11 August 2024 | 7:15PM HKT _ Navigating China Internet: Key investor focuses into Tencent & Alibaba prints & what to watch out for With Tencent and Alibaba kicking off the China Internet results season amongst the mega-caps on Weds and Thurs (after HK market close) respectively, we expect broadly in-line 2Q prints, where we estimate Tencent adj. operating profit to grow 33% yoy on accelerating growth and Alibaba's group EBITA to decline 11% yoy on core businesses investments (mostly in-line with sell-side ...

9 August 2024 | 8:07PM EDT _ Healthcare Pulse: Reflecting On 2Q24 Earnings Amid An Uncertain Macro... Investor sentiment; market color; sector themes; charts to | --- | --- | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------- ...

9 August 2024 | 10:10AM BST _ Ferrous Tracker: Drop in Steel Output Hits Iron Ore Consumption n The Platts 62%Fe iron ore index (CFR China) returned to $99.3/t yesterday (8th August), down 4% from last Friday. n With little change in both supply and stocks, we view declining Chinese iron ore consumption as being the key factor driving prices lower. Mysteel's sample of 247 steel mills showed a 2% WoW drop in consumption of imported iron ore, reflecting a similar decline in hot metal output. n Meanwhile, flat ...

Investment Rating - The report does not explicitly provide an investment rating for the industry or companies discussed Core Insights - China's July exports missed expectations at 7.0% year-on-year compared to a 9.5% consensus, while imports exceeded expectations at 7.2% year-on-year against a 3.2% consensus. The strength in imports may be attributed to more working days, and the export miss does not necessarily indicate lower export volume. In June, export value increased by 8.6% year-on-year, with export volume rising by 16.7% year-on-year. The report suggests that Chinese exports can remain strong in the near term, although the medium-term outlook is less certain [1][3] - Headline CPI inflation in July rose to 0.5% year-on-year, up from 0.2% in June, driven entirely by higher food price inflation. Core CPI inflation decreased from 0.6% year-on-year in June to 0.4% in July, with services price inflation also edging down from 0.7% to 0.6%. The overall economic picture indicates a persistent supply and demand imbalance alongside weak price inflation [3] - China's net foreign direct investment (FDI) reached a new low in Q2, influenced by both rising outward FDI and declining inward FDI. The People's Bank of China's Q2 Monetary Policy Report indicated a continued effort to lower financing costs for corporates and households. Given recent US recession fears and the potential for tariff escalations, the report recommends going short on the Chinese Yuan against the CFETS basket due to weak economic fundamentals and an easing monetary policy [5][6] Summary by Sections Trade Data - July exports were 7.0% year-on-year, missing the 9.5% consensus, while imports were 7.2% year-on-year, exceeding the 3.2% consensus. The report indicates that the export miss does not imply lower export volume, as June saw an 8.6% increase in export value and a 16.7% increase in export volume [1][3] Inflation - Headline CPI inflation rose to 0.5% year-on-year in July, up from 0.2% in June, driven by food prices. Core CPI inflation fell to 0.4% year-on-year from 0.6% in June, indicating a persistent imbalance in supply and demand [3] Foreign Direct Investment - China's net FDI flows reached a new low in Q2, with both outward and inward FDI trends contributing to this decline. The report suggests a bearish outlook on the Chinese Yuan due to weak economic fundamentals and ongoing monetary easing [5][6]

Investment Rating - The investment rating for the company is "Buy" [7][10]. Core Views - The report indicates that the company's automotive parts business is experiencing stable growth, supported by the increasing demand for both fuel and new energy vehicles. The company is expected to become a competitive supplier of planetary roller screws for humanoid robots, benefiting from its entry into the high-end humanoid robot supply chain [7][10]. - The report highlights that the company's revenue, gross profit, EBIT, and net profit for Q2 2024 were RMB 354 million, RMB 121 million, RMB 64 million, and RMB 74 million respectively, showing year-on-year growth of 9%, 4%, 1%, and a decline of 2% in net profit [2][6]. - The report notes a slowdown in the growth rate of the automotive parts business, with a year-on-year increase of 8% in the first half of 2024 compared to 20% in 2023. The decline is attributed to seasonal factors and a slowdown in the downstream market [2][3]. Financial Overview - Q2 2024 financials: Revenue of RMB 354 million (+9% YoY), Gross Profit of RMB 121 million (+4% YoY), EBIT of RMB 64 million (-8% YoY), and Net Profit of RMB 74 million (-2% YoY) [2][6]. - The gross profit margin for Q2 2024 was 34%, a decrease of 2 percentage points year-on-year, while the net profit margin was 21%, down 2 percentage points year-on-year [2][6]. - The company expects to achieve approximately RMB 10 million in sales from its machine tool components by the end of the year, with positive progress in commercializing ball screws and linear guide products [3][5]. Market Outlook - The management anticipates a recovery in the growth rate of the automotive parts business in the second half of 2024, with turbocharger component revenue expected to grow by over 10% year-on-year [2][3]. - The company is expanding its production capacity, with plans for a factory in Anhui to begin mass production in Q4 2024 and a new facility in Thailand expected to start construction in the second half of 2024 [2][3]. - The report projects that the company will capture 5% of the global market share in high-end humanoid robot planetary roller screws by 2024, increasing to 15% by 2025 and contributing 8% to incremental revenue by 2027 [7][10].

Investment Rating - The report does not explicitly provide an investment rating for the company or industry analyzed [1]. Core Insights - The neutral real rate (r*) is a crucial benchmark for monetary policy and financial markets, representing the equilibrium real policy rate that neither stimulates nor contracts economic growth [3][4]. - Recent estimates suggest that the neutral real rates in the US and other major developed economies are higher than previously thought, particularly post-pandemic [1]. - The study highlights that the differences in neutral real rates across countries are primarily driven by GDP per capita, inflation rates, and current account balances, with specific impacts quantified [1][17]. Summary by Relevant Sections Neutral Real Rate Estimation - The neutral real rate can be estimated through economic models or inferred from financial market pricing, with market-based measures being particularly useful for cross-country comparisons [4][5][6]. - The analysis includes 12 developed and 24 emerging market economies, using data back to 2000 to derive neutral real rate estimates [6]. Cross-Country Differences - The report identifies that the neutral real rates in emerging markets (EM) and developed markets (DM) have moved in tandem over the past 25 years, with fluctuations largely driven by changes in US/global r* [9][10]. - Factors affecting country-specific risk premia, such as economic development levels and inflation volatility, play a significant role in explaining cross-country differences in r* [11][12]. Key Drivers of Neutral Real Rates - The analysis finds that a 10 percentage point increase in GDP per capita lowers neutral real rates by 12 basis points, while a 1 percentage point increase in average inflation raises them by 33 basis points [17]. - Improvements in current account balances lead to a decrease in neutral real rates, with a 1 percentage point improvement lowering rates by 7 basis points in general and by 20 basis points in emerging economies [17]. Macroeconomic Stability - The findings suggest that macroeconomic stability can yield high returns, with lower inflation and improved external balances providing pathways to sustainably lower interest rates and capital costs [19][20]. - The case of Turkey illustrates that strong economic growth does not necessarily correlate with high equilibrium rates, indicating that effective macroeconomic policies can lead to lower real interest rates [21].

Election Dynamics and Polling Trends - The presidential race has shifted significantly, with Vice President Harris now leading by around 3pp nationally, up from a 1pp lead earlier [4][6] - Harris has gained ground in key swing states, particularly in Sunbelt states like Arizona, Georgia, Nevada, and North Carolina, where her support has increased by 5pp on average [6] - The race remains highly competitive, with 7 swing states worth a combined 100 electoral votes now within roughly 2pp of even [6][7] Policy Implications of Election Outcomes - A Democratic sweep could lead to significant fiscal legislation in 2025, including higher corporate and high-income taxes, expanded family benefits, and new welfare programs [2] - In a divided government scenario, policy changes would be more limited, with only the expiration of certain 2017 tax cuts for high-income individuals likely to occur [2] - Harris is expected to release an economic plan soon, which may resemble Biden's budget proposal but with additional spending on areas like healthcare, childcare, and housing [40] Congressional and Senate Outlook - Democrats hold a slight 0.8pp lead in the generic ballot for the House, but the Senate remains highly competitive, with Democrats likely to lose Sen Manchin's seat in West Virginia [30][35] - Prediction markets now favor a Harris win with divided government as the most likely outcome, overtaking the previous consensus of a Republican sweep [37][38] - A Democratic House and Republican Senate would likely shift the political center slightly to the left, given the Senate's historical tendency to operate closer to the center [39] Economic and Market Influences - Economic indicators like GDP growth, consumption, and payrolls have a stronger relationship with election outcomes than equity market moves, particularly earlier in the election year [19][22] - A rise in the unemployment rate could negatively impact the incumbent party, with each 0.1pp increase associated with a 0.4pp reduction in the Democratic vote share [23] - Voters' trust in handling the economy remains mixed, with recent polls showing Harris gaining a slim advantage, though Trump still leads in some key states [26][27]

Investment Rating - The report assigns a "Buy" rating to Mindray Medical (300760.SZ) and a "Neutral" rating to United Imaging (688271.SS) [21][22]. Core Insights - The report indicates that the procurement amount for major medical devices in China is gradually improving, although it has not yet reached a turning point. The procurement amounts for five out of seven tracked medical devices increased month-on-month in July 2024, while year-on-year growth remains negative for all seven devices [5][6]. - The report anticipates that market growth will normalize in the second half of 2024 and into 2025, driven by a reduction in the impact of anti-corruption measures [5][6]. - Mindray Medical is expected to benefit from multiple growth drivers, including a recovery in procurement activities and the latest developments in medical equipment update policies [21]. - United Imaging is positioned to lead the domestic replacement process in medical imaging equipment, with significant market share growth expected in MRI and CT devices by 2032 [22]. Summary by Sections Mindray Medical - Mindray Medical is a leading medical device manufacturer in China, focusing on patient monitoring systems, medical imaging, and in vitro diagnostics. Domestic market revenue accounted for 61% of total revenue in 2023 [21]. - The stock is currently trading below its five-year average P/E ratio, primarily due to policy risks. The company is expected to maintain its market leadership due to a strong product portfolio and competitive pricing [21]. - The 12-month price target for Mindray Medical is set at RMB 450, with an implied upside of 73.2% from the current price of RMB 259.78 [25]. United Imaging - United Imaging is recognized as a leader in medical imaging equipment in China, with a projected market size increase from RMB 53.5 billion in 2021 to RMB 101 billion by 2032 [22]. - The company is expected to capture significant market share in MRI and CT devices, with annual revenue growth projected at 18.6% over the next 11 years [22]. - The 12-month price target for United Imaging is RMB 149, with an implied upside of 29.4% from the current price of RMB 115.13 [26].

13 August 2024 | 10:31AM HKT 2131d4eaf4cb4d50b1d51c8af07b64b4 Wistron (3231.TW): Better 3Q24 ahead on AI servers ramp up, PCs and general servers recovery; Product mix and larger scale to support GM We remain positive on Wistron post 2Q24 results and July revenues, which are both in line with our estimates. We expect a better 3Q24 ahead with stronger seasonality, PCs and general servers recovery on new product cycle, and AI servers ramp up on better GPU supply. Although there are still some uncertainties in ...

13 August 2024 | 10:18AM HKT Wiwynn (6669.TW): 2024 Nl +79% YoY, in line; ASIC Servers and General Servers to drive growth in 2H24; Buy Wiwynn delivered in-line 2Q24 results, sustaining strong YoY growth on low base last year (Read more in our results first take). We expect sequential top-line growth in 3Q/4Q24E, up 82%/ 68% YoY, with gross margin at 9.5%, above its historical level of ~8% on continuous NRE (non-recurring engineering) charges on new AI server projects. We expect ASIC (Application Specific I ...