Morgan Stanley Fund has stated in a document that to some extent, equipment companies have a perception of "decline" at the micro level. The caution caused by continuous downstream overcapacity expansion in the equipment manufacturing industry has put pressure on performance. Looking ahead, the focus is on the pace of interest rate cuts. The export chain is significantly oversold in the early stage, and if interest rate cuts begin, there may be hope to transition from decline trading to interest rate cut channel trading. Overall, the equipment manufacturing industry sector is currently still centered on stable and relatively high certainty assets, including the shipbuilding sector, rail transit sector, and construction machinery sector. It is recommended to continue to focus on equipment renewal areas, especially in the areas of subsidies where funds are being implemented and central enterprise equipment renewal, as well as future new productivity technology and robotics fields. As the market enters the period of semi-annual financial reports, the caution caused by continuous downstream overcapacity expansion has put pressure on the performance of the equipment manufacturing industry. In August, the machinery (CMC) index fell by about 7%, underperforming the Shanghai and Shenzhen 300 indices and the Shanghai Composite Index during the same period. However, both domestic and international demand have seen some opportunity signals recently. In terms of domestic demand, total demand is still weak, and the demand for a broad spectrum of mechanical equipment is also weak, with industrial product prices generally at low levels. However, some details are worth noting. Central finance combined with support from central enterprises has become the current key expansion area, including: railway investment (+10%), water conservancy investment (+28%), power grid investment, and equipment renewal. Among the sub-sectors of high-end equipment that have shown strong performance this year, rail transit and construction machinery have felt the impact significantly, with fundamentals gradually playing out. According to data from the Construction Machinery Industry Association, in July 2024, various types of excavators sold a total of 13,690 units, an 8.6% increase year-on-year, with 6,234 units sold domestically (a 21.9% increase year-on-year) and 7,456 units exported (a 0.5% decrease year-on-year). CME's forecast for August in the construction machinery sector is 6,600 units sold domestically (a 17% increase year-on-year) and 7,700 units exported (a 4% increase year-on-year), with domestic demand continuing to remain stable. In terms of external demand, the overseas manufacturing PMI experienced a decline for four consecutive months in July. Looking at the performance of overseas excavators and most industrial products, the growth rate in July-August has slowed down to some extent. Equipment companies have some perception of "decline" at the micro level, especially noticeable in Europe compared to North America. Looking ahead, Morgan Stanley Fund believes that the focus should be on the pace of interest rate cuts. The export chain has shown a significant oversold position in the early stage, and if interest rate cuts are implemented, there may be a transition from decline trading to interest rate cut channel trading. In terms of policy, on July 25, 2024, the National Development and Reform Commission and the Ministry of Finance issued "Several Measures to Support Large-scale Equipment Renewal and Trade-in of Consumer Goods". In terms of funding sources and arrangements, around 300 billion yuan of support funds are available, sourced from the issuance of a one trillion long-term special government bond in May 2024. Of this amount, 148 billion yuan is arranged by the National Development and Reform Commission for implementing support policies in the general industry and shipbuilding industry, while 150 billion yuan is directly provided to local governments to implement support policies in other areas. Additionally, any central allocated funds that are not used by December 31, 2024 will be taken back by the central government.