We have analyzed key events and allocation themes worth monitoring in September. First, potential Fed rate cuts may strengthen the weak dollar environment, providing fresh catalysts for commodity assets that have already been in a strong trend, particularly precious metals and copper, potentially accelerating the rally in non-ferrous metals. Second, with Apple and META holding product launches in September, Apple's edge AI capabilities and META's AR glasses could drive a new wave of more sustainable edge device and edge AI ecosystem trends, succeeding the current cloud AI hype, making consumer electronics, especially Apple supply chain stocks, worth attention. Third, we believe anti-involution trends will gradually emerge along three lines: industries with high capital expenditure intensity over the past two years showing signs of marginal reduction; industries already showing signs of self-discipline or policy implementation; and industries that achieve anti-involution domestically while pursuing profits internationally through quota-based profit margin improvements. Fourth, equipment displays from military parades may strengthen expectations for China's military trade exports. While the defense sector appears event-driven in the short term, post-parade military trade developments are actually key to opening market expectation space. Fifth, innovative drug catalysts are expected to increase significantly in September, while recent technology sector rotation has cleared short-term speculative funds previously accumulated in the sector, suggesting innovative drugs may continue their upward trajectory after this adjustment. For allocation, we recommend continued focus on resources, innovative drugs, consumer electronics, chemicals, gaming, and defense in September.

**Fed Rate Cuts Expected to Strengthen Weak Dollar Environment** *Relevant Sector: Non-ferrous Metals*

Following Powell's softened stance at the Jackson Hole meeting, if the Fed delivers rate cuts in September, it may initiate a new trend of policy adjustments, marking synchronized policy cycles between China and the US again, providing China with greater monetary policy flexibility. Rate cuts themselves may catalyze globally-priced commodities, especially precious metals and copper, while stimulating medium to long-term global demand for industrial goods and resources. However, rate cuts are not the fundamental driver of resource stock performance - supply constraints remain the core driver. Against the backdrop of increasingly complex global geopolitical situations and countries pursuing autonomy and strategic security, supply shock frequency is increasing, such as Congo's cobalt controls this year, Indonesia's recent nickel controls, and China's stricter rare earth controls. Essentially, scarce resources should not be sold cheaply, and when a country has sufficient control and market share of scarce resources, these can even serve as tools for leveraging geopolitical influence. Additionally, we observe major powers beginning conscious strategic resource stockpiling, such as the recent US Geological Survey recommendation to include six metals in strategic reserves and the Department of Defense's plans to increase cobalt strategic reserves.

**Apple's AI and META's Glasses to Drive New Wave of More Sustainable Edge Device Industry Trends** *Relevant Sector: Consumer Electronics*

For Apple's autumn launch event, our focus is on AI integration and hardware-software combination. The market currently underestimates Apple's AI progress and potential. Apple's biggest advantage in edge AI lies in its full-chain integration capabilities. Apple AI has built a collaborative system of "edge hardware + proprietary models + developer ecosystem." Even in the previously weakest model layer, Apple's gap with other manufacturers is narrowing. As large language models hit capability ceilings and major companies gradually shift focus to applications, Apple's ecosystem barriers will become its late-mover advantage. If Apple's September 9 launch provides more application examples, it may directly drive incremental demand from supply chain segments, with edge computing demand growth rates expected to exceed cloud-side demand, bringing phased investment opportunities for Apple suppliers. Short-term focus on Apple supply chain valuation recovery, with core suppliers expected to benefit; medium-term edge computing upgrades driving increased demand for chips, packaging, thermal management, and testing equipment; long-term comprehensive application ecosystem reconstruction, with developers shifting from "connecting users" to "connecting Agents," potentially making productivity software and service applications new winners. META's AR glasses in September are also important, as hardware forms, hardware-software integration, and operating methods may bring new industry consensus and standards. However, given current lack of clear AR glasses monetization scenarios, user accumulation and developer ecosystem formation will require lengthy processes, making these primarily thematic opportunities, with supply chain investment focus on new technologies like optical waveguides and MicroLED.

**Anti-involution Evolving from Reflexive Trading to Three Clear Themes** *Relevant Sectors: Chemicals and Others*

Anti-involution has moved past the first phase of vague policy concept speculation, with reflexive price surge trading gradually returning to calm. We will focus on three themes going forward:

1) **Theme One**: Expansion control only, prioritizing industries with high capital expenditure intensity over the past two years showing reduction signs. We recommend focusing on "underperformers" with slowing new capacity additions, mainly left-side logic of supply-demand cycle reversal. Anti-involution combined with supply clearing inflection points typically feature low valuations with upside elasticity exceeding downside risk, such as power semiconductors, potash fertilizer, synthetic resins, and electrolytes.

2) **Theme Two**: Industries already showing signs of self-discipline or policy implementation. We recommend focusing on "average performers" with policy intervention implementation, typically industries that have already passed inflection points regardless of anti-involution, with anti-involution policies and price increases gradually taking effect. Characteristics include healthy demand/competitive landscape and confirmed supply improvement, such as lithium carbonate, express delivery, and coal.

3) **Theme Three**: Domestic anti-involution with international profit extraction. We recommend focusing on "top performers" pursuing internal anti-involution and external profit extraction - good industries that had already entered prosperity cycles before anti-involution, where China holds dominant global market share and further extracts global profits through anti-involution, with prosperity uptrend expected to strengthen, such as tungsten, cobalt, rare earths, refrigerants, phosphorus chemicals, and aluminum electrolysis.

**Military Parade Equipment Display May Strengthen China Military Export Expectations** *Relevant Sector: Defense*

The defense sector has actually lagged in this rally relative to catalyst event intensity and frequency. Whether military parades or the "15th Five-Year Plan," if defense sector downstream demand remains solely driven by domestic military equipment demand growth, the fastest revenue growth phase has passed, with limited profit margin improvement space. As the final year of the 14th Five-Year Plan, the CSI Defense Industry revenue growth was only +1.1% year-over-year in the first half of this year (2024: +2.1%, Q1 2025: -9.9%, Q2 2025: +10.0%). For the defense sector to open long-term expectation space, investment logic must transform from "domestic order-driven" to "international market and emerging industry space expansion." Military export growth is the core breakthrough for profit margins and growth, requiring more validation examples. According to SIPRI data, China's weapon exports accounted for 5.8% of global military trade from 2019-2023, with nearly 60% sold to Pakistan, indicating insufficient diversification of military trade revenue. Additionally, satellite communications, low-altitude economy, and deep-sea equipment represent strategic growth spaces for the industry. Therefore, we believe September 3's military parade is not catalyst realization but rather the beginning of the defense sector's long-term logic.

**Innovative Drug Catalysts Expected to Increase Significantly, While Recent Technology Rotation Has Cleared Speculative Funds** *Relevant Sector: Innovative Drugs*

From current sector rotation patterns, innovative drugs recently showed significant lagging characteristics. Previous strong momentum attracted substantial trend-following funds for indiscriminate buying, especially in A-shares, where speculation in small-cap pharmaceutical companies essentially represented capital relay behavior. Under recent stronger technology sector momentum, innovative drugs faced some pressure from short-term speculative fund outflows. Market-wide fund pursuit of Hong Kong innovative drug stocks also intensified volatility. According to public fund quarterly reports, for products with contractual Hong Kong stock holding limits of 20%-50%, Q2 2025 actual Hong Kong stock holdings totaled 420.6 billion yuan, up 26.3 billion yuan quarter-over-quarter, with Hong Kong stocks' share of total equity market value (overall method) rising from 28.8% in Q1 2025 to 30.4% in Q2 2025, further deviating from the 18.4% benchmark level. Much of Q2's increased allocation went to Hong Kong innovative drug stocks. Of course, as A-share computing power and sci-tech sectors continued attracting substantial short-term trend funds, innovative drugs recently experienced adjustment driven more by capital factors than valuation or industry logic changes. With earnings season ending, September is expected to bring more catalysts, and recent adjustments clearing speculative funds should restore innovative drugs' allocation value.

**September Allocation Continues Focusing on Resources, Innovative Drugs, Consumer Electronics, Chemicals, Gaming, and Defense**

We continue recommending focus on industries with genuine profit realization or strong industry trends, emphasizing resources, innovative drugs, gaming, and defense. In ETF terms, these correspond to Non-ferrous Metals ETF and Rare Metals ETF (focusing on rare earths and energy metals), Hang Seng Innovative Drug ETF (focusing on major pharmaceutical companies rather than small-cap speculation), Gaming ETF, and Defense Leaders ETF. From a medium to long-term perspective, we highlight industries with domestic supply control and external demand growth where China has or hopes to maintain pricing power. From short-term profit realization angles, we recommend rare earths, cobalt, tungsten, phosphorus chemicals, pesticides, fluorochemicals, and solar inverters, which could be expressed through Chemical ETF. Additionally, September features intensive consumer electronics product launches, and China's AI applications will likely be driven by C-end users and edge devices (rather than North American enterprise services market's high token-based payments). We also suggest attention to consumer electronics, particularly Apple supply chain revaluation opportunities following Apple's September 9 autumn launch.

**Risk Factors**

Escalating China-US friction in technology, trade, and financial sectors; domestic policy intensity, implementation effects, or economic recovery falling short of expectations; unexpected tightening of domestic and international macroeconomic liquidity; further escalation of Russia-Ukraine and Middle East conflicts; China's real estate inventory digestion falling short of expectations.