Post-market industrial semiconductor materials and chips welcome favorable news.

【Answer 1】 Stocks with projected Q3 earnings growth Yesterday’s forecast was that funds would flow out of tech stocks and rotate into infrastructure-related stocks—especially infrastructure, wind power, and photovoltaics. Today’s market performance broadly aligned with this expectation: tech stocks were hit hardest on the downside, clearly indicating a gradual outflow of capital. Meanwhile, the wind-power sector—which we highlighted for attention—performed relatively well: Dajin Heavy Industry surged to its daily limit-up. Next, we should focus on stocks with projected Q3 earnings growth. With October underway, most companies will release their Q3 earnings reports this month—making it an opportune time to trade the ‘Q3 earnings season.’ Yesterday, we spotlighted Dajin Heavy Industry and Xinjiang Communications Construction Group. Dajin Heavy Industry opened sharply higher in today’s pre-market auction, with auction volume reaching 10,000 lots—about 3% of yesterday’s total trading volume of 330,000 lots. Given Dajin’s relatively tight shareholding structure, its rise to the daily limit-up today was notably stable. We consider this a viable entry point. Coupled with the wind-power sector’s solid performance—many stocks rose over 5%—though no other stocks joined Dajin in hitting the limit-up, we still believe Dajin may reach the daily limit-up tomorrow; its strength at that level will then guide our decision on whether to hold or exit. The second stock is Xinjiang Communications Construction Group. Buying near its opening price today yielded a modest gain of several percentage points. Although we highlighted infrastructure stocks yesterday, overall sector strength remained underwhelming: large-cap stocks such as China Railway Construction Corporation and China Power Construction Corporation posted only modest gains, suggesting limited institutional participation—meaning we must wait for a more favorable timing. Today’s market lacked clear thematic leadership; perhaps the Q3 earnings theme stood out slightly. We recommend watching Tianshun Shares. Tianshun Shares exhibits characteristics typical of a ‘controlled-stock’ (i.e., one heavily influenced by a dominant shareholder or group). Its price swung dramatically—from -8% to +8%—two days ago, a move requiring strong control over the stock. Today’s surge to the daily limit-up signals the beginning of an upward move. In terms of fundamentals, Tianshun Shares boasts outstanding performance: its Q3 earnings are confirmed to show substantial growth. Q3 Earnings Forecast: The company expects net profit for Jan 1–Sep 30, 2019 to range between RMB 26 million and RMB 35 million—a staggering year-on-year increase of 5,046.48% to 6,827.95%, compared to RMB 505,200 in the same period last year. Moreover, Tianshun Shares has an extremely small free-float market cap—total market value stands at under RMB 2 billion. As recent market trends show, controlled stocks have performed exceptionally strongly—examples include Leguo Shares and Jinghua New Materials. If Tianshun Shares develops similar momentum, its upside potential remains considerable.

[Guojin Morning Brief] The price-increase theme: How do commodity price hikes transmit to company stock prices? How might tail risks in emerging markets unfold?

【Answer 2】 Cai Hao Head of Macroeconomic Research Center Head of Fixed Income Research Team The full-year CPI is expected to average around 1.15% year-on-year and 0.13% month-on-month, suggesting overall inflationary pressure will remain mild. Traditional inflation metrics fail to reflect asset-price trends, resulting in significant discrepancies between measured inflation and people’s real perceptions—and weakening their relevance and guidance for monetary policy. Therefore, forward-looking analysis of asset-price movements remains essential. Overall, under the current policy framework, neither the headline CPI nor broad-based inflation—including asset prices (i.e., ‘real inflation’) —faces substantial upward pressure this year. However, we must remain vigilant regarding international crude oil prices and the potential impact of rising oil prices on global central banks’ monetary policies. Price levels are unlikely to constrain monetary policy throughout the year, nor serve as a catalyst for later-stage policy normalization. Should the consensus hold that prices will rise moderately and stabilize, future monetary policy priorities will likely center on guarding against credit-default risks and monitoring rising financial leverage. Risk Warning: Economic growth exceeding expectations; excessively rapid asset-price appreciation; surging oil prices prompting premature monetary tightening; rapid accumulation of financial leverage triggering a policy pivot. For full details, please click: “Fixed Income Commentary: Will CPI and Asset Prices Become Decisive Factors Guiding Monetary Policy?” From Commodities to Equities: How Commodity Price Hikes Transmit to Stock Prices — Investment Strategy Series: The Price-Increase Theme Ai Xiongfeng / Jiang Hao / Ding Shitao / Chen Yi Core View: This round of commodity price increases bears many similarities to the 2010 commodity bull market: 1) Liquidity: Global liquidity remains extremely loose amid pandemic-induced shocks, and the U.S. dollar is relatively weak; 2) Demand: With vaccine rollout and stimulus policies across countries, the world is entering a synchronized recovery phase; 3) Supply: After two years of subdued capital expenditure, capacity expansion cannot keep pace with demand growth in the short term—resulting in overall supply-demand mismatch. 2021 will see simultaneous expansion in both commodity supply and demand; we favor commodities with high demand elasticity but low supply elasticity—such as certain chemical and non-ferrous metal products. How commodity price hikes translate into stock prices: Earnings impact is the core driver—with resource companies benefiting directly. Yet stock price performance depends not only on earnings but also on liquidity conditions and risk appetite; equity risk premium is the key factor causing divergence between commodity and equity price trends. Correlation strength between commodity and equity price movements ranks as follows: Precious Metals > Industrial Metals > Energy & Chemicals. At present, we maintain a positive outlook on sustained price increases for select sectors—including non-ferrous metals, chemicals, and paper manufacturing. Risk Warning: Slower-than-expected economic recovery; overseas black-swan events (e.g., geopolitical risks). For full details, please click: “From Commodities to Equities: How Commodity Price Hikes Transmit to Stock Prices — Investment Strategy Series: The Price-Increase Theme” Strategy Weekly Report: Intensifying Earnings Forecasts—Earnings as the Litmus Test for Stock-Picking Clusters Ai Xiongfeng Ai Xiongfeng Macroeconomic Research Center Economic Strategy Analyst Markets are now entering a period of密集 earnings forecast disclosures. So far, 930 companies have released annual earnings forecasts, while 31 have issued preliminary annual results. Based on these earnings forecasts, 55% indicate improved performance—continuing the upward trend observed last quarter.

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