Macro: China's economic activity has fallen again, pushing for policy easing again; real estate policy is more focused on boosting demand and destocking, including further relaxing housing purchase restrictions, reducing mortgage down payment ratios and interest rates, and encouraging local governments to purchase unsold commercial housing into affordable housing; the government will promote a new round of business equipment and household cars and appliances through moderate subsidies to boost domestic demand; deflation may ease as commodity prices rebound and service prices slowly recover. The U.S. economy is still resilient, inflation continues to exceed expectations, the market for the Fed's rate cut is expected to have fallen sharply, the dollar interest rate and exchange rate rebounded sharply to promote financial conditions to tighten, the second half of the economy and inflation or return to the slowdown trend, the Fed may cut interest rates in September, the year's rate cut of about 50 basis points.

science and technology: optimistic, continue to be optimistic about AI computing power/end-side growth, mobile phone/PC demand recovery and industrial chain performance continue to improve, A/H science and technology sector 1Q performance recovery accelerated, industrial prosperity bottomed out; Overseas technology leader 1Q performance is good, global cloud manufacturers capital expenditure increased significantly, promoting strong growth of AI server industry chain; Apple/Qualcomm 2Q Guidelines Better than Expected, optimistic businesses such as mobile phones/PCs benefit from AI-side innovation, Xiaomi SU7 listing and Tesla's push for FSD into China is expected to accelerate the landing of high-end smart driving. On the whole, the fundamentals of the industry continue to improve, and they are optimistic about AI-driven, demand recovery and domestic substitution benefit industrial chains. At the same time, they are optimistic about enterprises with higher share increase, cycle recovery and innovation certainty. It is suggested to pay attention to AI server industrial chains such as Industrial Fulian (601138 CH, unrated), Supermicro Computer (SMCI US, unrated), Hongteng Precision (6088 HK, Buy) and Lixun Precision (002475 CH, Buy), as well as AI PC/mobile industry chains such as Xiaomi Group (1810 HK, Buy), Apple (AAPL US, Unrated), Lenovo (992 HK, Unrated), Transsion Holdings (688036 CH, Unrated), BYD Electronics (285 HK, Buy) and Ruisheng Technology (2018 HK, Hold).

semiconductor: cautiously optimistic. April to May is the performance release period for the annual and quarterly reports of domestic and overseas companies.

AI sector: NVIDIA's performance will be a weather vane for the industry in late may. Referring to the industry chain results that have been announced so far, we believe that the AI boom will continue: 1) Cloud vendors (AMZN/MSFT/GOOG) and META's combined capital expenditure in the first quarter was $44.6 billion, a record high. According to Bloomberg's forecast, the capital expenditure of the four companies will reach 201.7 billion billion US dollars in 2024 (up 36% year-on-year), most of which will be invested in the construction of AI infrastructure and the purchase of related equipment. 2) Zhongyi Asahi's first-quarter revenue increased by 164 YoY, and the net profit of the parent company increased by 326 YoY. Tianfu Communications revenue increased 155 percent year-on-year in the first quarter, and net profit attributable to the parent company increased 215 percent year-on-year. Strong demand for AI supported the performance of the industry chain, which was in line with our previous expectations. Semiconductor equipment sector: We released our semiconductor equipment sector report in April and covered Northern Huachuang (002371 CH, BUY) for the first time. North Huachuang is China's leading semiconductor equipment manufacturer, benefiting from the trend of domestic substitution, we are optimistic about the company's future development, the first coverage to give a "buy" rating, target price of 405 yuan (link). We maintain the previous main line recommend: 1) continue to be optimistic about the development of the artificial intelligence (AI) industry chain, especially the storage market (HBM3 and HBM3e), optical communications, and demand growth in wired connections (networking).

We prefer the real A- share beneficiary target in the AI industry chain, and prefer Zhongyi Asahi (300308 CH, buy). 2) Semiconductor supply chain will further strengthen localization, continue to be optimistic about the semiconductor domestic substitution theme, optimistic about the demand for semiconductor equipment, recommend North Huatron (002371 CH, buy). 3) The consumer electronics market bottomed out at the end of 2023, and Huawei's return is expected to lead to a rebound in demand. Benefit from new product launches and market share growth, bullish on Weir shares (603501 CH, buy) and Zhuo Shengwei (300782 CH, buy). 4) In addition, because telecom operators have the advantages of high financial visibility, stable cash flow, high dividend yield, and less susceptible to the international situation, it is believed that the communications sector will still be favored by some investors who prefer conservative strategies.

Internet: Since late April, the industry index has benefited from the recovery of capital and the recovery of sentiment supported by the marginal improvement of fundamentals, and the valuation revaluation, the monthly dimension of High beta stocks, companies with sound fundamentals and continued improvement of shareholder returns have outperformed the market. Looking forward to May, after the recovery of sentiment promotes the overall valuation repair or has been more fully reflected, fundamentals and shareholder returns may become the focus of market attention again. Companies that are still able to give more than expected profit growth under the help of the gradual easing of industry competition, the stability of the main business and the ability to further reduce costs and increase efficiency, and fundamentally moderate performance has been fully expected by the market, but in the shareholder return dimension is expected to give better-than-expected performance of the company or worthy of focus. The annual dimension still recommends focusing on three main lines: 1) incremental revenue and profitability from business going out to sea; 2) companies that have the ability to maintain high levels of shareholder returns or are expected to further improve shareholder returns; and 3) companies that are expected to benefit from incremental policy catalysis. From a monthly stock selection perspective, we recommend to fight more (PDD US, buy), Baidu (BIDU US, buy), Tencent (700 HK, buy), Alibaba (BABA US, buy).

Software and IT services: neutral optimism. The easing of US dollar liquidity pressure in 2024 is expected to drive sector valuation revaluation, while at the fundamental level, personnel cost control, focus on profitability improvement and cash flow improvement may remain important short-term themes for companies in the software and IT services sector in an environment where overall corporate IT spending is gradually recovering. With the gradual recovery of the macro environment driving the recovery of enterprise IT spending, sector performance is expected to recover, valuation or gradual revaluation, while the leading companies in cloud transformation are expected to continue to achieve economies of scale, and the rate of profit margin improvement is expected to lead their peers. Looking ahead to the medium to long term, we are optimistic about: 1) thematic investment opportunities for software localization, 2) the fundamental structural improvement brought about by the gradual deepening of the combination of generative AI and traditional software applications, and the increase in user experience and subscription unit price, and 3) the potential revenue growth brought about by the business of leading software manufacturers. recommend BUY Kingdee International (268 HK, BUY) and Salesforce(CRM US, BUY).

medicine: We expect innovative drugs, medical devices support policies will continue to land, looking forward to the introduction of national policies. At the same time, we expect that medical equipment trade-in policies will be introduced in various places to stimulate the release of demand for medical equipment. We expect that China's pharmaceutical industry is expected to return to healthy growth as supportive policies in the industry fall into place and industry regulation normalizes, and the impact of the new crown base gradually recedes. The pharmaceutical industry may continue to rebound, mainly due to 1) the expected improvement of domestic policies, the improvement of the payment environment for innovative products by medical insurance, the continuous benefit of demand stimulus policies for medical equipment, and the expected continuous recovery of medical demand in the anti-corruption normalized backyard; 2) Sailing out to provide additional growth momentum, authorized transactions for innovative drugs are expected to continue to land, and innovative medical devices are expected to expand overseas markets; 3) Long-term investment opportunities such as GLP-1 and ADC; 4) Sector valuation attraction, most leading stocks dynamic price-earnings ratio below the historical average of 1 standard deviation, some stocks dividend yield attraction.

we continue to be optimistic about Baiji Shenzhou (BGEN US, buy), Gushengtang (2273 HK, buy), Mindray Medical (300760 CH, buy), United Shadow Medical (688271 CH, buy), Giant Bio (2367 HK, buy), Cinda Bio (1801 HK, buy), Korenbotai (6990 HK, buy).