Guotai Junan Securities: The improvement in the domestic fundamentals in this round is expected to continue, with a structural focus on the "technology bull market."

According to the Zhitong Finance APP, Guojin Securities released a research report stating that after the central bank cut interest rates, fiscal policy followed suit as expected, launching a 12 trillion yuan debt relief plan. After the policy is implemented, the pressure on local debt will be greatly alleviated, helping local governments to lighten their burdens and allocate more fiscal resources to promote economic growth. On the overseas front, the results of the U.S. election will have limited impact on domestic balance sheets within the year; under the Federal Reserve framework, the interest rate cut cycle remains unchanged, continuing to monitor unemployment rate trends. In the short term, the anchor for market pricing is the tangible improvement in domestic fundamentals, especially if M1 rebounds, it will enhance market upward momentum and increase the slope of market rises. We are optimistic about the "growth > consumption" direction focusing on mid-cap + oversold + undervalued + repurchase + merger and acquisition expectations, structurally concentrating on "technology bull." Guojin Securities' main viewpoints are as follows: The current improvement in domestic fundamentals is expected to last for 3 to 4 months, which will continue to support market rebounds. Domestically, as the "package policy" is gradually implemented, there are signs of marginal improvement at the macro, meso, and micro levels, which are expected to further support market rebounds. From the economic data in October, improvements have already begun to manifest, with October's M1 year-on-year at -6.4%, showing a turning point compared to September. Considering that M1 leads PPI by about 6-9 months, it can be expected that the turning point for PPI will be seen in Q3 of 2025, indicating that the market will see the profit bottom. The Minister of Finance stated that in 2025, policies are expected to increase support for "two new" areas, and the sustainability of improvements in retail sales is worth looking forward to; in October, the new residential price index in Shanghai and Shenzhen showed positive month-on-month changes, and the second-hand residential price indices in Beijing, Shanghai, and Shenzhen also turned positive month-on-month, indicating that the stabilization of housing prices plays an important role in stabilizing the overall asset price system in the country. On the overseas front, on one hand, the results of the U.S. election will have limited impact on domestic balance sheets within the year; on the other hand, under the Federal Reserve framework, the interest rate cut cycle remains unchanged: indicating that potential risks still exist. We maintain the reminder to monitor the median level of the unemployment rate forecast at 4.4%; once it breaks through, it means that overseas risks will reheat. In the short term, the anchor for market pricing is the tangible improvement in domestic fundamentals, and if M1 rebounds as expected, it will enhance market upward momentum and increase the slope of market rises. We maintain that "loose monetary + loose fiscal" will exert force on the domestic economic liability side, which is expected to repair the cash flow and balance sheets of local governments, enterprises, and households, thereby driving marginal improvements in domestic demand conditions in Q4 of 2024. Coupled with the marginal increase in fiscal expenditure growth, this will support fundamental recovery and drive the market to continue rebounding. In terms of the duration of the cycle, referencing Q3 of 2013 and Q1 of 2019, it can be understood that the logic of "liability side" repair leading to fundamental improvement often lasts for 3 to 4 months, and it is expected that fundamentals will improve until the end of this year or even into January of next year. **Additionally, whether the market can reverse in the future depends on the key factor of whether the "profit bottom" can appear more quickly, which points to further efforts on the fiscal total and a structural shift towards the "asset side." Considering that the "profit bottom" has not yet appeared, it is expected that it will be difficult to see a cyclical rotation among major sectors such as "technology-consumption-cycles," presenting an overall trend of "finance setting the stage, growth taking the lead," and "large-cap setting the stage, mid and small-cap taking the lead." Therefore, attention should be paid to "denominator elasticity" + "numerator constraints being weak," and we are optimistic about the "growth > consumption" direction focusing on mid-cap + oversold + undervalued + repurchase + merger and acquisition expectations In the direction of "consumption," structurally focusing on "technology bull." How to screen current thematic investment opportunities? Currently, domestic liquidity has significantly loosened, the fundamentals have shown a turning point but have not yet shown obvious strengthening, and market sentiment is at a high level, making it a good time to participate in thematic investments. By reviewing the rebound period from February to March this year, we can find: 1) Leverage funds have played an important role in thematic investments; on one hand, the trend of thematic indices is highly correlated with the increase or decrease of leverage funds, and on the other hand, the scale of inflow of leverage funds is proportional to the increase in thematic investments, with a strong momentum effect before the market peaks; 2) The larger the drawdown from the peak and the newer the theme, the greater the increase. Based on the above characteristics, we have selected 10 concept indices from 293 popular concept indices on Wind according to the following logic for investment reference: 1) First, filter out 53 concept indices with significant increases in leverage funds and large drawdowns since the peak; 2) Then, select 19 concept indices with marginal performance improvements from them; 3) Further filter out the 10 concept indices with the latest release dates, mainly including ZhiPu AI, CheLuYun, PEEK materials, SPD, and other concept indices. November industry allocation: Focus on the technology main line First choice for growth: TMT, especially electronics and computers; defense and military industry; pharmaceuticals and biotechnology, etc. Second choice for consumption: social services; medical beauty; liquor; light industry. The bottom warehouse allocation remains gold + innovative drugs. Risk Warning The "hard landing" of the U.S. economy is accelerating confirmation, exceeding market expectations; domestic exports are slowing more than expected