当前五点关注要点

ZHANG JiqiangAnalystSAC No. S0570518110002SFC No. AMB145zhangjiqiang@htsc.com+(86) 10 6321 1166 Huatai Research 30 June 2025│China (Mainland) Convertible bond weekly Our core views Themainland Chinese stock marketexhibited‘technical breakout’characteristicslast week(23-27June2025),driven by semi-year-end positioning and convergingthematic opportunities. With limited earnings momentum to sustain directionalmoves,we see low probability of sustained trends,with stock indices likelyexperiencing minor fluctuations while sector-specific opportunities persist.Investors should maintain a‘sector-over-index’approach, focusing on undervaluedtech, defense-related minor metals and other thematic trades, while temporarilyavoiding crowded high-dividend-yield(HDY)sectors. On convertiblebonds (CBs),we adopt a neutral-to-cautious stance, advising partial profit-taking in the nearterm.CBselection should prioritize relatively inexpensive options: 1) mid/large-capbond-likeCBs andterms-backedonesnearing maturity; 2) small/mid-cap balancedCBsbelowRMB125andnewissueswithmodestpremiums;3)high-price/low-premium varieties requirecareful monitoring of call risks. Equity market:trend reversal remains elusiveRecent market movements exhibited ‘technical breakout’ characteristics,catalyzed by easing Middle East tensions, rising Fed rate cut expectations, and domesticfinancial catalysts. However, the swift pullback after multiple thematic drivers andpositive factors converged underscores the absence of unified upward momentum.Wesee key constraintsincludingweak earnings momentum, lingering domestic/external uncertainties, and excessively polarized market styles. We believethenear-term focus should center on China-US tariff negotiations, June PMI data, andA-share interim earnings. We maintain that sustained directional moves remainunlikely, with indices facing modest pullback risks after briefly testing the upperbound of their trading ranges. Nevertheless, we think sector-specific opportunitiesand structural themesare likelytostay more active than in previous months.Investors should maintain a ‘sector-over-index’ approach, trading around thematichotspots while avoiding crowded exposuressuch asinnovative drugs and HDYsectors. Sector: technology, defense components andminormetalsWe see the following sector-wise priorities.1)Continue positioning along frontier techthemes such as AI and nuclear fusion,focusing on narrative-drivenopportunitiesahead of potential catalyst events–prioritize AI applications,domestic LLMs,and solid-state batteries.2)Accumulate globally competitiveChinese industrial leaders awaiting long-term revaluation, particularly machinerysector leaders benefiting from downstream demand expansion.3)Target defensesubsectorstapping overseas market potential and international arms tradedemand, especially components and non-ferrous minor metals.4) HDY playsshow diminished upside momentum–seek marginal catch-up opportunities ratherthan strategic allocation.5)Stablecoin/cross-border payment themes; monitordigital RMB pilot expansion and overseas compliance progress (focus on financialIT),although some constituents exhibit excessive pricing. Convertible bonds focus:five market watchpointsWe note five key points to watch.1) Whathas driventhe CB index to new highs? We attribute thisprimarilyto underlying equity strength and solar sector CBs’recovery.2)Regarding Pudong Development Bank’s potential premiumconversionreplay,we anticipate limited investor upside based on historicalexperiencewith China Everbright Bank CBs,favoring corporate&strategicholders.3)For remaining upsidepotential,we think CB upward momentum mightbeconstrained by rich valuations(average price at RMB123),althoughfixed-income+ funds may sustain demand, particularlycertainprimary bond funds.4)For correction risks, we seeahigher probability than breakout, with triggers including liquidity shocks from bond market corrections, equity pullbacks, andvaluation compression.5)For structural opportunities, we suggest prioritizingrelatively undervalued exposures: mid/large-cap bond-like CBs and terms-backedones nearing maturity. CB advice: neutral-to-cautious stance, focus ontheundervaluedCBs followed equities higher last weekin themainland Chinesemarket, pushing valuations to new highs withthemedian absolute price exceeding RMB123.Givenconstrained return expectations, limited index upsidepotential, and persistent CBselection challenges, we adoptaneutral-to-cautious stance and advise partialprofit-taking.The focus should center on relatively inexpensive options:1)mid/large-cap bond-like CBs and terms-backed ones nearing maturity;2)small/mid-cap balanced CBs below RMB125 with better risk-reward profiles; 3)newissues with low absolute prices;4)high-price/low-premium varieties.However, we note these typically exhibit higher volatility and require preciseequity/call option analysis, favoring single-security opportunities. Risks:underlying equity underperformance;liquidity s