Economic Indicators - The US services PMI stagnated at 50.1 in July, down from 50.8 in June, significantly below the market expectation of 51.5[3] - The manufacturing PMI fell to 48 in July, down from 49 in June, also below the expected 49.5, indicating a contraction in the manufacturing sector[4] - The employment index in the services sector dropped to 46.4, indicating a significant contraction in hiring[4] Inflation and Employment - The price index for services rose to 69.9, close to levels seen at the end of 2022, indicating heightened inflationary pressures[4] - The expected CPI growth may rebound, complicating the Federal Reserve's efforts to balance employment and inflation[3] - The unemployment rate is projected to rise slightly in Q3, with inflation expected to rebound, leading to potential interest rate cuts in October and December[3] Market Expectations - Following the PMI data release, market expectations for interest rate cuts decreased by 5 basis points to 58 basis points for the year[3] - The Federal Reserve is anticipated to maintain interest rates in September, with potential cuts in October and December, targeting a year-end policy rate of 3.75%-4%[3]

Global Economic Overview - The global economy is experiencing a slowdown with diverging growth rates and increasing inflation disparities, leading to differentiated monetary policies across countries [1][3] - The US aims to attract industrial investment through high tariffs, a small government, low tax rates, and low oil prices, while China plans to moderately expand fiscal stimulus and support for households [1][3] United States - The US GDP growth is projected to decline from 2% in the first half of the year to 1.3% in Q3 and 1% in Q4, with a further drop to 1.6% in 2025 [1][4] - Unemployment is expected to rise from 4.2% to 4.5% by year-end, while inflation is anticipated to rebound slightly before gradually decreasing [1][6] - The Federal Reserve is expected to lower interest rates twice in Q4, with the 10-year Treasury yield forecasted to decrease from 4.5% to 4.1% by year-end [1][9] United Kingdom - The UK economy is forecasted to slow down, with GDP growth decreasing from 1.3% in Q1 to 0.9% in Q4, and a projected decline to 1% in 2025 [1][14] - Inflation is expected to rise initially before declining, with CPI growth peaking at 3.6% in Q3 and falling to 3.2% in Q4 [1][17] - The Bank of England may lower interest rates once in Q4 and twice in the following year, with the 10-year government bond yield expected to decrease from 4.6% to 4.35% by year-end [1][21] Eurozone - The Eurozone is also facing economic slowdown, with GDP growth projected to fall from 1.5% in Q1 to 0.9% in Q4, and a slight recovery to 1.2% in 2026 [1][1] - Inflation is expected to decrease, with CPI growth declining from 2.3% in Q1 to 1.8% in Q4 [1][1] - The European Central Bank is anticipated to cut interest rates once in the second half of the year, with the 10-year AAA bond yield expected to rise from 2.75% to 2.9% by year-end [1][1] Japan - Japan's economy is projected to slow down, with GDP growth decreasing from 1.7% in Q1 to 0.4% in Q4, and a slight recovery to 0.9% in 2025 [1][1] - Inflation is expected to decline, with CPI growth falling from 3.8% in Q1 to 2.1% in Q4 [1][1] - The Bank of Japan is likely to delay interest rate hikes until January 2026, with the 10-year government bond yield expected to rise from 1.57% to 1.7% by year-end [1][1] China - China's GDP growth is forecasted to decrease from 5.4% in Q1 to 4.6% in Q4, with a further decline to 4.9% in 2025 [1][1] - Inflation is expected to fluctuate, with CPI growth projected to drop to -0.2% in Q3 before rising to 1% in Q4 [1][1] - The Chinese government plans to moderately expand fiscal stimulus, with a broad deficit rate expected to rise from 6.6% in 2024 to 9% in 2026 [1][1]

Investment Rating - The report maintains a "Buy" rating for Meta, Microsoft, Amazon, and Google, indicating a positive outlook for these companies in the cloud and AI sectors [4][34]. Core Insights - The growth of cloud business for leading US cloud vendors is becoming a significant driver for stock price increases, with a notable acceleration in revenue growth observed in 2Q25 [4][21]. - The overall cloud business revenue for Amazon AWS, Google Cloud, and Microsoft Azure grew by 23% year-over-year in 2Q25, up from 20% in 1Q25 and 21% in 2Q24, with Google Cloud and Microsoft Azure showing more pronounced acceleration [4][3]. - Capital expenditures for leading cloud vendors have been increased due to strong demand signals, with a total of $95 billion in capital expenditures reported for 2Q25, a 67% increase year-over-year [3][4]. - AI-related investments are impacting profit margins, with some companies experiencing a decline in segment profit margins while overall operating margins improve due to enhanced operational efficiency in other core businesses [4][11]. Summary by Relevant Sections Revenue Growth - Google Cloud's revenue grew by 32% year-over-year to $13.6 billion in 2Q25, driven by strong demand for GCP core and AI products [3][28]. - Microsoft Azure and other cloud services saw a 39% year-over-year revenue increase in 2Q25, exceeding previous guidance [15][34]. - Amazon AWS reported revenue of $30.9 billion in 2Q25, a 17.5% increase year-over-year [21][27]. Capital Expenditures - Total capital expenditures for Microsoft, Google, Amazon, and Meta reached $95 billion in 2Q25, reflecting a 67% year-over-year increase [3][4]. - Google raised its FY25 capital expenditure guidance to $85 billion, a 62% increase year-over-year, to meet strong cloud demand [28][4]. - Meta's capital expenditure is projected to be between $66 billion and $72 billion for FY25, a growth of 68%-84% year-over-year [12][34]. Profit Margins - Despite a decline in segment profit margins for Microsoft and Amazon, overall operating margins improved due to efficiency gains in other business units [4][19]. - Meta's operating profit margin is expected to decline by approximately 1 percentage point in FY25 due to rising depreciation and personnel costs, partially offset by revenue growth from AI [11][12]. - Google Cloud's operating profit margin improved by 9 percentage points year-over-year to 20.7% in 2Q25, aided by strong revenue growth [28][4].

Global Market Overview - Major global stock markets showed positive performance, with the Hang Seng Index closing at 24,903, up 1.61% for the day and 24.14% year-to-date [1] - The Hang Seng Tech Index rose by 2.29%, reflecting a year-to-date increase of 23.57% [1] - The US markets experienced slight declines, with the Dow Jones down 1.20% and the S&P 500 down 0.98% [1] Hong Kong Stock Performance - The Hang Seng Financial Index increased by 2.00%, with a year-to-date rise of 27.05% [2] - The Hang Seng Property Index rose by 1.35%, reflecting a year-to-date increase of 22.31% [2] Chinese Stock Market Insights - The Chinese stock market saw gains, particularly in healthcare, materials, and information technology sectors, while real estate and consumer sectors lagged [3] - Southbound capital inflow reached a four-month high of 23.43 billion HKD [3] - A forecast for the A-share market indicated strong performance for upstream companies in non-ferrous metals and chemicals due to rising product prices [3] Company Analysis: Yum China - Yum China maintained its full-year guidance, with Q2 sales increasing by 4% to 2.79 billion USD and net profit rising by 1% to 215 million USD, aligning with market expectations [4] - The company reported a gross margin of 70.9% and an operating profit margin of 10.9%, both exceeding market expectations [4] - The management set a conservative same-store sales growth target for the second half of the year, citing macroeconomic instability and cautious consumer behavior [5] Company Analysis: China Tower - China Tower's H1 2025 results met expectations, with revenue growing by 2.8% year-on-year to 49.6 billion RMB and net profit increasing by 8.0% to 5.8 billion RMB [5] - The net profit margin improved to 11.6%, reflecting a slight increase from the previous year [5] - The company announced an interim dividend of 0.13 RMB per share, enhancing shareholder returns [5] Focus Stocks - Geely Automobile (175 HK) rated as "Buy" with a target price of 24.00 HKD, indicating a potential upside of 32% [6] - Tencent (700 HK) also rated as "Buy" with a target price of 660.00 HKD, suggesting a 17% upside [6] - Alibaba (BABA US) rated as "Buy" with a target price of 141.20 USD, indicating a potential increase of 21% [6]

Market Performance - The Hang Seng Index closed at 24,903, up 1.61% for the day and 24.14% year-to-date [1] - The Hang Seng Tech Index rose by 2.29%, reflecting a year-to-date increase of 23.57% [1] - The Shanghai Composite Index increased by 1.62%, with a year-to-date performance of 7.93% [1] Sector Performance - The Hang Seng Financial Index gained 2.00% for the day, with a year-to-date increase of 27.05% [2] - The Hang Seng Real Estate Index rose by 1.35%, showing a year-to-date performance of 22.31% [2] - The Hang Seng Utilities Index had a modest increase of 0.53%, with a year-to-date performance of 3.93% [2] Chinese Market Insights - Chinese stocks saw gains, with healthcare, materials, and information technology sectors leading the way [3] - Southbound capital inflow reached a net buy of HKD 23.43 billion, marking a four-month high [3] - A-shares in the banking and steel sectors showed significant gains, while biopharmaceuticals and computers lagged [3] Company Analysis: Yum China - Yum China maintained its full-year guidance, with Q2 sales up 4% year-on-year to USD 2.79 billion, and net profit up 1% to USD 215 million [4] - The company reported a gross margin of 70.9% and an operating profit margin of 10.9%, both exceeding market expectations [4] - The management set a conservative same-store sales growth target for the second half of the year, citing macroeconomic instability [5] Company Analysis: China Tower - China Tower's H1 2025 results met expectations, with revenue growth of 2.8% year-on-year to RMB 49.6 billion and net profit growth of 8.0% to RMB 5.8 billion [5] - The EBITDA increased by 3.6% to RMB 34.2 billion, with an EBITDA margin of 69.0% [5] - The company announced an interim dividend of RMB 0.13 per share, enhancing shareholder returns [5] Focus Stocks - Geely Automobile (175 HK) rated as "Buy" with a target price of HKD 24.00, indicating a potential upside of 32% [6] - Tencent (700 HK) also rated as "Buy" with a target price of HKD 660.00, suggesting a 17% upside [6] - Alibaba (BABA US) rated as "Buy" with a target price of USD 141.20, indicating a potential increase of 21% [6]

Economic Overview - The U.S. economy is projected to experience a nominal GDP growth rate of approximately 5% in 2024, followed by a slight decline to 4.9% in 2025 and 4.6% in 2026 due to tariff impacts and diminishing policy effects[64] - China's economic recovery is characterized by fluctuations, with GDP growth expected to rise from 4.6% in Q3 2024 to 5.4% in Q1 2025, before declining again[64] Stock Market Performance - In the economic contraction phase, stocks generally decline significantly, with essential consumption, energy, utilities, and healthcare sectors outperforming, while real estate and technology sectors lag behind[18] - During the economic recovery phase, stocks in discretionary consumption, real estate, technology, and materials sectors show the highest gains, while utilities and essential consumption sectors underperform[18] Sector Analysis - In the economic expansion phase, technology, finance, and real estate sectors tend to outperform, while utilities, essential consumption, and healthcare sectors underperform[18] - Average annual returns for the consumer discretionary sector during the recovery phase are 40.8%, with a market outperformance rate of 64.5%[15] Economic Indicators - Key economic indicators include consumer confidence, manufacturing orders, and employment rates, which are closely linked to stock market performance[28][29] - The U.S. consumer confidence index has a direct correlation with the S&P 500 index, indicating that increased consumer confidence typically leads to stock market gains[27] Monetary Policy and Interest Rates - The U.S. Federal Reserve's monetary policy is influenced by the Taylor rule, which incorporates inflation rates and unemployment levels to determine the federal funds rate[43] - High fiscal deficit rates combined with low household savings rates contribute to high inflation and interest rates in the U.S. economy[46] Currency and International Relations - The U.S. dollar index is expected to fluctuate, potentially dropping below 95, with a slight rebound anticipated towards the end of the year[55] - The relationship between the U.S.-China nominal GDP growth rates and interest rate differentials will influence the USD/CNY exchange rate, with projections suggesting a slight appreciation of the yuan[114] Investment Strategy - The S&P 500 is forecasted to rise by 3% in the second half of the year and 8.5% for the entire year, with a favorable outlook on sectors such as information technology, communication services, finance, healthcare, and essential consumption[50]

Report Industry Investment Rating - Not provided in the given content Core Viewpoints - Yesterday, the IG space opened 5 - 10bps wider with a cautious tone, and various bonds had different price movements. For example, TH bank BBLTB sub - curve and TW lifers gradually recovered and closed 1 - 3bps wider. In Chinese properties, GRNLGR 28 - 31s dropped 1.0 - 2.9pts [1]. - This morning, MTRC Perps were up 0.2pt, ADSEZ 31 - 41s and ADGREG 42s rose 0.6 - 2pts, while CKINF 4/4.2 Perps decreased 1pt [2]. - AVIC launched a tender offer and consent solicitation for its USD300mn AVICCP 2.375 02/09/26 at par, and is soliciting consent from bondholders for two modifications [6][7]. Summary by Related Catalogs Trading Desk Comments - The IG space opened 5 - 10bps wider. TH bank BBLTB sub - curve and TW lifers closed 1 - 3bps wider. Lower - beta papers with 4.5% yield or below and front - end papers were heavily traded. FRESHK 26 - 28s had a spread change of 7bps tighter to 3bps wider. In Macau gaming, different bonds had price changes ranging from unchanged to +1pt. Among greater China higher - beta credits, Perps moved higher. There were block selling on FRNs of China leasing/securities houses and two - way flows on EU/Japan banks FRNs. Yankee AT1s recovered. In Chinese properties, GRNLGR, LNGFOR, and VNKRLE bonds dropped, while LIFUNGs rose. In the SEA, MEDCIJ 28 - 29s were unchanged to 0.1pt lower, and VEDLN 28 - 33s were unchanged to 0.2pts higher [1]. Analyst Comments - AVIC launched a tender offer and consent solicitation for AVICCP 2.375 02/09/26 at par. It failed to furnish audited FY24 financial statements and expects to be unable to provide unaudited 1H25 financial statements on time. It is soliciting consent for two modifications: removing the financial statement requirement and adding an early redemption option. The offer expires on 15 Aug'25, and two bondholder meetings will be held on 26 Aug'25. The tender offer settlement is on 29 Aug'25. The resolutions are binding if passed and the eligibility condition is met. The tender offer can be an opportunity for investors to switch to other Chinese IG names [6][7][9]. Macro News Recap - On Monday, S&P (+1.47%), Dow (+1.34%), and Nasdaq (+1.95%) were higher, and UST yield was lower with 2/5/10/30 yield at 3.69%/3.75%/4.22%/4.80% [5]. Last Trading Day's Top Movers - Top Performers included GWFOOD 3.258 10/29/30 (price 86.3, change 2.4), WESCHI 4.95 07/08/26 (price 92.8, change 1.3), etc. Top Underperformers included GRNLGR 6.9 02/12/29 (price 20.1, change - 2.9), GRNLGR 8 1/4 01/22/31 (price 20.1, change - 2.9), etc. [4]. Offshore Asia New Issues - **Priced**: No Offshore Asia New Issues Priced Today [12]. - **Pipeline**: Licheng International Development plans a 3 - year issue with a 5.5% pricing and is unrated. Macquarie Bank plans an 11NC10 issue with a pricing of T + 170 and has an issue rating of A3/BBB+/BBB+ [13]. News and Market Color - Regarding onshore primary issuances, 85 credit bonds were issued yesterday with an amount of RMB66bn. Month - to - date, 130 credit bonds were issued with a total amount of RMB149bn, a 4.4% yoy increase. S&P revised the outlook of Adani Electricity Mumbai to stable from negative, affirmed BBB - rating [14]. - S&P revised the outlook of Adani Green Energy RG2 to stable from negative, affirmed BB+ rating; revised the outlook of Adani Ports to positive from negative, affirmed BBB - rating. Agile plans to deliver a preliminary restructuring proposal to offshore creditors in 3Q25. Ant Group will exit India's Paytm by selling its 5.84% stake for up to INR38bn (cUSD434mn). Road King bondholder group can block revised consent solicitation. SK Telecom will help develop a South Korean ChatGPT challenger. SK On will focus on cutting - edge technology [21].

Global Market Overview - The Hang Seng Index closed at 24,508, down 1.60% for the day but up 45.32% year-to-date [1] - The Shanghai Composite Index closed at 3,573, down 1.18% for the day and up 20.11% year-to-date [1] - The U.S. Dow Jones closed at 44,131, down 0.74% for the day and up 17.09% year-to-date [1] Hong Kong Stock Performance - The Hang Seng Financial Index closed at 44,485, down 1.37% for the day and up 49.16% year-to-date [2] - The Hang Seng Real Estate Index closed at 18,268, down 2.31% for the day and down 0.33% year-to-date [2] Chinese Stock Market Insights - The Chinese stock market saw a rebound, with sectors like materials, information technology, and finance leading gains, while telecommunications and consumer staples lagged [3] - A total of 1.96 million new A-share accounts were opened in July, a 71% year-on-year increase [3] - The People's Bank of China indicated a preference for a strong RMB policy, with personal stock trading income remaining tax-exempt [3] Investment Opportunities - Geely Automobile (175 HK) is rated as a buy with a target price of 24.00, representing a 34% upside potential [4] - Luckin Coffee (LKNCY US) is rated as a buy with a target price of 44.95, indicating a 21% upside potential [4] - Tencent (700 HK) is rated as a buy with a target price of 660.00, suggesting a 22% upside potential [4] Sector Analysis - The equipment manufacturing sector, represented by companies like Sany International (631 HK) and Zoomlion (1157 HK), shows strong buy ratings with target prices indicating significant upside potential [4] - The semiconductor sector, including companies like Horizon Robotics (9660 HK) and Beike Micro (2149 HK), is also rated as a buy, reflecting optimism in technological advancements [4]

Macro Economic Overview - The US job market has significantly weakened, with July non-farm payrolls falling below market expectations and a downward revision of 258,000 jobs for May and June, leading to a three-month moving average of 35,000 jobs [2] - The unemployment rate has slightly increased, reaching a new high since 2021, but remains at historical lows. The labor participation rate has continuously declined to its lowest since 2022, indicating a contraction in labor supply [2] - The Federal Reserve faces a dilemma as tariffs are expected to drive inflation up, with predictions of maintaining interest rates in September and potential rate cuts in October and December [4] Industry Insights Express Delivery Industry - Recent discussions between the State Post Bureau and express operators, along with proposed amendments to pricing laws, are expected to catalyze positive changes in the express delivery sector over the next 3-6 months [5] - An increase in package prices is anticipated, although the momentum may not be as strong as in 2022 due to the current profitability of express operators being higher than in 2021 [5] Semiconductor Industry - Major cloud service providers have reported higher-than-expected capital expenditures, with a total of $89 billion in Q2 2025, exceeding Bloomberg's consensus by 12.8% [6] - The demand for computing power is expected to continue growing, with a projected 43% year-on-year increase in global AI-related capital expenditures by 2025 [6] Technology Sector - Apple's Q2 2025 results exceeded market expectations, with revenue and EPS growth of 10% and 12% year-on-year, driven by strong iPhone sales and a rebound in the Chinese market [6] - The company anticipates a mid-to-high single-digit revenue growth for Q3, with a gross margin of 46%-47%, which is above market expectations [6] Company Analysis Amazon - Amazon's Q2 2025 revenue reached $167.7 billion, a 13.3% year-on-year increase, surpassing both internal and consensus expectations [7] - The company expects Q3 2025 revenue to be between $174 billion and $179.5 billion, indicating a year-on-year growth of 9.5%-13% [7] Coinbase - Coinbase reported a 28% quarter-on-quarter decline in net revenue to $1.42 billion, primarily due to reduced volatility in the cryptocurrency market [7] - Management expects a recovery in trading revenue in July, with guidance for Q3 2025 subscription and service revenue between $665 million and $745 million [7] Green Tea Group - Green Tea Group's H1 2025 net profit is expected to be between RMB 230 million and 237 million, reflecting a year-on-year growth of 32%-36% [8] - The company anticipates a significant improvement in profit margins, with a projected net profit margin of approximately 10.2% for H1 2025, up from 9.4% in the previous year [8]

Employment Data - In July, the U.S. added 73,000 non-farm jobs, below the market expectation of 104,000[5] - The non-farm employment figures for May and June were revised down by 258,000 to 19,000 and 14,000 respectively, resulting in a 3-month moving average of 35,000, the lowest since the pandemic[5] - Private sector job growth increased from 3,000 to 83,000 in July, while goods-producing jobs decreased by 13,000, with manufacturing jobs experiencing three consecutive months of negative growth[5] Unemployment and Labor Participation - The unemployment rate rose from 4.1% to 4.2%, marking a new high since 2021 but still at historical lows[5] - The labor participation rate fell to 62.2%, the lowest since 2022, indicating a contraction in labor supply[5] - The household survey showed a decrease of 260,000 in employment and an increase of 220,000 in unemployment in July[5] Federal Reserve's Dilemma - Fed Chair Powell indicated that even if job growth drops to zero, a stable unemployment rate would suggest a robust labor market due to simultaneous declines in supply and demand[5] - The Fed faces a dilemma as tariffs may drive inflation up, complicating the balance between expanding employment and reducing inflation[5] - It is anticipated that the Fed will likely keep interest rates unchanged in September, followed by rate cuts in October and December[5]