Industrial: Technological industry trends lead the market, and the effectiveness of investment in prosperity will once again increase.

Industrial's research report states that the upward adjustment of profits at the molecular end driven by industrial trends in the technology sector has been the core logic behind the global equity asset recovery since April, but it has also led to the market becoming more concentrated in structure. The recent impressive performance and industry progress of AI technology giants have strongly countered the pessimistic narrative of the AI industry cycle peaking in January and February, and the market consensus on the bull market led by the technology industry trend will also become stronger. Considering the period from June to the first half of July, as the interim performance forecasts are disclosed, the effectiveness of cyclical investments will once again increase, and the core catalyst for the market will continue to focus on cyclical certainty varieties. Key points from Industrial are as follows: -After the concentration of profits at the molecular end driven by industrial trends, the long tail pressure of liquidity at the denominator end has returned to the public's attention. -Since the end of March, the global resonance repair of equity assets has been driven by the upward adjustment of profits at the molecular end driven by industrial trends in the technology sector, which can withstand the headwinds of tightening global liquidity at the denominator end. The outperforming South Korean stocks, Taiwan stocks, Nasdaq, Nikkei, and A-shares since the end of March all have high technology content, while European and Indian stock markets with lower technology content have shown clear underperformance. -Therefore, the recent global resonance repair since the end of March does have factors of undervaluation repair due to the easing of geopolitical tensions between the US and Iran, but fundamentally, it is the strong economic logic presented by the impressive performance and industry progress of AI technology giants that has led to the upward adjustment of profits at the molecular end. In fact, liquidity issues brought about by US-Iran geopolitical tensions are still unresolved in this process, but the strong economic momentum at the molecular end can withstand the headwinds of tightening global liquidity at the denominator end. However, after the concentration of profits at the molecular end in the previous phase, a series of events in the recent period have brought the long tail pressure of liquidity at the denominator end back into the public's view. The margin of 1) the US CPI in April was 3.8% year-on-year and the PPI was 6%, both exceeding market expectations, and inflationary pressures from rising oil prices are becoming evident; 2) The US-Iran situation continues to be in a deadlock, with the Strait of Hormuz still closed, and oil prices remain high; 3) The US's higher-than-expected inflation data, combined with the new Chairman Powell's advocacy of "tapering" after taking office, has led the market to shift its expectations towards a possible rate hike by the Federal Reserve this year; 4) The 10-year US Treasury yield broke 4.5%, reaching a new high since January last year; the 30-year US Treasury yield broke 5%, reaching a new high since July 2007. Therefore, global assets are echoing the performance after Powell's nomination in late January: major stock indices are generally adjusting, with emerging markets and technology assets experiencing greater impact; the US dollar, US long-term interest rates are rising; and metal prices are falling significantly. Compared to the three advantages at the end of January, the market's understanding of the underlying logic of this bull market will be more thorough, and the positive cycle of earnings accumulation will be further strengthened. After the replay of the "Powell moment" in global assets, the market tends to compare the current situation to the end of January. Industrial believes that, on the one hand, since the easing of liquidity pressure has not been the core logic behind the global equity recovery since April, the marginal increase in liquidity pressure recently should not be the reason for a significant market correction. More importantly, after facing doubts about the two key supports of the global bull market - Powell's nomination and the AI bubble, as well as the conflict between the US and Iran and the market's adaptation to a tighter liquidity environment, the market's more thorough understanding of the shift towards profitability and technological trends, as well as the strengthened positive cycle of earnings accumulation, will make the market's understanding of the underlying logic of this bull market more comprehensive. With this round of market resilience expected to be stronger, and with the upward potential opening up further after a short consolidation period. At the end of January, what kind of pricing environment did the market face? The nomination of Powell broke the expectations of loose global liquidity, combined with the pessimistic narrative of the AI industry trend peaking under the AI bubble and disruptive logic, causing the market to doubt whether the bull market could continue this year. And now, with the market witnessing a tighter liquidity environment following the US-Iran conflict and a strong return of the AI industry trend, the strong profits at the molecular end can withstand the headwinds of tightened liquidity at the denominator end, leading to a more thorough understanding of the underlying logic of this bull market. The accumulation of earnings effects since April, shifting from quantitative to qualitative change, means that the market's upward potential will continue to open up in the future: First, unlike the initial disruption of global liquidity logic at the end of January, the market has become more accustomed to a tighter pricing environment following the US-Iran conflict since March, and is more aware that the main contradiction in pricing this year will shift towards profitability. In January, the resonance in global equity and commodity markets was mainly driven by expectations of loose global liquidity. Powell's nomination at the end of January was the first disruption of global liquidity expectations this year, causing a significant market reaction. However, following the US-Iran conflict since March, the rise in oil prices, the wait-and-see approach of major central banks, and the full understanding of Powell's ideas and policies have made the market more accustomed to this tighter global liquidity pricing environment. The market is now more aware that loose global liquidity is no longer the main contradiction in market pricing this year, and therefore the resilience of global risk assets is expected to be stronger than in the previous round. Additionally, recent fluctuations in US bonds, oil prices, and US stocks will strengthen Trump's motivation for future economic policies, reducing previous concerns about the necessity of a hawkish approach. This "reflexivity" will also increase the resilience of global risk assets. Second, the recent impressive performance and industry progress of AI technology giants have effectively countered the pessimistic narrative that the AI industry trend peaked in January and February, making the market's consensus on the bull market led by technology trends stronger. In January and February, the market was still immersed in pessimistic narratives about the AI industry trend peaking under the AI bubble and disruptive logic, with "HALO trading" dominating. However, recent validations of impressive performance and industry progress by technology giants have fully proved that the AI industry trend driving prosperity in various sectors remains the most certain logic for global equity profit growth this year. The market has witnessed that profit growth can drive the rise in technology assets against the headwinds of liquidity pressures, demonstrating that when the economic outlook is strong enough, liquidity tightening is not a major constraint. Therefore, the market's consensus on the bull market led by technology trends will be stronger in the future. Third, the accumulation of capital resulting from the market effects driven by the technology industry trend since April has shifted from incremental changes to qualitative changes. This means that the market can no longer rely on existing strategies, and once the positive cycle of incremental capital is established, the market's upward potential will continue to expand: So far this year, actively managed fund issuance has reached levels close to the previous full year, and with the accumulation of earnings effects, we have seen more positive signals: 1) the index measuring the average performance of actively managed equity funds has surpassed the previous high in February 2021; 2) half of actively managed equity funds have exceeded their previous highs in net asset value; 3) as the best representation of market profit accumulation, this year has seen the second consecutive year of "doubling funds," with the timing of their first appearance significantly earlier than historical precedents, second only to the two "comprehensive bull" periods in 2007 and 2015. Looking back at the previous two periods of significant expansion in actively managed funds, the appearance of these signals indicates that the conditions for a positive cycle of capital accumulation and qualitative growth have been met. Often, the transition from incremental to qualitative growth in actively managed funds and the acceleration of their scale signify the beginning of the cycle. This also means that the market can no longer rely on existing strategies, and once the expansion of actively managed funds becomes the main source of incremental capital, bringing in more off-market funds, the market's potential for future growth will continue to expand, and the united front embracing prosperity will continue to strengthen. In summary, the upward adjustment of profits at the molecular end driven by industrial trends has been the core logic behind the global equity asset recovery since April, but it has also led to more market concentration in structure. Recent events have brought the long tail pressure of liquidity at the denominator end back into focus, but the market's understanding of the shift towards profitability and technological trends since March, along with the strengthened positive cycle of earnings accumulation, means that the recent liquidity pressure cannot change the underlying logic of this bull market. Therefore, rather than the renewed pressure of liquidity at the denominator end becoming the main contradiction in pricing global capital markets, the market's shift in perspective can be seen as an opportunity for interim consolidation and structural rebalancing, which is also beneficial for the market's evolution in the medium to long term. After the short-term "chill," the "midsummer" and "deep autumn" are worth looking forward to. "Summer chill": Three approaches to address the situation - Stick to cyclical certainty like optical communications to focus on the most certain trends in prosperity - Continue to explore sub-opportunities within the AI sector and expand strong themes internally around AI - Use the new and old energy sector as a hedge to respond to market concerns about geopolitics and liquidity Risk warning - Economic data fluctuations, policy easing lower than expected, Federal Reserve rate cuts below expectations, escalation of geopolitical situations, etc.