's rapid economic growth in the past mainly manifest in the rapid increase in debt, especially hidden debt, and the issue of excessively high real estate prices. China has decisively burst the real estate bubble through financial means and required local governments to timely resolve hidden debts and promote the transformation of financing platforms. Fiscal expenditures have shown a strong pro-cyclical nature and structurally lean more towards technology and other important security areas, with increased subsidies in the consumer sector but still room for further enhancement. If the Trump administration significantly raises tariffs on Chinese products in 2025, there would also be great uncertainty in China's export prospects, requiring continuous macroeconomic efforts to promote the recovery of domestic investment and consumption in order to achieve high-quality economic transformation in development. Developing new productive forces to promote economic structural transformation and upgrading is the long-term direction we must adhere to, which is not contradictory to short-term demand stimulus policies. Accelerating demand expansion, promoting income growth and asset appreciation, is necessary to resolve current debt risks, promote smooth economic transformation, and achieve high-quality growth. At present, policies have emphasized stability in growth and employment. We also look forward to deeper reforms, redesigning the distribution of finances and administrative rights between the central and local governments, fully mobilizing the enthusiasm of local governments and various enterprises. We believe that the Chinese economy will emerge from the trough by 2025, and the revaluation of the equity market's value will also be fully launched. Xiao Nan (E Fund): The core contradiction in the current market lies in the space and pace for further boosting the real economy. However, at this stage, we must make relatively balanced allocations to avoid significant losses brought about by overly forward-looking strong judgments in the short term. On the one hand, we wait for the economic fundamentals to gradually stabilize and rebound by allocating to consumption, engineering machinery, and resource products, among others. At the same time, we balance short-term uncertainties through high dividend and high prosperity sector allocations. Currently, Hong Kong's resource products, consumer goods, and growth stocks are relatively cheap, so we have further increased holdings in these companies to further strengthen the balance of our portfolio. However, the underlying logic of our stock selection should continue to focus on the quality and sustainability of company earnings, emphasizing the intrinsic competitiveness of companies and whether they can achieve excess returns amid competition. Zhu Shaoxing (Fortune Fund): The fourth quarter's series of macroeconomic policies have clearly signaled a turnaround. Market confidence has significantly recovered in the short term from a very low base. These policies will inevitably take some time to have a positive impact, and we remain patient about this. But if we look further ahead, we believe that the positive factors will eventually take effect. Despite the rapid recovery of the A-share market's overall valuation, it still remains attractive in the long term within a long-cycle view, with equity assets currently in a good risk-return range. Looking at a longer time frame, we believe that the current difficulties will find a way out. It is appropriate for investors to choose to bear the corresponding expected return levels as market volatility is expected. Qiao Qian (CICC Global Fund): We still believe that obtaining long-term returns requires attention to both fundamentals and valuations. After experiencing rapid increases in the market, we will focus more on the ability of enterprises to match fundamentals after the macroeconomic background adjustments in the medium to long term, and make more positive assessments and adjustments. Chen Hao (E Fund): Looking ahead to 2025, the market still faces uncertainties such as the degree of domestic economic recovery, the pace of overseas interest rate cuts, trade and geopolitical frictions, and the progress of industrial development. However, we see many positive factors are also accumulating: (1) The policy end is continuously strengthening its protection of the capital market, paying more attention to the construction of the investment function of the capital market; (2) The downside risks in some industries are gradually being absorbed, with high-quality enterprises having already passed the inflection point of the operating cycle; (3) Market participants' cognition of capital allocation and shareholder returns is deepening; (4) The pressure from the external high interest rate environment has somewhat eased. We believe that the above positive changes will help to gradually reverse the negative trends on the side of Chinese assets and the pessimistic expectations on the demand side. Yang Ruiwen (Invesco Great Wall Fund): Nowadays, the market is still filled with various doubts, and market confidence remains relatively fragile. In fact, this is not an unfamiliar scene. I clearly remember that in 2008 when the four trillion stimulus plan was introduced, there were also voices claiming that it was not sufficient, but the results were evident. The supply-side reform in 2016 also encountered skepticism, and before I made a large investment in coal stocks at the end of June 2016, I also had some exchanges with the market. At that time, doubts and pessimism were mainstream, but the industry's fundamentals had actually changed significantly, while most people were still stuck in past beliefs. Over the years, the benefits of the supply-side reform on the profitability of coal stocks are clearly visible, which is also a key reason why coal stocks have significantly outperformed the market in recent years. Similarly, the monetization of shantytown reconstruction that started in 2014-15 was initially full of doubts. I also did not believe in it and even held a skeptical attitude until 2017, but the booming real estate chain market brought many ten-fold stocks. We must believe in a common sense: the market bottom is full of doubts, and the market top is full of consensus. We should not abandon independent thinking due to widespread doubts. We must also believe that policymakers' responses to the situation are dynamic and flexible. From doubt to consensus, this process creates many investment opportunities. Li Xiaoxing (Yinhua Fund): Looking ahead to 2025, the focus of the market is on considering internal driving forces, external shocks, and policy responses, to see if nominal growth can return.Rise. We believe that under the utility of a series of policy combinations, good factors will gradually accumulate, economic recovery expectations will gradually rise. With the expected improvement in fundamentals and the further compression of bond market yield space, we judge that the equity market may receive more favor from funds in 2025.Dong Li (CITIC Global Fund): The December economic work conference provided instructions on the key tasks for economic work in 2025. The overall tone continued the relaxed tone of the September conference, with increasing domestic demand as the top policy priority. In the real estate sector, the focus remained on stabilizing and stopping the decline. Monetary policy mentioned "moderately loose" monetary policy for the first time in over a decade, while fiscal policy emphasized a more proactive approach and increased fiscal deficit ratio. We expect that in 2025, domestic macroeconomic policies will be more proactive and targeted in response to weak domestic demand and the potential impact of the new round of tariff policies following Trump's presidency. With these strong macroeconomic policy supports, we believe that the trend of stable and positive development of the domestic economy will continue. In the capital market, risk appetite recovery in late September drove index significantly higher, leading to a volatile market in the fourth quarter. As related policies are implemented, related sectors have shown good performance. Currently, overall market valuations are at a moderate level. As the capital market is an important part of household wealth, policies are focusing more on shareholder returns, so we remain optimistic about the future development of the market. Zhang Feng (East Securities Asset Management): Looking ahead to 2025, judgments on both domestic and international demand require observation after key moments. Domestically, we need to continue observing whether economic data will continue to improve and the effectiveness of policies. Internationally, we need to observe how trade issues evolve after the incoming US president takes office. Currently, we maintain a neutral and objective attitude, holding companies with high confidence in their alpha logic, and cautiously observing these issues. In the long term, there has not been a major change in demand judgment. Many industries have gone through a phase of inventory clearance, capacity reduction, and optimization. Although there has not been a significant increase in demand in the short term compared to three or four years ago, the clearance of supply-side issues has improved the potential returns of some industries. Combined with the direction of policies, such as scrappage programs and supply-side restrictions, we actively seek structural opportunities. Particularly, we focus on excellent companies that have faced pressure from weak external demand in the past and have a good competitive position. These companies may have a trend of increasing net asset returns. Looking ahead, the gradual changes in long-term factors such as population and debt are slow and irreversible, so we cannot expect to return completely to the previous environment and must look forward. In various industries, we also emphasize sectors and companies that align with long-term trends such as technological innovation and international expansion. Luo Shuai (Nanfang Fund): Looking ahead to next year, despite facing tariff barriers, the support from domestic economic policies can fully offset and digest external pressures. Structural policies to promote internal demand and consumption will not only support economic growth at a high level but also promote the upgrading and transformation of domestic industries. On the other hand, many companies have already established a global industrial layout, with some achieving localized industrial chains. In the case of increased tariffs, they may be able to capture more market share. Ren Xiangdong (CITIC Global Fund): Looking to the future, we believe that despite market fluctuations, A-shares are expected to achieve positive investment returns in 2025. Faced with international turmoil and pressure from the switch in domestic growth momentum, the Chinese economy has encountered some difficulties in the past two years, but we believe that the Chinese economy remains optimistic in the medium to long term. The suppressive factors in the domestic economy such as real estate are weakening, and the momentum for industrial upgrading in China remains strong. With the dual effects of nature and policies, the supply side of Chinese manufacturing industry is also expected to gradually clear. Although the market has rebounded, most companies are still undervalued. Trends such as AI and intelligent vehicles are clear in the industry. These factors are important conditions for A-shares to achieve positive returns. II. How to view AI investment opportunities? Li Xiaoxing (Yinhua Fund): The investment in the AI industry has shifted from the grand narrative of the initial stage from 0 to 1 to focus on industry progress and performance realization. Overseas supply chain performance on the algorithmic side is leading, and domestic algorithms will benefit in the long term from localization. In the future, we will focus on the terminal investment opportunities brought by AI landing on the edge side; as the cost of algorithms gradually decreases, we will pay attention to the progress of industrial applications on the application side. Yang Ruiwen (Invesco Great Wall Fund): In the AI field supporting the grand narrative of the US, our progress is also evident. Recently, the emergence of Unitree's wheel-legged robot dog and the open-source MoE model DeepSeek-V3 has shaken the entire AI industry. In the past ten years, our circle of friends has been amazed at how powerful Boston Dynamics is, but suddenly, Unitree's wheel-legged robot dog is a more powerful presence at a much lower cost. The same miracle has also occurred in the field of large models. DeepSeek has launched an open-source model with extremely low costs, directly reducing training costs by more than 10 times. Everyone suddenly realizes that our lagging computing power can be compensated for by improving training efficiency and reducing training costs, and more importantly, the speed at which our models catch up is so fast. Google's former CEO Eric Schmidt claimed a year ago that American AI had left us behind, but now he has completely changed his tune and said that Chinese AI is very close to American AI. Open AI GPT5.0 continues to be postponed, and if it is ultimately released as incremental progress rather than a leap, it is only a matter of time before Chinese companies catch up. The rapid contraction of computing power will also allow Chinese companies to achieve at lower costs, ultimately reflecting the advantage of latecomers. Under such rapid contraction of computing power, when technological development surpasses computing power contraction, the advantage of American AI companies will continue to increase, but if technological development is slower than computing power contraction, the advantage of American AI companies will continue to weaken. AI breakthroughs have not been as fast as initially expected, and computing power is still rapidly contracting. The gap between our AI and America's AI is not necessarily widening but more likely shrinking rapidly. Luo Shuai (Nanfang Fund): In terms of hardware, artificial intelligence has endowed electronic products with more functionality, leading to the emergence of new products that are expected to boost the prosperity of the consumer electronics industry. In terms of software applications, while focusing on innovative applications, existing Internet companies, due to their vast data and computing power, and solid user base, are expected to rejuvenate in the process of AI transformation. Artificial intelligence will be an essential part of the future for a considerable period of time.The most important technological trend will bring important changes to various industries. Our country is in the forefront internationally in terms of talent reserves and current model levels. At the same time, we have a huge domestic application market and are expected to form a positive cycle of "application-data-algorithm iteration", continuously improving the production efficiency of various industries.Qin Yi (Hongde Fund): The future technology sector will revolve around three main themes: "Localization of AI computing power (such as semiconductor chips/manufacturing/equipment)", "Innovation of AI hardware at the edge (such as chains/AI glasses)", and "Implementation of AI applications". Among them, the communication and electronics sectors have already shown good stock price performance in the past two years, and in 2025, at some point, there is a high probability that computers and media will also see a rapid increase in investment opportunities. The electronics sector belongs to a sector with fundamental support, performance realization, and acceptable valuation, and will continue to place high emphasis on this sector in the future. Mo Haibo (Wanjia Fund): In 2024, the global AI industry is showing a rapid development trend, with model capabilities continuously enhancing. Both independent AI applications and system-level experiences have made significant progress, driving rapid growth in the number and duration of AI users. The industry gradually sees the benefits of AI in terms of input and output, leading to a more firm investment in AI and continuous growth in CAPX expenditure. Recently, Microsoft increased its AI-related investment amount for the 2025 fiscal year to 80 billion US dollars, and it is expected that the overall AI capital expenditure growth rate of major overseas internet companies will be over 50% in 2025. The development of AI overseas is ahead of that in China, with China lagging behind overseas by about 1 year in terms of computing power infrastructure. Led by ByteDance, Chinese companies are expected to significantly increase their AI investment amount in 2025, with the overall growth rate expected to be higher than overseas. Therefore, 2025 is expected to be a big year for domestic computing power infrastructure. Consequently, we remain positive about NV chains and domestic computing power targets, with the core focus on computing chips, optical modules, and AI applications. Dong Jizhou (Taixin Fund): It is a consensus that AI is reshaping the entire social structure, and I personally see it in three aspects: 1. LLM enters the "model equality" era, and the leading advantage of OPENAI models is gradually narrowing. Models relying on computation cards and training data stack for enhanced capabilities are reaching a bottleneck, and high-quality small-parameter models can replace large-parameter models in usage scenarios. At the same time, the call cost of models with the same parameters is significantly decreasing, and the hardware foundation for application scenarios is already in place. 2. In the field of high-speed computing, the importance of "storage" and "transmission" is significantly increasing beyond "computing". 3. In the application field of models, as a tool for empowering productivity, AI applications have entered the commercial stage in various fields, such as data services, CRM/ERP integration with AI into enterprise data flows, and many industry-specific applications. In terms of hardware innovation, "cloud, edge, and end" will become the organic whole of AI hardware deployment, with AI access at the edge becoming a trend, such as AI smartphones, AIPC, AI headphones, and AI glasses. Jin Zicai (Caifu Fund): We continue to hold a positive view on the overseas computing power sector, and we believe that the A-share market may still be undervaluing the entire overseas computing power sector. The overseas computing power sector benefits from the drive of AI capital expenditure and the huge space for future potential applications, and we continue to be optimistic about it. Our obvious difference from the market lies in that we are quite optimistic about the long-term market space and performance sustainability of the entire computing power sector, while maintaining a cautious optimism about the pace of AI landing on the terminal side. In addition, we liken the 2024 domestic computing power sector to the overseas computing power at the beginning of last year, indicating that the arms race for AI capital expenditure in China has just begun and is expected to replicate the growth trajectory of overseas computing power last year. We will prioritize companies that benefit significantly. Feng Ludan (Zhongou Fund): Artificial intelligence is reshaping the core elements of productivity, which is human intellectual labor. In the past, technological revolutions mainly liberated and enhanced human physical labor, but AI is the first technology in history that can make decisions on its own, not just simple automation, representing the first large-scale replacement and enhancement of human intellectual labor. Its potential lies not only in replacing human labor but also in unleashing human creativity and comprehensively improving social productivity. The biggest change in the AI industry in the fourth quarter is that the market's focus is gradually shifting from AI basic infrastructure to new AI hardware and AI applications. We divide AI investments into four stages: the first stage is the construction of AI basic infrastructure, mainly for building training centers for large-scale AI clusters. The second and third stages are new AI hardware and AI applications, where AI transitions from the laboratory to commercial scenarios as models mature and become available. In the fourth stage, AI technology will penetrate and become ubiquitous, just like water and electricity are now everywhere. We are currently in the middle and late stages of the first stage, with representative GPU chips being the main battleground. In the future, we expect to see more investment opportunities in new AI hardware and AI applications. We also continue to focus on the progress of domestic AI, and we are pleased to see the rapid rise of domestic AI, with significant progress in base model capabilities and application landings, and platform companies actively developing in the field of AI applications, seeking new breakthroughs. III. How to view technology investment opportunities? Liu Huiying (Nuoyan Fund): In the fourth quarter of 2024, the Philadelphia Semiconductor Index performed flat, but A-share semiconductors performed well. From the sector structure, the previously emphasized "breakthrough in advanced chip processing is the pivotal point for the long-term development of the entire Chinese semiconductor industry" has already been reflected in stock prices during this round, with excellent performance in the "bottleneck" links of each chip localization chain. In addition to the demand for localization, the industrial wave of artificial intelligence has also brought new demand for Chinese chips, and the long-term upward trend of Chinese chips is irreversible. Due to its special attributes different from traditional industries, the technology industry requires a group of "patient capital" who understand the nature of its industrial development. The rise of US Nasdaq technology stocks is supported by a group of "patient long-term money" that supports the US technology industry, who have institutionalized and rationalized industry trend investment, nurturing global technology giants with market capitalization reaching trillions of dollars. The semiconductor industry, due to its "large market, strong importance" attributes, is a battleground for technological competition among various countries. Looking ahead, I firmly believe that Chinese technology will definitely break through US blockade comprehensively, and in this process, the growth of Chinese semiconductors will maintain a relatively high growth rate in the medium to long term. When Chinese technology companies fully break through the US.After sanctions, China's overall semiconductor industry will enter a high-speed development period lasting for decades (similar to the American stock market NASDAQ), reshaping the profit distribution of the global technology industry chain. In this process, China's technology will produce a group of globally competitive technology giants. This fund is committed to selecting and accompanying these companies to grow into global technology leaders.opportunities become particularly attractive. Companies that have a track record of stable or growing net profits and free cash flow, along with a commitment to increasing shareholder returns, are especially appealing to long-term investors. These companies not only have the ability to weather adversity, but also provide a solid foundation for long-term investment. Qin Yi (Hongde Fund): In the context of increasing uncertainty in both domestic and international environments, certainty becomes scarce. Therefore, opportunities that provide certainty in terms of dividends and buybacks are particularly attractive. In a market where it is difficult to find assets that combine both high quality (with outstanding competitive advantages, high return on investment ROIC, and abundant free cash flow) and high dividend yield, companies that have demonstrated the ability to maintain or increase net profits and free cash flow in challenging environments are highly valued. These companies also show the capability and willingness to increase returns to shareholders, which is likely to be a long-term commitment, providing a solid foundation for long-term investors. Long-term investors can increase their equity stake in high-quality companies over time without additional investment, either through direct company repurchases or reinvestment of dividends.The sector will continue to be the direction for capital inflow. It is important to note that in this process, we must distinguish true certainty sectors, rather than simply continue the logic of high dividend sectors from the past two years. The risk of this sector is that, if the economy confirms recovery in the second half of 2025, this sector will face the possibility of declining investment profitability and continued capital outflows.Zhao Feng(Ruiyuan Fund): The yield of government bonds in the fourth quarter fell sharply, reflecting both the expected loose policy on liquidity and the overall decline in investment returns in the current economic stage. Bonds outperforming stocks was the theme throughout 2024, with the ten-year government bond yield falling by nearly 100 basis points for the whole year. As of the close on January 3, 2025, the yield had dropped below 1.6%, and with further expected liquidity easing by the central bank, there is still room for short- to medium-term government bond yields to decline. The significant drop in fixed income asset yields has led to a severe asset shortage in the financial market, or more precisely a scarcity of high-yielding assets. For many financial institutions, matching asset-liability costs has become a serious challenge, especially as stable, long-term return instruments appear increasingly scarce. This situation points to a clear investment opportunity, which is high-quality equity assets with long-term stable returns. Taking the example of holding H-shares in telecommunications operators, at the beginning of 2024, the dividend yield was around 8% (based on the pre-tax dividend yield expected for 2024), and as of the close on January 3, 2025, based on the current year's expected earnings, the pre-tax dividend yield could still reach around 7%, without taking into account its significant net cash assets and the potential for increasing dividend payout levels. Even after considering the impact of dividend tax, the after-tax yield is still far higher than the ten-year government bond yield, and it also comes with a free potential inflation protection option. Of course, there are other types of assets in the market that may be more affected by macroeconomic factors in the short term, which could put pressure on dividend returns. However, considering a longer investment horizon and taking into account their stable business models, product penetration rates, and market share, one can still anticipate long-term growth potential in income and profits, combined with dividend returns making long-term holdings quite attractive. Luo Jiaming(Zhongou Fund): Due to the rapid decline in government bond yields, high dividend assets are once again favored by asset allocation funds, especially stocks with bank-heavy index weights. Against the backdrop of the extensive structural transformation of the economy in the past, the valuation of these financial assets is indeed low, and their dividend yields still have a relatively high cost-effectiveness compared to risk-free rates, with room for valuation recovery. As we mentioned in our previous quarterly reports, dividend yield is one aspect to consider in equity investment, but not the only one. In a situation where overall market valuation is low, we prefer to allocate funds to high-quality companies with more growth potential. Fundamentally, assets that can create long-term returns for shareholders must possess the ability to generate more free cash flow in the long term, reflected in financial indicators such as a higher return on equity (ROE) or return on invested capital (ROIC). At the same time, we found that the dividend yields of some such high-quality companies may not be lower than those of dividend stocks that have undergone significant valuation recovery in recent years. V. How to view investment opportunities in new energy sources? Li Xiaoxing(Yinhua Fund): From a fundamental perspective, the lithium-ion and photovoltaic industries are running at a bottom, still digesting excess capacity, with some segments showing signs of stabilization and rebound. Coupled with some self-regulation by the industry on the supply side, product prices are not expected to decline significantly. The wind power industry has already gone through the stage of falling prices earlier, and accelerated demand may drive the profitability of the entire industry chain. From a stock price perspective, the new energy sector has recovered in the fourth quarter and is currently at a relatively fair valuation. We are more optimistic about companies leading in cost and technology advantages that continue to widen this trend as the sector progresses. Mo Haibo(Wanjia Fund): 1) Most of the market value already incorporates most of the negative expectations. Over the past 2-3 years, most leading companies in the photovoltaic industry have experienced significant declines, and the market already has ample expectations of industry competition becoming more intense. 2) Positive changes on the policy front. Starting in the second half of 2024, we gradually noticed some positive changes in the policy environment for the photovoltaic industry. Firstly, the Central Political Bureau mentioned preventing "internal competition" on July 30, and secondly, on October 14, a special symposium was held on preventing "internal competition" in the photovoltaic industry. Various departments have also introduced related policies, and overall, we feel that the photovoltaic industry is under the protection of domestic policies. Once policies start to stabilize, it will be difficult for the industry fundamentals to deteriorate further. With orderly self-regulation in the industry and gradual price recovery in the supply chain, inventory levels in some segments of the main photovoltaic industry chain are already relatively low. With expectations of seasonal demand picking up after the Spring Festival, there is room for prices in the main industry chain to rise. We will continue to monitor the progress of self-regulation policies and changes in prices. Yang Yu(Huaxia Fund): Regarding lithium-ion batteries, the verification of the off-season not really weakening continues in the first quarter of 2025, with the overall sequential decline expected to be better than in previous years. At the end of the year, price negotiations for key supply chain components have shown signs of improvement, with price increases expected for iron-lithium, negative electrodes, 6F, and copper foil, indicating a trend of improved profitability. In the medium term, demand for lithium-ion batteries is expected to continue to grow at a good pace in 2025, ushering in a year of strong demand. In terms of profitability, two consecutive years of industry lows have pushed the profitability of the industry chain to extremely low levels, with some leading companies in certain segments having returns on investment of less than 10 years, widespread industry losses, significantly slowing down of capacity expansion, and increased capacity utilization rates in the industry. The profitability percentile is moving closer to reasonable profit levels. Currently, most segments still have significant room for recovery, and it is worth looking forward to further increases in industry capacity utilization rates in the second half of 2025-2026. Looking ahead, we will continue to focus on the following aspects in the lithium-ion battery sector: 1) Product upgrades as the main theme: Iron-lithium batteries and their energy density upgrades are entering a period of significant progress, with clear trends towards high-voltage solid products; rapid charging of negative electrodes brings differentiation, non-listed or phased-out products, and next-generation batteries such as solid-state batteries and high-capacity energy storage cells command a premium, benefiting from better cost control and higher profitability on a per-ton basis. 2) Price adjustment elasticity: Expectations of no significant off-season declines have led to early price hike expectations in the industry chain. We are focusing on the expectations of price increases in certain segments, further improving profitability, and ensuring cost-effectiveness. 3) Overseas supply chain: The launch of the European carbon market and new Tesla vehicle cycles bring marginal changes and continuous improvement expectations, with higher barriers to entry and a more complex environment, making it possible for leading companies in the industry chain to have opportunities for alpha returns in overseas chains. 4) New technology: Solid-state batteries are currently in the early stage of technology route selection, and various technological routes have companiesFocus on the deterministic market on the material and equipment side. Continue to be optimistic about leading companies in the lithium battery industry chain. At the current point in time, we are optimistic about the opportunity for a bottom reversal in the photovoltaic sector. In terms of photovoltaics, demand is meeting expectations, with the industry gradually shifting from "policy expectations" to "price expectations." In terms of demand, it is expected that global new installed photovoltaic capacity will exceed 500GW by 2024, with a high year-on-year growth rate. In the domestic market, new installed capacity from January to November was 206GW, a year-on-year increase of 26%. In overseas markets, cumulative component exports from January to November reached 224GW, a year-on-year increase of 29%, with non-European and American overseas markets being highlights, with exports of 136GW from January to November, a year-on-year increase of 46%. In terms of policies, the industry's self-discipline framework is gradually being implemented and details are continuously being improved. Recently, we have observed signs of price increases in several links. From the perspective of profit pressure in various links, market forces have forced many production capacities to stop, and prices have slightly recovered. With the implementation of subsequent self-discipline rules, the industry chain prices may soon see positive feedback. In terms of wind power, the industry is expected to enter a period of rapid growth in 2025, and we continue to be bullish on investment opportunities in the wind power sector. In terms of offshore wind, the Q4 Jiangsu project has been launched, and the 7.65GW Phase II offshore wind project in Jiangsu has started competitive allocation; the Guangdong Qingzhou 500KV submarine cable has been awarded, and the Fan Shi One and Fan Shi Two projects have completed wind turbine bidding and sea use changes, accelerating project initiation. Based on the progress of projects, offshore wind installations in 2025 are expected to grow rapidly, with a wide capacity reserve space for potential projects. In addition, overseas countries actively compete for offshore wind sites, offshore wind main projects are progressing, site bidding continues, and with submarine cables and piling capacity in short supply, there is potential for domestic enterprises to provide opportunities for international expansion. In terms of onshore wind, there has been a surge in wind turbine tendering this year, stabilizing wind turbine prices; at the same time, domestic wind turbines are accelerating international expansion, with a surge in new overseas orders this year, laying the foundation for domestic wind turbine and parts companies to achieve growth in shipments and performance in 2025. 6. How do you view consumer investment opportunities? Hu Xinwei (Huatai mutual fund): In the short term, with the relatively weak economic background, the growth of many consumer companies is slowing down or even experiencing fluctuations in income and profits. The market has also given relatively low valuations. However, these consumer companies mostly have very sound balance sheets, strong cash generation capabilities, and strong dividend abilities, with a growing willingness to distribute dividends. From the perspective of dividend yield, the static dividend yield of many consumer companies can even rank among the top in the market. Therefore, we believe that if the macroeconomic situation does not further deteriorate, the value bottom of many companies is gradually becoming apparent. At the same time, with the introduction of substantial economic stimulus measures by the government, we believe that the fundamentals of the Chinese economy and domestic consumption are expected to stabilize and rebound. Li Xiaoxing (Yinhua Fund): Consumer stocks are still in the process of expected improvement after the policy shift, and the confidence in judging the bottom is gradually increasing, while the outlook for 2025 is becoming more optimistic. On the one hand, policies have proposed to fully expand domestic demand, with a series of measures in the pipeline; on the other hand, the high savings rate of residents remains high, overall expectations are relatively weak, and confidence is insufficient, but all of these are reflected in the valuations of consumer stocks. Core assets such as liquor and home appliances have high certainty, valuation, and dividend yield. The improvement of offline retailing, the increase in market share of mid- to high-end domestic products, and the related assets are expected to perform well. In addition, the export of consumer goods in 2025 still remains a long-term strategic direction. Jiao Wei (Yinhua Fund): Regarding the contradictions and considerations of new consumption and traditional consumption: Undoubtedly, in the new economic situation and social form, the traditional consumption upgrade represented by liquor faces challenges in consumption stratification. In the past era of rapid development, when the entire society was willing to pay high fees for brands, the long-lasting high ROE of liquor made it one of the best business models. But now this model is facing the awkward situation of widening the moat while urban population declines. The biggest risk in the liquor industry is when participants are not willing to step on the brake when overall slowing is needed, but instead accelerate by stepping on the gas. If the problem facing liquor can be solved by continuously increasing inventory for unachievable sales targets, it is undoubtedly as absurd as believing that printing money can solve economic stagnation or printing diplomas can solve intellectual disabilities. We are pleased to see that, starting from the third quarter, liquor companies have collectively recognized the problem of inventory and have taken the difficult step to actively reduce it. Companies that can rationally, calmly, and pragmatically turn growth targets into dividends for investors after experiencing this process will still have great investment attractiveness. On the other hand, the transformation from consumption upgrade to consumption stratification has spawned opportunities in many niche industries, such as fast-moving consumer goods, functional beverages, pet food, emotional consumption, etc., bringing space for small companies. Looking from a longer-term perspective, we believe that the current consumption stratification represents the long-term trend of society, that is, young people seeking a rebalancing of social allocation. In this process of rebalancing, investment targets that optimize governance structures to reward shareholders or capture the wave of emerging consumption by young people are expected to bring returns to investors. Jin Zicai (Caitong Fund): We are optimistic about companies in the consumer sector with new business models and new product forms, especially the former. We believe that the main excess returns in the future consumer sector will come from "newness", and companies that adapt to the current macro environment and make changes will benefit more. We are particularly bullish on companies that align with the current trend of cost-effective consumption in new business formats for their growth potential in the future. 7. How do you view pharmaceutical investment opportunities? Ge Lan (Zhongou Fund): Different sub-industries within the industry are at different profit cycles, but overall stability, some sub-industries, although performance is still at a low level, but leading indicators such as new signed orders have stabilized or rebounded. At the policy level, the National Medical Insurance Administration is exploring innovative drug payment mechanisms, promoting enabling commercial health insurance, potential growth in commercial insurance will help improve the domestic medical market space, and enhance patient treatment experiences; at the same time, the National Medical Insurance Administration is also studying and exploring the formation of Class C drug catalogs, supporting new drugs, good drugs to be timely included in the reimbursement scope. At the national level, centralized procurement, innovation drug negotiations will continue the overall industry guidance trend of "high innovation", "high clinical value", and "high cost-effectiveness". Innovative national drug negotiations, 2024 collective procurement of in vitro diagnostic reagents, the fifth batch of high-value consumables procurement will generally.The framework is stable and the price reduction is basically in line with expectations. The tenth batch of centralized procurement of generic drugs also reflects the national level's continuous and deep promotion of the idea of centralized procurement of generic drugs.In terms of operation, pharmaceutical companies have basically adapted to the new environment of compliance, and overall sales are stable; some high-difficulty generic drugs are expected to be approved overseas in the fourth quarter, bringing new revenue growth points for relevant companies; innovative drug companies are still advancing overseas authorizations, with breakthroughs in small molecules, ADC, multi-antibodies, nucleic acid drugs, and emerging heavyweight deals with prepayments exceeding $500 million USD. Newco's cooperation is also becoming richer. Despite facing funding pressure from the demand side, equipment is expected to see improvement in procurement in the fourth quarter compared to the third quarter. Based on long-term value investment ideas, combined with the company's profit cycle, historical valuation levels, operating trends, etc., we continue to focus on innovative drug equipment and its industrial chain, OTC, consumer healthcare, and other areas. Looking ahead to the first quarter of 2025, we continue to be bullish on innovative drug equipment and its industrial chain. Overseas investment and financing are steadily recovering, domestic investment and financing are gradually bottoming out, and domestic companies are constantly obtaining funds through external authorizations and Newco, providing a foundation for future research and development investments. This is also partly reflected in the stabilization or positive turnaround of order growth rates in the innovative drug industry chain. From the perspective of global innovation exploration, the FDA has historically approved stem cell therapy for the first time, representing a significant breakthrough in related drug fields; in addition, the discoverers of MicroRNA have been awarded the 2024 Nobel Prize in Physiology or Medicine, creating anticipation for the future development space of small nucleic acid drugs. In the medical equipment field, with the gradual implementation of replacement plans and the announcement of major economic policies by the government, the rigid demand for equipment procurement is expected to be restored to a certain extent, although there may be some delay, company performance will gradually improve as bidding and tendering activities resume. Li Xiaoxing (Yinhua Fund): Recently, the pharmaceutical industry has shown positive attitudes towards encouraging the development of commercial insurance, and the gradual implementation of commercial insurance in various regions has made us see the possibility of "open source". Zhao Bei (Industrial Bank Ruixing Fund): The pharmaceutical industry index saw a sharp rebound in the macro policy expectations in late September, but after peaking in the fourth quarter, it fluctuated and fell, performing worse than the overall market. The lower-than-expected industry performance in the third quarter and the disruption caused by the centralized procurement policy in the fourth quarter are key factors affecting share prices and expectations. In the short term, uncertainties such as the pressure to control medical insurance costs and overseas tariffs still exist, but due to its essential characteristics, the pharmaceutical industry still has some resilience in terms of performance. The industry valuation has been contracting for four consecutive years, and negative expectations have been fully reflected. Some companies are currently at reasonable or even undervalued levels, and long-term investment may yield returns matching performance growth. We are optimistic about investment opportunities in the direction of innovation, consumer upgrade, and internationalization in line with industry and policy trends. The overall innovative drug sector benefits from the interest rate cuts by the Federal Reserve. We believe that the research and development capabilities of domestic innovative drug companies are rapidly aligning with global standards and have gained global advantages in some sub-fields. The recent trend of "license-out" in the industry reflects this trend. Under the backdrop of the "capital winter" and stricter regulations, the domestic innovative drug industry has also undergone a "supply-side reform". This is favorable for leading innovative drug companies with advanced products, strong research and development capabilities, strong financial reserves, and strong sales realization capabilities, as the degree of industry competition is expected to decrease significantly in the future. Therefore, we have increased our allocation to strong research and development companies with innovative products that have potential for international expansion. As for the outsourced research and development services (CXO) industry for innovative drugs, as the Federal Reserve's interest rate hike cycle ends, overseas investment and demand for innovative drug research and development are expected to gradually rebound. However, the potential risks of sanctions against Chinese leading companies in the CXO sector add uncertainty to the future development of the sector. With the delay in the progress of the "Biosecurity Law" in the fourth quarter of 2024, we have increased our allocation to the CXO sector accordingly. For CXO and upstream research companies primarily driven by domestic demand, although the current outlook for domestic new drug research and development has not shown significant improvement, with the positive support of national policies, there is also potential for gradual stabilization and recovery in the future, so we have also increased some allocation to these companies. The traditional Chinese medicine industry continues to receive policy support, and there are favorable policies such as adjustments to the basic drug list yet to be implemented. Although there was significant differentiation in the industry in the third quarter, with some OTC companies destocking leading to fluctuations in performance, heavily-invested companies still maintained steady performance growth. We believe that compared to stable growth assets such as utilities and consumer goods, there is still room for valuation improvement in leading companies in the traditional Chinese medicine industry. For those Chinese medicine companies that have indeed improved their management in the past few years and can withstand the epidemic cycle while achieving long-term steady growth, there are still significant investment opportunities. Sun Wei (Huashang Fund): The pharmaceutical sector currently faces both opportunities and challenges. The challenge lies in the significant pressure on medical insurance funds, the continuation of centralized procurement and cost control policies, and the ongoing anti-corruption special actions in the medical industry, which still have an impact on medical equipment and some drugs. The uncertain overseas environment with risks such as the US government's biosecurity law and tariff policies against China Meheco Group also need to be observed for further progress, so the overall performance of the pharmaceutical sector is not very impressive. The opportunities we can currently see are mainly in innovative products, as medical insurance policies are more favorable to innovative drugs and equipment, and companies with strong product capabilities will seek opportunities for overseas expansion. 8. How do you view investment opportunities in the defense industry? Li Xiaoxing (Yinhua Fund): The defense industry is expected to enter the final year of the "14th Five-Year Plan" in 2025, and industry demand is expected to shift from weak recovery to strong recovery, with accumulated orders over the past two years expected to be released. We are bullish on the industrial chain, major manufacturers, key supporting companies of central state-owned enterprises, missile industry chains that have fully reversed their predicaments, as well as new directions such as commercial aerospace, low-altitude economy, and domestically-made large aircraft. He Chongkai (E Fund): The performance of the defense industry sector in the fourth quarter of 2024 showed significant excess returns compared to the overall market index. Companies with good performance were also affected by the overall market style in the fourth quarter. For example, companies related to themes such as "stealth materials," "satellite Internet," "low-altitude economy" had significant excess returns. According to our analysis and forecasts of major defense companies, some relatively high-quality defense companies are experiencing a dual decline in orders and gross profit margins this year, which is also due to the challenging market environment.Price is the most important influencing factor. However, our research has also found many positive factors, such as a lot of information indicating that R&D projects in the industry are very heavy, which suggests that the military industry may face a relatively positive and optimistic demand in 2025.In 2025, the last year of the "Fourteenth Five-Year Plan", the demand for military equipment is expected to be relatively strong. At the same time, we believe that the impact of military personnel adjustments on equipment procurement is nearing its end, so we are optimistic about the industry's excess returns in 2025. Within the military industry sector, we are positive about (1) the main factories benefiting from the adoption of core advanced equipment; (2) the aircraft and engine industry chain benefiting from military aircraft, C919, and the global transfer of civil aircraft production capacity; (3) the military electronics sector benefiting from informatization and autonomous controllability requirements; (4) the advanced military materials sector represented by titanium alloy, carbon fiber, high-temperature alloy, and stealth materials; (5) the marine engine segment with a good layout, high prosperity, and technological upgrades brought about by carbon reduction. Hu Ze (Yongying Fund): Looking ahead to 2025, we believe that it will be a year for new productive forces to support economic growth, with many new technologies and new formats gradually emerging, with low-altitude economy being a key representative. The low-altitude industry has been established, and we expect related development policies to be gradually released in an orderly manner, with many more catalysts expected. For example, the start of infrastructure construction in pilot cities, nationwide low-altitude economic pilot documents, the operation of demonstration projects, and the establishment of more industrial funds, etc. 9. How do you view investment opportunities in cyclical products? Shi Cheng (Guotou UBS Fund): Upstream resource products, as well as chemical products with resource attributes, are likely to be at a long-term bottom in terms of prices. By the end of 2024, the increase in supply in all links has basically ended, and supply will not be a major factor affecting most links of new energy. From the demand side, there are both existing downstream markets maintaining relatively high growth rates and new emerging markets. We expect to see an investment opportunity in resource products, but price increases typically occur in peak seasons for industries, so we may have to wait for some time for the market in 2025. Wu Qingyu (Xinda Aoyang Fund): With the shift in policy direction, the pessimistic expectations towards pro-cyclical varieties in domestic demand have been restored, but it is important to understand that the transmission of monetary and fiscal policies to real fundamentals still has a lag, and it is unlikely to see immediate recovery in industrial enterprise profits or an immediate reversal of the supply and demand situation in upstream industrial products. Moreover, in recent years, there has been excessive capacity expansion, and we expect that the fundamentals of industrial products, especially the upstream and midstream processing sectors, will take time to bottom out. Therefore, considering the strong certainty in the pro-cyclical direction, while also considering the weaker fundamentals at the practical level, we still favor resource and pan-resource pro-cyclical products with performance support, reasonable valuations, and supply shrinkage, and we also pay attention to high-quality cyclical growth leaders in relevant subdivided industries with long-term cost advantages that can withstand cycles. Li Xiaoxing (Yinhua Fund): We have differentiated views on the various sub-sectors of the cycle, reducing reliance on price-sensitive varieties in the sector, and will make judgments based on the direction and pace of domestic demand stimulus. We are positive about high dividend directions, especially for some varieties with strong certainty in supply-side constraints. Crude oil experienced an adjustment in international oil price expectations in the fourth quarter due to policy expectations. However, we believe that this policy faces certain difficulties and internal inconsistencies, hence we are not pessimistic about oil prices and have added some oil and gas industry targets on dips. Green energy, due to the unstable profit expectations, has seen significant stock price declines, but the inevitability of its long-term development and short-term urgency is unquestionable. If accompanied by appropriate care for a smooth transition, relevant targets have also entered a suitable allocation range. Hu Yibin (Hua'an Fund): The irreversible changes brought about by the global clean energy revolution to the cost and supply pattern of upstream resources have the potential to lead to positive changes in profit and valuation for some key resources in downstream industries, including critical resources in strategic emerging industries, particularly those in which state-owned and private enterprises play a leading role. Sun Xiao (Zhonggeng Fund): Resource companies represented by basic metals and precious metals. 1) In the medium term, the rigidity of supply-side constraints, the overall resource-intensive characteristics of basic metals, tight resource constraints, weak production capacity elasticity, and difficulty in price declines have led to a continued upward adjustment of price centers. 2) In the short term, the demand side faces pressure, prices are subject to strong suppression by the strong US dollar, but the relatively stable supply and demand situation, macro-policy changes, and the rise of new and old, domestic and foreign emerging demand still have the potential for resonance. 3) Some companies have high stock asset values and good volume growth expectations, leading companies or integrated companies have good growth, profit, and dividend potential, and valuations are still low, corresponding to potentially high levels of return. 10. How do you view investment opportunities in Hong Kong stocks? Li Xiaoxing (Yinhua Fund): In the fourth quarter, due to foreign concerns about international relations, the stock prices of high-quality targets in the Internet sector of Hong Kong stocks experienced a significant decline, making the valuations very attractive. Most Internet companies have had sustained high growth in the past few years, mainly driven by the rapid repair of profit margins. With macro policies gradually landing, we expect stable revenue growth, which can drive the growth of Internet companies. With the commercialization of AI, we believe that Internet companies will be at the forefront of concentrated application landing and are optimistic about the gradual commercialization of AI applications. Sun Xiao (Zhonggeng Fund): Hong Kong stocks in the Internet sector benefit from economic recovery and stable consumption, continue to invest in new technologies such as AI, and have both growth and sustainability in returns. 1) Friendly policy shift, Internet companies benefit from recovery. Policy shifts boost the economy, providing favorable conditions for the development of Internet companies and space to expand their business. E-commerce, advertising, local life services, and other areas are strongly related to economic recovery, and policies such as subsidies for trading in old for new goods are expected to stimulate demand recovery, which is structurally favorable for the performance growth of Internet companies. 2) Platform-type companies have deep competitive barriers and are developing into the "infrastructure" of people's daily lives, seizing new technological opportunities. Leading companies are deepening their efforts in their respective fields, with widespread user bases and strong R&D capabilities, especially platform companies in e-commerce, social networking, etc., demonstrating strong network effects, increasing investment in technologies such as cloud computing, big data, and AI, and are expected to seize digitization opportunities, open up new product cycles, business models, and application scenarios, and gain new growth momentum. 3) Large growth potential in earnings, sustainable shareholder returns. Leading Internet companies have shown strong growth potential in weak economic cycles.In the current environment, companies display strong profitability resilience, and are expected to quickly unlock growth potential as the economy recovers. Some companies have low valuations, and focusing on diverse shareholder returns such as dividends and buybacks has become the norm, with sustainability being foreseeable.Liu Yang (Guotou Credit Suisse Fund): Looking ahead, overseas factors will continue to disrupt the Hong Kong stock market, especially the direction of US-China relations. Although the market has some expectations for possible trade policies, Hong Kong stocks have still experienced a certain degree of adjustment with the outcome of the US election and cabinet nominations. Looking long term, we believe it is more important to focus on China's own fundamentals and closely monitor whether more positive policies will be implemented. Although various support measures may take some time to take effect, we believe that now the policy direction is clearer, which should help improve the economic outlook and consolidate investor confidence. This article was reprinted from the Yao Wang Houshi WeChat public account, author: CICC Strategy Team; GMTEight Editor: Liu Jiayin.