Industry or Company Involved - **China's Economy** Key Points and Arguments 1. **China's Economic Outlook in 2025 hinges on two factors: external tariffs and domestic stimulus**. The US tariffs are expected to phase in from 25Q2 and increase by 15% in a staged manner, impacting China's exports and GDP. Domestic policy is expected to become more expansionary, but not a decisive shift from the current real-growth-targeting and reactive easing mode. 2. **Tariff Risks**: The baseline assumption is a 15% annualized increase in tariffs, similar to the 2018-19 trade dispute. The US has indicated a desire to strengthen oversight on tariff evasion, but implementation may be challenging due to China's dominant role in global manufacturing. 3. **Trade Diversion**: The US has indicated a desire to strengthen oversight on tariff evasion, and we do anticipate meaningful measures to close such "loopholes" through third countries and a crackdown on de minimis shipments. Implementation, however, may prove challenging, given China's dominant role in global manufacturing. 4. **Impact of Tariffs**: A 15% tariff hike with partial diversion will slow China's exports by -6.0% and China's GDP by –1.0% ceteris paribus. 5. **RMB Depreciation**: The RMB depreciation pressure is real under tariff threats. Amid trade dispute 1.0, USDCNY responded to almost every announcement of tariffs and deals. Based on this sensitivity, USDCNY could reach 7.7-8.0 under 60% tariffs, and in the escalating stage, the markets could price in extreme scenarios. 6. **Confidence Problem**: Two years after reopening, social confidence is still weak. The confidence issue appears broad-based and entrenched now. Weak sentiment would continue to weigh on the economy in 2025. 7. **Deflation Challenge**: China's longest streak of deflation drags on. The GDP deflator should remain negative in 24Q4E, the seventh consecutive negative reading. This is unprecedented for China, with a similar episode only in 1998-99. 8. **Policies**: China should and probably will navigate the turbulence with policy stimulus. The support would step up to offset potential tariff shocks, but not to reflate the economy. 9. **Monetary Easing**: Rate and RRR cuts will likely continue. The monetary policy stance is now officially stated as "moderately loose" by the Politburo and the CEWC. 10. **Fiscal Policy**: We expect overall government deficit to increase ~RMB2.5tr to RMB11.5trn for 2025. The central government could take up all the increase. 11. **Targeted Consumer Support**: Targeted consumer support would likely top policymakers' priority list for 2025. Following the recent pay hikes for civil servants, more mini measures could come through. 12. **GDP Growth**: We maintain our forecast that GDP growth could retreat to 4.2%YoY in 2025E after hitting 5.0% in 2024E. 13. **Inflation**: China may not find an easy way out of deflation in 2025E. We forecast CPI to average 0.6%YoY and PPI to decline -1.9%YoY in 2025E – no reflation. 14. **Consumption**: Retail sales could grow only 3.5%YoY in 2024E, setting the stage for rebound. Indeed, household savings rate stood at 38.0% in 24Q1-3, still notably higher than the pre-Covid 36.2%. 15. **Investment**: Property investment could record a fourth high single-digit or double-digit contraction in 2025. Policymakers are aiming for "stopping the decline of the sector and foster a stabilization," yet we think it is more about home prices and sales, instead of investment. 16. **Trade**: Exports look set to decline from the all-time high amid tariff uncertainties. Headline exports likely grew 5.4%YoY in 2024 with the momentum for volume even stronger. 17. **Key Risks**: The shock could be more significant especially in the case of a 60% universal tariff on China. Our current expectations are at best an educated guess, and we see risks largely balanced around this base case.

Summary of PDD Holdings Inc. Conference Call Company and Industry Overview - **Company**: PDD Holdings Inc (Ticker: PDD.O) - **Industry**: China Internet and Other Services - **Market Cap**: US$125,021 million - **Current Stock Price**: US$96.82 (as of January 3, 2025) - **Price Target**: US$150.00, indicating a potential upside of 55% [13][17] Key Takeaways - **Temu's Expansion**: - Temu entered one new country, Sri Lanka, in December 2024 under the fully entrusted model [16] - Total number of countries entered under the fully entrusted model reached 25 [16] - Monthly downloads for Temu decreased by 4% month-over-month to 40 million, with regional contributions of 6% from the US, 24% from Europe, and 28% from Latin America [16] - **User Metrics**: - Global accumulated downloads reached 884 million, a 5% increase month-over-month, with 23% from the US, 27% from the EU, and 25% from Latin America [16] - Monthly Active Users (MAU) increased by 4% month-over-month to 352 million, with 15% from the US, 28% from Europe, and 28% from Latin America [16] - Daily Active Users (DAU) reached 35.4 million, a 2% increase month-over-month, with 19% from the US, 32% from Europe, and 25% from Latin America [16] Financial Performance - **Earnings Per Share (EPS)**: - 2023: Rmb 41.12 - 2024 Estimate: Rmb 71.77 - 2025 Estimate: Rmb 80.24 - 2026 Estimate: Rmb 90.23 [13] - **Revenue Projections**: - 2023: Rmb 247,639 million - 2024 Estimate: Rmb 392,164 million - 2025 Estimate: Rmb 464,624 million - 2026 Estimate: Rmb 515,585 million [13] - **Valuation Metrics**: - Price-to-Earnings (P/E) ratio projected to decrease from 25.3 in 2023 to 7.9 in 2026 [13] - Return on Equity (ROE) expected to decline from 51.0% in 2023 to 31.2% in 2026 [13] - Free Cash Flow yield ratio projected to increase from 5.4% in 2023 to 13.8% in 2026 [13] Risks and Opportunities - **Upside Risks**: - Faster-than-expected user growth driven by consumption trends - Improved unit economics for Temu - Reduced operational expenses due to less intense competition [19] - **Downside Risks**: - Increased competition impacting margin improvements - Potential drop in user engagement as subsidy levels normalize - Regulatory challenges affecting Temu's growth [19] Conclusion PDD Holdings Inc. is positioned for growth with its Temu platform expanding internationally. The financial outlook shows significant revenue growth and improving cash flow metrics, although risks from competition and regulatory environments remain. The stock is rated as "Overweight" with a strong price target indicating substantial upside potential [13][17].

Summary of the Conference Call on China Property & Property Management Industry Overview - **Industry**: China Property & Property Management - **Outlook for 2025**: Destocking to persist with five key themes identified for the year [2][9] Key Themes for 2025 1. **Existing Homes' Share Gains**: The trend of existing homes gaining market share from new homes is expected to continue, driven by buyer concerns over project quality and completion risks [2][19] 2. **Rising Importance of Rental Market**: The rental market is becoming increasingly significant, with a shift from buying to renting properties, impacting rental prices and government inventory buyback programs [2][24][26] 3. **Challenges for Luxury Malls**: Luxury malls are anticipated to face ongoing challenges due to a mismatch between supply and demand, with luxury retail sales declining by approximately 10% in 2024 [2][29][31] 4. **C-REITs as a Rising Asset Class**: The decline in interest rates is expected to benefit C-REITs, with a notable increase in their average unit price by 12% in 2024 [2][33][37] 5. **Diminishing Policy Impact**: The influence of government policies on the physical and stock markets is expected to decrease, with a focus shifting towards individual company fundamentals [2][3] Market Performance and Expectations - **2024 Performance**: MSCI China Real Estate declined by 11%, underperforming MSCI China by 26 percentage points [3][14] - **2025 Expectations**: Anticipated declines in the residential new home market with projected YoY declines of 10% in GFA sales and new starts, and a 10% decline in tier-1 cities' property prices [2][18] Stock Preferences - **Preferred Stocks**: BEKE and CR Land are favored due to their structural advantages in the current market environment [4] - **Cautious Stance**: A cautious outlook on developers and managers due to ongoing price and volume stabilization issues, with increased default risks highlighted [4] Valuation Metrics - **Current Valuation**: MSCI China Real Estate is trading at a forward PE of 8.4x and P/BV of 0.60x, compared to historical averages of 6.7x and 0.87x [5][9] Additional Insights - **Secondary Market Growth**: Secondary transactions increased to 47% of total transactions in 2024, up from 30% in 2022, indicating a shift in market dynamics [21] - **Rental Yield vs. Mortgage Rates**: Rental yields in tier-1 cities remain lower than mortgage rates, affecting investment decisions [25][26] - **Luxury Market Outlook**: Anticipated decline in domestic luxury spending by 8% YoY in 2025, with luxury brands expected to slow store expansions [30][31] Conclusion The conference call highlighted a challenging outlook for the China property market in 2025, with significant shifts towards existing home transactions and the rental market, alongside persistent challenges for luxury retail spaces. The anticipated decline in property prices and the evolving landscape of C-REITs present both risks and opportunities for investors in this sector.

January 6, 2025 03:35 PM GMT China Property | Asia Pacific Weekly Database Tracker #1 Weekly primary unit sales were +49% YoY and -43% WoW. Weekly secondary unit sales were +67% YoY and -27% WoW. The total sell-through rate was 68% last week. Weekly primary unit sales in 50 cities were +49% YoY (vs. +21% YoY last week) and -43% WoW for the week ended January 5: Tier 1 city sales were +42% YoY (vs. +34% YoY last week) and -37% WoW. Tier 2 city sales were +65% YoY (vs. +22% YoY last week) and -46% WoW. Tier 3 ...

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the semiconductor industry in China, particularly the progress in semiconductor localization and the impact of domestic demand subsidies amid limited tariff effects [1][2]. Core Insights 1. **Price Competition in Foundries**: Ongoing price competition in mature node foundries is noted, with some inventory digestion and China's subsidies for consumer electronics purchases contributing to this dynamic [2][3]. 2. **IC Design Sector Performance**: China's integrated circuit (IC) design sector is expected to reach CNY646 billion (approximately US$90 billion) in 2024, reflecting a ~12% year-over-year increase, but this growth lags behind the global semiconductor industry growth estimated at 19% [2][3]. 3. **Company Closures**: Over 14,600 Chinese semiconductor companies closed in 2024, primarily in consumer electronics, semiconductor component distribution, and analog sectors, indicating a normalization in the growth of China's chip design industry [2][3]. 4. **Price Reductions by Chinese Foundries**: Prices for 12-inch wafers from Chinese foundries have decreased by up to 40% compared to Taiwanese companies, with 20-30% discounts on 8-inch wafers. This pricing pressure has been ongoing since mid-2024 [2][3]. 5. **US Trade Investigation**: The Biden Administration has initiated a trade investigation into older Chinese-made "legacy" semiconductors, which may lead to increased tariffs. However, the direct impact on Chinese mature node chip companies is expected to be limited due to low export volumes to the US [2][3]. 6. **Stock Implications**: Caution is advised regarding mature node foundries like UMC and Vanguard due to competition from China, while a positive outlook is maintained for Chinese wafer fabrication equipment (WFE) companies like NAURA and AMEC due to aggressive capital expenditure plans [2][3]. Additional Insights 1. **Semi Equipment Imports**: China's semiconductor equipment imports were valued at US$29 billion from January to November 2024, marking a 20% year-over-year increase, although growth is decelerating [6][7]. 2. **High Bandwidth Memory (HBM) Development**: China is still behind in HBM technology, with local vendors only able to produce 4-8 layer HBM, while CXMT targets volume production in the second half of 2025 [7][8]. 3. **Self-Sufficiency Projections**: China's semiconductor self-sufficiency ratio is projected to reach 25% by 2026, up from 20% in 2023, driven by weak consumer demand and limited breakthroughs in advanced logic chips [28][29]. 4. **Market Dynamics**: The semiconductor market is experiencing a divergence in stock performance, with notable outperformance from companies like Espressif and GigaDevice, attributed to demand from AI applications [10][11]. Conclusion The conference call highlights the challenges and opportunities within China's semiconductor industry, emphasizing the impact of domestic policies, competitive pricing, and the ongoing transition towards greater self-sufficiency in semiconductor production. The insights provided are crucial for understanding the current landscape and future trends in the industry.

Industry and Company Overview * **Industry**: Energy sector, focusing on natural gas, oil, and related infrastructure and services. * **Key Companies**: Antero Resources (AR), ARC Resources Ltd (ARX CN), Baker Hughes (BKR), ConocoPhillips (COP), Cenovus Energy (CVE CN), Chevron (CVX), Expand Energy (EXE), TechnipFMC (FTI), Pembina Pipeline Corp (PPL CN), Shell (SHEL), Scorpio Tankers (STNG), Tenaris S.A. (TEN), ExxonMobil (XOM), YPF S.A. (YPF) Key Themes and Insights 1. **US Natural Gas Demand Growth**: * **Demand Pull**: Improved permitting and infrastructure development expected to drive additional gas-fired generation and pipeline construction. * **LNG Exports**: Expectation for lifting of the "LNG Pause" benefiting infrastructure and natural gas producers. * **Storage Situation**: Tightening storage situation into the winter of 2025-26 due to rising production and demand. * **Appalachia**: Significant growth potential in natural gas power demand, driven by pipeline expansions and data center demand. 2. **Global Oil Macro**: * **Non-OPEC Supply Growth**: Expected to match global oil demand growth in 2025. * **Iran Sanctions**: Potential impact on global oil supply and prices. * **China Demand**: Significant contribution to global oil demand growth. 3. **US Oil Future Role**: * **Shale Maturity**: Oil sentiment negative, but oversupply thesis unlikely to dissipate. * **US Supply**: Wide dispersion in US oil supply, driving uncertainty. 4. **LNG Outlook**: * **Oversupply Thesis**: Pushed to the right due to project delays and higher-than-expected demand. * **North American LNG**: Expected to grow significantly, driven by operating, under-construction, and proposed projects. 5. **Global Refining S&D**: * **Capacity Closures**: Indicate marginally tighter supply and demand in the second half of 2025. * **Refining Margins**: Expected to remain under pressure due to excess cash balances and concerns over demand growth. 6. **Energy M&A**: * **E&P Consolidation**: Significant room for further M&A in the E&P sector. * **Midstream Services**: Likely to follow L48 E&P consolidation. 7. **Midstream**: * **Strong Demand Fundamentals**: Underpin volume growth across key North American basins. * **Valuations**: Expected to re-rate higher due to central bank policy easing and solid growth outlook. 8. **Shipping**: * **Iran Sanctions**: Potential for stricter enforcement under the Trump administration. * **Tanker Utilization**: Expected to increase, driving up spot rates for VLCCs and tankers. 9. **International Capex**: * **Onshore Capex**: Expected to remain flat in 2025. * **Offshore Capex**: Expected to increase in 2025, but decelerating trend is clear. Stock Picks * **Buy**: AR, ARX CN, BKR, COP, CVE CN, CVX, EXE, FTI, PPL CN, SHEL, STNG, TEN, XOM, YPF * **Hold**: APA, BRY, CNQ CN, CHRD, CIVI, DVN, ENB CN, EOG, HES, KEY CN, MUR, NOG, PPL, RRC, SUBC NO, TRP CN, TEN, YPF Conclusion The energy sector is expected to see significant growth in natural gas demand, driven by US LNG exports and global demand. Oil demand is expected to remain strong, but supply concerns and geopolitical factors could impact prices. Midstream and services companies are expected to benefit from strong demand fundamentals and improving valuations.

J P M O R G A N Global Markets Strategy 02 January 2025 China/Hong Kong Monthly Wrap Dec 2024: the fourth year is the charm In 2024, China and HK equity indices reversed course after a three-year correction. MXCN/HSI/HSCEI/HSTECH rose by +2.7%/+3.4%/+5.1%/+2.8% in USD during December, for USD price returns of +16%/+18%/+27%/+19% during 2024. MXCN's large-cap high yielders were well bid as the 10Y CGB yield dipped to a record low of 1.68% (Figure 4Southbnd iflowsnt HKlised hgyilers & Figure 5MXCN andMXHK: Cy ...

Summary of the Conference Call on China Steel and Iron Ore Industry Industry Overview - The conference call focused on the **China Steel and Iron Ore** industry, providing insights into consumption trends, inventory levels, and production rates. Key Points Steel Consumption Trends - Apparent consumption of **rebar** continued to decline, while consumption of **flat products** remained relatively high [1] - Downstream consumption for rebar fell further by **10% week-over-week (WoW)**, attributed to holidays and the upcoming **Chinese New Year** [2] Inventory Levels - **Steel inventory** at traders increased by **75,000 tons (kt)**, or **1.0% WoW**, while inventory for long products rose by **2.9% WoW**. Conversely, inventory for flat products decreased by **0.4% WoW** [2] - **Steel inventory** at mills was reported at **3,491 kt**, down **0.3% WoW** [2] - **Iron ore inventory** at small and medium-sized mills increased by **9.9 kt**, or **4.7%**, from the previous week [3] - Inventory at ports decreased by **0.6% WoW**, totaling **142.9 million tons (mt)** [3] Production Rates - The **utilization rate** of 247 mills dropped by **0.58 percentage points (ppts) WoW**, reaching **85.6%** [4] - Average daily output for **long products** decreased by **3.5% WoW**, totaling **2.89 million tons (mnt)**, while output for **flat products** dropped by **0.6% WoW**, totaling **5.41 mnt** [4] - The **iron ore operating rate** at 126 sample mines was **60.9%**, down **3.2 ppts** compared to two weeks prior, with an average daily output of **383.9 kt**, down **5.0%** [3] Market Dynamics - The **steel demand** outlook remains cautious, with the industry facing challenges due to seasonal factors and inventory adjustments [6] - The **CISA (China Iron and Steel Association)** reported that member mills' production was **1.98 million tons per day** for mid-December, down **2.3%** from the preceding 10 days but up **2.5% year-over-year (YoY)** [4] Additional Insights - The **EAF (Electric Arc Furnace)** capacity utilization rate decreased by **0.34 ppts WoW**, reaching **52.45%** as of December 27 [4] - The overall sentiment in the industry remains **attractive**, indicating potential for recovery in the medium to long term [6] Conclusion - The China Steel and Iron Ore industry is currently experiencing a decline in rebar consumption and mixed inventory trends, with production rates also showing a downward trajectory. Seasonal factors and market dynamics are influencing these trends, but the long-term outlook remains cautiously optimistic.

Industry and Company Overview * **Industry**: Offshore oilfield services (OFS) * **Company**: COSL (China Oilfield Services Limited) * **Analyst**: UBS * **Date**: 2 January 2025 Key Points Industry Trends 1. **Offshore OFS Utilization and Day Rates**: The offshore OFS industry has been experiencing an upcycle since 2021, driven by rising oil prices and increased capex by global oil companies. Rig utilisation rates have been high, with average day rates for jack-ups, semi-subs, and drill ships increasing annually since 2022. * [2] 2. **Global Offshore Rig Utilization**: The average utilisation rate for offshore rigs in 2024 was 79%, with jack-up utilisation experiencing a temporary decline in Q324 due to service suspensions in the Middle East, followed by a recovery in Q424. * [2] 3. **Offshore Rig Day Rates**: Day rates for offshore rigs have remained on an upward trajectory in 2024, with rates for jack-ups, semi-subs, and drill ships increasing by 12%, 8%, and 16% respectively from the end of 2023. * [2] 4. **Global Offshore OFS Demand**: Global offshore OFS demand is expected to remain solid, with day rates for jack-ups, semi-subs, and drill ships projected to increase by 6%, 9%, and 9% respectively from 2026 to 2028. * [3] 5. **Regional Variations**: The Mediterranean, Southeast Asia, and Australia have seen the fastest growth in average day rates for jack-ups in 2024. Norway has maintained high day rates for semi-subs, with the average leading edge day rate increasing by 23% YoY. * [4] 6. **Rig Suspensions in the Middle East**: Some rigs in the Middle East were suspended from service in 2024 due to service suspensions. However, new contracts have been secured for a quarter of the suspended rigs, and demand is expected to recover in 2026. * [4] 7. **Supply Gap**: UBS expects a supply gap to emerge in 2030, requiring an investment of US$250-400bn/year to fill the gap, accounting for the natural decline at mature fields and the need for new projects. * [19] COSL Analysis 1. **COSL Drilling Business**: UBS has updated its analysis of COSL's drilling business and adjusted its 2024/2025/2026 earnings estimates. The company's drilling segment is expected to experience high growth in 2025, driven by new contracts for suspended rigs and higher day rates for some of its semi-subs. * [5] 2. **COSL Earnings Estimates**: UBS has adjusted its DCF-based price target for COSL from HK$10.80 to HK$10.60, implying a 10x 2025E PE. The company's 2025 net profit growth forecast is 40%. * [5] 3. **COSL Valuation**: COSL's 2025E PE of 6.6x is below the global OFS peer average of 11.9x, and its 2025E P/BV of 0.6x is below the global OFS peer average of 1.6x. * [5] 4. **COSL Rig Contracts**: UBS has provided a detailed breakdown of COSL's rigs subject to contract changes in 2025, including new contracts for suspended rigs and higher day rates for some of its semi-subs. * [40] 5. **COSL Financials**: UBS has provided a financial overview of COSL, including revenue, EBITDA, net profit, capex, EPS, DPS, ROE, and gearing ratio. * [42] Risks 1. **Oil Prices**: COSL's share price tends to track oil prices, which could impact sentiment on the stock. 2. **Deep-water Drilling**: The market may have higher earnings expectations for COSL from deep-water drilling offshore China, which faces higher risks than shallow-water drilling. 3. **Exchange Rates**: If the US dollar appreciates against the renminbi, there could be upside risk to COSL's earnings. 4. **Large Portion of Revenue from CNOOC**: While this represents reliable revenue, there is a risk that COSL may not raise rates in line with overseas peers. * [48]