Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Onshore clients have become less bearish on China's near-term growth outlook, with expectations for RMB appreciation against USD and a belief that exports may be more resilient than previously feared [1][2] - Clients express skepticism regarding incremental policy easing, viewing the current easing mode as reactive rather than preemptive, and anticipate further fiscal expansion in H2 to stabilize growth [2][10] - Concerns about US-China tariff negotiations remain, with clients expressing low conviction in potential outcomes and expecting tariffs to remain at current levels for the rest of the year [3][8] Summary by Sections 1. Near-term Growth Outlook - Onshore clients have adjusted their views to be less negative about China's growth, noting resilience in macro data and some bargaining power in trade negotiations [2] - Clients believe that solid GDP growth in H1 may reduce the urgency for significant policy stimulus, although further fiscal measures are still deemed necessary [2][10] 2. US-China Tariff Relations - Clients show low conviction regarding the future of US-China tariffs, with expectations that current tariffs (around 39%) may persist [3][8] - The complexity of potential trade deals is acknowledged, with clients anticipating that any agreement would be more complicated than previous arrangements [3] 3. Exports, Consumption, and Inflation - While strong exports are not seen as sustainable, clients expect some resilience in H2, with concerns about the property sector and PPI deflation remaining [9] - The report forecasts CPI at 0.0% and PPI at -2.4% for 2025, with expectations for home prices in top-tier cities to stabilize by H2 2026 [9] 4. Triggers for Policy Easing - Clients identify potential triggers for policy easing, including rising youth unemployment, falling home prices, and significant declines in durable goods sales [10] - There is a belief that some pro-growth policies may not yet be fully priced in for the remainder of the year [10] 5. RMB and Interest Rates - Onshore clients expect further RMB appreciation against USD, with forecasts of USDCNY at 7.1/7.0/6.9 over the next 3, 6, and 12 months [12] - Clients anticipate that China rates will remain low for an extended period, with a wide interest rate differential between China and the US [12] 6. Onshore vs Offshore Client Perspectives - Differences in perspectives are noted, with onshore clients focusing more on stabilizing the property sector and improving local policy implementation, while offshore clients emphasize signals from policy meetings [13] - Both groups see more upside than downside for China equity and RMB, viewing Q3 as a critical period for market developments [13]

25 June 2025 | 8:38PM CST TSMC (2330.TW) Growth outlook further reinforced by easing concern on AI order cuts and growing CoWoS adoption; reiterate Buy (on CL); TP to NT$1,210 | 2330.TW | 12m Price Target: NT$1,210.00 | Price: NT$1,070.00 | Upside: 13.1% | | --- | --- | --- | --- | | TSM | 12m Price Target: $242.00 | Price: $220.09 | Upside: 10.0% | We are raising our earnings forecast for TSMC by 2-6% for 2025-2027E as we raise our 1) wafer revenue forecast for 3nm/5nm, partially to factor in our easing co ...

Investment Rating - The report initiates coverage of Circle Internet Group (CRCL) with a Neutral rating and a 12-month price target of $83, indicating a potential downside of 54% from the current price of $180.43 [1][13][29] Core Insights - CRCL is positioned as a unique asset in the crypto ecosystem, being the only pure play crypto-native company that can expand into large existing fiat markets without the direct price volatility associated with crypto trading [1][27] - The main product, USDC, is a stablecoin designed to represent USD on the blockchain, with a projected 40% compound annual growth rate (CAGR) in USDC supply from 2024 to 2027 [2][27] - The report anticipates a 26% revenue CAGR and a 37% adjusted earnings per share (EPS) CAGR for CRCL from 2024 to 2027, driven by market share gains and the expansion of the crypto ecosystem [2][27] Summary by Sections Business Overview - CRCL issues and manages USDC, which has a market cap of $61 billion as of June 2025, representing 25% of the total stablecoin market cap [30][31] - The company has seen significant growth in USDC, with a market cap increase from $25 billion at the end of 2023 to $61 billion by mid-2025 [30][31] Financial Projections - Revenue is projected to grow from $658.9 million in 2024 to $1.324 billion by 2027, with net income expected to rise from $214.7 million to $550.9 million in the same period [4][10] - The adjusted pre-tax margin is forecasted to increase by approximately 11.5 percentage points to 53% by 2027, benefiting from a largely fixed cost base [2][27] Market Dynamics - The report highlights the potential for USDC to penetrate new total addressable markets (TAMs), particularly in cross-border payments and fiat trading, which could provide significant upside [3][28] - The stablecoin market is expected to grow from approximately $240 billion to over $1 trillion in the next 3-5 years, with a significant portion of clients anticipating this growth [24][28] Competitive Positioning - CRCL's growth is supported by ongoing global stablecoin legislation that favors compliant stablecoins like USDC, alongside strategic partnerships that enhance market share [2][27] - The company is positioned to benefit from a strong regulatory framework, which is expected to catalyze long-term growth in the stablecoin sector [27][29]

Investment Rating - The report maintains a "Buy" rating for CATL A/H shares, with a 12-month price target of Rmb323.00 for CATL A shares and HK$343.00 for CATL H shares, indicating an upside potential of 27.8% and 5.7% respectively [1][4][20]. Core Insights - The launch of Xiaomi's YU7, equipped with CATL batteries, is expected to bolster CATL's product mix improvement and drive growth in Qilin battery penetration starting in the second half of 2025 [2][26]. - Xiaomi has become CATL's largest high-end battery customer, contributing approximately 50% of Qilin and Shenxing installations in Q1 2025, with projections indicating significant growth in battery supply to Xiaomi in the coming years [3][31]. - The report emphasizes that product mix improvement is crucial for CATL's unit profit expansion, which has been undervalued by the market [4][38]. Summary by Sections Market Overview - CATL's market capitalization is Rmb1.2 trillion (approximately $160.7 billion), with an enterprise value of Rmb881.8 billion (approximately $123.0 billion) [5]. Financial Projections - Revenue is projected to grow from Rmb362 billion in 2024 to Rmb588 billion by 2027, with EBITDA increasing from Rmb77.5 billion to Rmb143 billion over the same period [5][18]. - EPS is expected to rise from Rmb11.58 in 2024 to Rmb22.49 in 2027, reflecting a strong growth trajectory [5][18]. Growth and Margins - Total revenue growth is forecasted at -9.7% in 2024, followed by a recovery with 20.4% growth in 2025 and 22.1% in 2026 [13]. - EBITDA margin is expected to improve from 21.4% in 2024 to 24.3% by 2027, indicating enhanced profitability [13]. Competitive Position - CATL is projected to maintain a significant market share in the EV battery sector, with Xiaomi closing the gap with top competitors like Tesla and Geely [28][30]. - The report highlights that CATL's high-end NCM battery, Qilin, is expected to see a resurgence in penetration, alleviating pressures from lower-priced LFP battery competition [2][24].

Investment Rating - The report does not explicitly provide an investment rating for the manufacturing sector but discusses the challenges and potential for productivity growth in the context of globalization and technological advancements [3][54]. Core Insights - The report identifies an unprecedented stagnation in global manufacturing productivity over the last 20 years, attributing it to factors such as globalization, weak investment post-global financial crisis (GFC), and a slowdown in technological innovation [3][51]. - Import competition from China has negatively impacted domestic manufacturing productivity growth in developed markets (DMs), with estimates suggesting a reduction of over 0.5 percentage points in annual productivity growth due to increased import penetration [16][26]. - The report emphasizes that the biggest driver of slow manufacturing productivity growth is a decline in the pace of innovation, particularly in information and communication technology (ICT) and electronics manufacturing, which has slowed annualized productivity growth by 1.5-2 percentage points in most DMs [39][40]. Summary by Sections Globalization and Chinese Manufacturing - The report discusses how increased import competition from China has led to lower capacity utilization and reduced new factory investment in DMs, contributing to a decline in productivity growth [15][26]. - A 1 percentage point increase in import penetration from China is estimated to lower annual DM manufacturing productivity growth by 0.1-0.2 percentage points, with effects persisting for at least six years [16][20]. Weak Investment Post-GFC - The report highlights that weak investment following the GFC has significantly hindered manufacturing productivity growth, with real manufacturing investment in DMs slowing by approximately 4 percentage points relative to pre-GFC trends [31][34]. - It estimates a drag of about 0.8 percentage points on annualized productivity growth over the 10 years post-crisis due to this weak investment environment [32][35]. Technological Slowdown - The report indicates that the slowdown in manufacturing productivity is largely driven by a stepdown in innovation, particularly in electronics manufacturing, which has seen a deceleration in productivity growth due to the exhaustion of easy gains from technological advancements [39][40]. - Total factor productivity has stagnated across DMs over the last 20 years, suggesting a broader slowdown in technological progress [44][50]. Implications for the Outlook - The report concludes that while recent policy efforts, such as tariffs and investment promises, may provide some support to domestic manufacturing productivity, a significant turnaround is unlikely without a meaningful pickup in the pace of innovation, particularly from advancements in robotics and generative AI [54][57].

Investment Rating - The report indicates a low probability of major supply disruptions, with current market pricing reflecting less than 4% probability of such events occurring this year [4][18][19]. Core Insights - Oil prices have returned to near pre-escalation levels, with Brent crude currently in the high $60s range, following a muted geopolitical response from Iran [3][6]. - The geopolitical risk premium in the oil market has significantly decreased, falling from nearly $15 per barrel to below $1 per barrel [7][18]. - Market expectations for Brent prices in September and December 2025 suggest a 60% chance that prices will remain in the $60s, with a 28% probability of exceeding $70 [11][14]. Summary by Sections Market Pricing of Supply Disruptions - The probability of a major supply disruption, such as a closure of the Strait of Hormuz, has decreased from around 15% to below 4% [3][18][19]. - The report highlights a disconnect between oil market pricing and Polymarket predictions regarding supply disruptions, with oil markets consistently pricing lower probabilities [22][25]. Geopolitical Risk Premium - The geopolitical risk premium has sharply declined, reflecting traders' experiences with geopolitical shocks that did not lead to significant oil supply disruptions [3][25]. - The report attributes this decline to various factors, including Iran's restrained response and strong incentives from the US and China to avoid large disruptions [25]. Price Expectations - The market's modal expectation for Brent prices in September 2025 remains in the $60s, with a wider distribution for December 2025 prices [14][16]. - The report suggests that the risks to Brent prices in December 2025 are now roughly symmetric, contrasting with the short-term upside skew observed previously [14][16].

Investment Rating - The report suggests a focus on hedging strategies due to elevated macroeconomic and policy uncertainty, indicating a cautious investment stance in the current environment [3][4]. Core Insights - Elevated macroeconomic and policy uncertainty is expected to maintain high equity volatility in the second half of the year, with potential catalysts such as tariff deadlines and geopolitical tensions [3][4]. - Stagflationary shocks pose a significant risk to balanced portfolios, particularly with inflation risks driven by tariffs, while a reflationary rebound could enhance growth optimism [3][4]. - Recent shifts in investor option positioning indicate a more bearish outlook on equities, while bullish positioning in EUR/USD has begun to moderate [3][4]. Summary by Sections Macroeconomic Environment - The probability of remaining in a high volatility regime for the S&P 500 is elevated, primarily due to ongoing macroeconomic uncertainty and potential negative surprises from various geopolitical events [4][5]. - The report anticipates a deceleration in US GDP growth to 1.25% year-over-year by Q4, influenced by recent labor data and declining hard economic indicators [4][7]. Hedging Strategies - The report identifies optimal hedges for stagflationary scenarios, including puts on USD high-yield credit and S&P 500 equal-weight, which are seen as attractive due to their low implied volatility relative to equity volatility [11][14]. - In a reflation scenario, rates payers and calls are highlighted as optimal hedges, with the implied volatility of longer-dated bonds having reset to near post-2020 lows [13][16]. Investor Positioning - Recent data shows a shift towards bearish positioning in equities, while bullish sentiment has increased in commodities like oil and gold [20][22]. - The report suggests that call options on EURO STOXX Banks and US Financials are attractive as upside hedges, while puts on MSCI EM and other emerging markets can serve as downside protection [16][20].

Investment Rating - The report assigns a Neutral rating to Ascletis Pharma Inc. with a 12-month target price of HK$4.92, indicating a potential downside of 46.0% from the current price of HK$9.10 [6]. Core Insights - The management has outlined a clearer development strategy for ASC30, which includes both oral and subcutaneous formulations of GLP-1RA, with a focus on achieving more weight loss and better tolerability compared to competitors [2][5]. - The emergent metabolism pipeline includes ASC47 and ASC50, with key data readouts expected in the second half of 2025, which could unlock further value in the anti-obesity and broader metabolism franchise [5]. Summary by Sections ASC30 Development Strategy - The oral formulation of ASC30 has shown a competitive preliminary drug profile in safety and weight loss, positioning it among the top tier of oral GLP-1 drug candidates [2]. - The subcutaneous formulation of ASC30 has a 36-day half-life, allowing for potential monthly dosing, which is competitive compared to other long-acting candidates [2][5]. - Management plans to initiate a Phase 2a study for ASC30 with topline data expected by the end of 2025 [2]. Emergent Metabolic/Autoimmune Pipeline - ASC47, targeting lean mass maintenance while reducing fat mass, has begun a Phase 2a trial in combination with semaglutide, with data expected by Q4 2025 [5]. - ASC50, an oral small molecule targeting IL-17, has shown promising pharmacokinetic data and is currently in a Phase 1 study for plaque psoriasis, with results anticipated in Q1 2026 [5]. - ASC40 has completed a Phase 3 study in acne in China, and management plans to file for NMPA NDA in the next six months [5].

Investment Rating - The report assigns a Buy rating to Kelun Biotech with a 12-month price target of HK$284.14, indicating a downside potential of 12.6% from the current price of HK$325.00 [7]. Core Insights - The management of Kelun Biotech is shifting the focus of sac-TMT from China to global trials, highlighting the significant commitment from Merck (MRK) with 14 ongoing global phase 3 trials across various tumor types [5][6]. - The early-stage pipeline is progressing steadily, with notable developments in SKB315 and SKB410, and a focus on radio-drug conjugates (RDC) as a promising area of research [6]. - Key catalysts expected in the second half of 2025 include NMPA approvals and data readouts for sac-TMT and other assets, with projected sales ramp-up for sac-TMT aiming for RMB 800 million to 1 billion for FY25 [6]. Summary by Sections Sac-TMT Global Trials - Sac-TMT (TROP2 ADC) is entering a mature R&D stage in China with two approved indications and two under NDA, while five phase 3 trials are ongoing [5]. - The strategy involves leveraging global trials for smaller indications in China, which are deemed less appealing from a return on investment perspective [5]. Early-Stage Pipeline - The early-stage pipeline includes SKB315 (CLDN18.2) for gastric cancer and SKB410 (Nectin4), which is licensed to Merck, showing complementary effects compared to existing therapies [6]. - Several phase 1 assets are under dose-escalation without a data sharing plan for 2025 [6]. Radio-Drug Conjugates (RDC) - RDCs are highlighted for their potential in tumors with strong encapsulation, offering a more straightforward payload release mechanism compared to traditional methods [6]. - The management emphasizes the need for target-specific delivery mechanisms in RDC development [6]. Key Catalysts - Anticipated catalysts in 2H25 include NMPA approval for sac-TMT in 2L EGFRmut NSCLC, A166 (HER2 ADC) approval, and phase 1 data readout for SKB315 [6].

Investment Rating - The report assigns a "Buy" rating for Sino Biopharmaceutical with a 12-month price target of HK$3.92, indicating a downside potential of 24.1% from the current price of HK$5.17 [7][8]. Core Insights - The company is on track for double-digit year-on-year growth in product sales for the first half of the year, driven by strong performance in innovative drugs and a stable generic drug portfolio [3][6]. - A major business development deal is anticipated in the near term, which is expected to contribute to sustainable revenue through licensing and collaboration [2][3]. - The company has a robust R&D pipeline with several assets poised for global opportunities, including TQC3721, TQ05105, TQA2225, TQB3616, TQB2102, and TQB2922, among others [2][3]. Summary by Sections Product Sales and Growth - Management reported that product sales growth in the first half of the year aligns with previous guidance of double-digit year-on-year growth, supported by innovative drug sales and a positive trajectory in the generic drug portfolio [3][6]. - The company expects to benefit from volume gains in the context of the Value-Based Procurement (VBP) policy, which is anticipated to start at the provincial level in 2026 and nationwide by 2027 [3][6]. Business Development and R&D Pipeline - The company is preparing for a significant licensing-out deal, which is expected to enhance collaboration income as a sustainable revenue source [2][3]. - The R&D pipeline includes multiple assets with global potential, such as TQC3721, TQ05105, and TQA2225, which are in various stages of clinical development and show promising efficacy [2][3]. Financial Projections - The report forecasts revenue growth from HK$28.87 billion in 2024 to HK$37.42 billion by 2027, with EBITDA increasing from HK$6.33 billion to HK$9.42 billion over the same period [8]. - The company’s market capitalization is noted at HK$97.6 billion, with a P/E ratio projected to decrease from 27.2x in 2024 to 22.3x by 2027 [8].