On December 4th, Zhongjia Fund issued a statement stating that the overall market is weak, but the expectation for reality is strong and the positioning remains unchanged. As we enter December, policy expectations are expected to enter a short-term boost period, combined with the fact that both domestic and foreign markets have priced in the Trump trade negotiations sufficiently and the US dollar index is starting to stabilize. It is judged that the period leading up to important meetings is conducive to a rebound. In the mid-term, after the meeting concludes and the policy validation period begins, the market sentiment may come under pressure again depending on the actual situation. Regarding policy expectations, it is advisable to take a longer-term view. With increased international political and economic uncertainty since Trump took office, there is also fiscal space available. It is more reasonable to adopt a wait-and-see approach towards US-related policies. Market volatility is expected to continue in the future, but in the short term, there may be some upside potential. It is recommended to observe market bottoming conditions and policy expectations, replenish and adjust positions, and increase short-term enthusiasm. 1. Market Review and Analysis Major Index Performance Last week, the main A-share indexes all rose, and trading sentiment improved. Chart 1: Weekly Changes in Major A-share Indexes (Data source: Wind, Statistic period: 2024/11/25-2024/11/29) Industry Performance Among the 31 Shenwan first-level industries, the textile and apparel, commercial trade, and light manufacturing sectors performed relatively well. Chart 2: Weekly Changes in Shenwan First-level Industries (Data source: Wind, Statistic period: 2024/11/25-2024/11/29) 2. Strategic Perspectives Macro Events and Data On November 27th, the National Bureau of Statistics released data showing that the total profits of industrial enterprises above a designated size in China from January to October reached 5.86804 trillion yuan, a decrease of 4.3% (previous value -3.5%), with operating income reaching 110.96 trillion yuan, an increase of 1.9% (previous value 2.1%). In October, profits increased by 10% year-on-year (previous value -27.1%). The data showed a trend of increasing revenue but not profits. Companies' expenses are also under pressure amidst the decline in profits. Additionally, accounts receivable for industrial enterprises above a designated size reached 26.33 trillion yuan, an increase of 7.8%. The rising accounts receivable and collection period have adverse effects on companies' cash flow and expectations, reflecting the continued impact of insufficient domestic demand on the economic fundamentals. The PMI for November recorded 50.3, slightly above expectations and with a positive trend for the third consecutive month. The production index continued to improve, new order index began to stabilize, the decline in new export orders narrowed (reflecting export opportunities), small business expectations improved, but the output price index remained under pressure. This indicates that domestic demand and supply pressures still exist. The PMI for the construction industry remains below the boom-bust line and is weakening, indicating a weak trend in new construction in the real estate and infrastructure sectors. Currently, manufacturing remains the driving force of investment, and the market's overall weakness remains with strong expectations for reality. Outlook Last week, the trading sentiment in the A-share market improved slightly. From a fundamental perspective, domestic demand remains weak, but policy expectations have improved. In terms of capital, the data flow from Northbound investments has switched to quarterly publication. On the other hand, margin trading data remains weak, but ETF data has turned positive. In the past few weeks, under the combined influence of the still weak fundamentals and the continuing decline in high expectations, the strength of mid and large-cap stocks led by institutional funds has been exhausted, while small-cap growth stocks led by trading funds have the upper hand. Policy factors remain the main force affecting expectations. Investors continue to price in new events related to the Trump trade negotiations and domestic policies to hedge against uncertainty, maintaining market volatility (with high trading volume and overall sentiment better than before the political conferences). In terms of industries, for defensive dividend-oriented industries, positions can be allocated, but they should be lower than in offensive sectors. In a volatile market, allocating to dividends can generate absolute returns or smooth out fluctuations. However, in periods of increased policy expectations, relative returns may be hard to achieve. It is recommended to allocate to dividend targets related to themes such as debt restructuring and market value management (the catalyst for debt restructuring and market value management is more concentrated, and the long-term observation of the balance sheets and cash flow statements of construction and real estate companies will determine whether true revaluation can happen; in the short term, more positions can be allocated to market value management companies trading below book value), stable cash flow industries such as utilities, finance, and precious metals. For more aggressive targets, focus on finding targets with low positions, good certainty, and strong emotional appeal. Focus on A-share technology stocks (with the highest certainty catalyst and relatively less affected by policy factors, thematic opportunities continue to emerge; targets with fundamental support and high probability of subsequent catalysts need to be found to deal with high volatility; in the short term, focus on AI applications, Huawei supply chain, robotics, low-altitude, and autonomous controllable directions), cyclical and elastic targets (with improved odds during the period of heightened policy expectations, higher odds compared to technology, etc. Sectors; allocation can be distributed between sectors such as the real estate chain, consumer goods, and lower-odds debt restructuring themes based on risk and catalysts), and advanced manufacturing and international expansion targets (find targets in industries such as new energy with approaching turning points, see if the Trump trade negotiations will bring oversold opportunities for international expansion targets).