Global Market Overview - The Hang Seng Index closed at 26,439, up 0.19% for the day and up 31.80% year-to-date [2] - The Southbound capital recorded a net inflow of HKD 3.189 billion [2] - The Chinese stock market showed mixed results, with sectors like consumer discretionary and industrial technology rising, while materials, healthcare, and real estate fell [2] Economic Indicators - China's Ministry of Commerce plans to promote orderly opening in the internet and cultural sectors [2] - Japan's government is expected to increase fiscal expansion, with potential tax cuts for households and inflation subsidies [2] - The U.S. retail sales increased by 0.6% month-on-month in August, marking the third consecutive month of exceeding expectations [3] Sector Performance - The automotive sector shows strong potential with companies like Geely Automobile and XPeng Motors rated as "Buy" with target prices indicating significant upside [4] - The equipment manufacturing sector, including companies like SANY International and Zoomlion, is also rated as "Buy" with positive growth forecasts [4] - The consumer discretionary sector, particularly Luckin Coffee and Green Tea Group, is highlighted for its growth potential, with target prices suggesting substantial upside [4] Investment Recommendations - Geely Automobile (175 HK) is rated "Buy" with a target price of HKD 25.00, indicating a 31% upside [4] - SANY International (631 HK) is rated "Buy" with a target price of HKD 8.90, suggesting a 29% upside [4] - Luckin Coffee (LKNCY US) is rated "Buy" with a target price of USD 44.95, indicating a 14% upside [4]

Group 1: Stock Recommendations - Recommended stocks include Geely Automobile (175 HK), Li Auto (9863 HK), Zoomlion (1157 HK), Sany International (631 HK), and Luckin Coffee (LKNCY US) with "Buy" ratings[5] - Target price for Geely Automobile is set at 25.00, indicating a potential upside of 36%[5] - Luckin Coffee has a target price of 44.95, representing a potential upside of 16%[5] Group 2: Financial Metrics - Geely Automobile has a market capitalization of $24.0 billion and a P/E ratio of 10.50 for FY24A[5] - Li Auto's market cap is $11.0 billion with a projected P/E ratio of 9.90 for FY25E[5] - The average dividend yield for the recommended stocks ranges from 0.0% (Luckin Coffee) to 5.2% (Green Tea Group)[5] Group 3: Performance Overview - The basket of 25 stocks listed in the previous report achieved an average return of 2.5%, compared to the MSCI China Index return of 6.8%[10] - Out of the 25 stocks, 10 outperformed the benchmark index[10] Group 4: Recent Changes - New addition to the recommended stocks is Guoquan Food (2517 HK) with a "Buy" rating[7] - Jiangnan Buyi (3306 HK) has been removed from the recommended list[7]

Economic Overview - The US GDP growth is projected to decline from 2.8% last year to 1.7% in 2025, with a slight recovery to 1.8% in 2026[7] - China's GDP growth is expected to improve from 4.6% in Q3 2024 to 5.4% in Q1 2025, but may drop to 4.7% in Q4 2025 due to various economic pressures[46] Inflation and Monetary Policy - US PCE inflation is anticipated to rise from 2.4% in Q2 to 2.9% in Q4 2025, before decreasing to 2.4% in 2026[9] - The Federal Reserve is expected to cut interest rates twice in late 2024, bringing the policy rate down to 3.25%-3.5%[4] Asset Allocation Strategies - In the US, the recommended asset allocation includes overweighting commodities, standard allocation to stocks and cash, and underweighting bonds, with a bearish outlook on the dollar[4] - In China, the strategy suggests overweighting stocks, standard allocation to commodities and bonds, and underweighting cash, with a moderate appreciation of the RMB expected[5] Market Trends - The US stock market is entering a late bull market phase, with a focus on sectors like healthcare, consumer staples, and industrials[4] - China's stock market is in the second phase of a bull market, with a focus on AI hardware, internet, and healthcare sectors[5] Debt and Consumer Behavior - The US consumer loan delinquency rate has reached historical highs, indicating increased financial pressure on low- and middle-income households[12] - China's household and corporate credit growth remains weak, despite an expansionary fiscal policy[87] Real Estate Insights - The US housing market continues to experience stagnation, with home sales and prices at historical lows due to high interest rates[15] - In China, the real estate market is showing signs of recovery, but new home sales in major cities are still lagging[55] Currency Outlook - The US dollar index is expected to weaken slightly, potentially dropping to 95 by year-end due to pressures from the White House on the Federal Reserve[42] - The USD/CNY exchange rate is projected to be around 7.1 by the end of this year, with a slight appreciation of the RMB expected in 2026[88]

Core Insights - The report highlights a general slowdown in the Chinese economy, with economic activity data showing a decline for two consecutive months, indicating increased risks for growth in the latter half of 2025 [4] - The report suggests that the Chinese government may implement further policy support in Q4, including a potential 10 basis point cut in the Loan Prime Rate (LPR) and a 50 basis point reduction in the reserve requirement ratio [4] - The report notes that the U.S. stock market has reached new highs, driven by sectors such as solar energy, AI, robotics, consumer discretionary, and semiconductors, while essential consumer goods, regional banks, and healthcare sectors have declined [3] Market Performance - The Hang Seng Index closed at 26,447, up 0.22% for the day and up 31.84% year-to-date [1] - The Shanghai Composite Index closed at 3,861, down 0.26% for the day and up 15.18% year-to-date [1] - The Shenzhen Component Index closed at 2,471, up 0.36% for the day and up 26.26% year-to-date [1] Sector Performance - In the Hong Kong market, the Hang Seng Financial Index decreased by 0.60% for the day but is up 30.32% year-to-date, while the Hang Seng Consumer Goods Index increased by 0.71% for the day and is up 34.12% year-to-date [2] - The report indicates that sectors such as consumer discretionary, energy, and essential consumer goods are leading the gains in the Hong Kong market, while materials, comprehensive, and real estate sectors are declining [3] Investment Opportunities - The report lists several focus stocks with potential upside, including Geely Automobile (target price: 25.00, current price: 18.46, upside: 35%) and Luckin Coffee (target price: 44.95, current price: 38.88, upside: 16%) [5] - Other notable stocks include BYD Electronics (target price: 47.37, current price: 41.44, upside: 14%) and Tencent (target price: 705.00, current price: 643.50, upside: 10%) [5] Economic Indicators - The report mentions that China's economic data for August showed weakness, with industrial output growth slowing and investment growth significantly declining [3] - The report also notes that the Eurozone bond yields are rising, with the European Central Bank indicating that the interest rate cycle may have ended [3]

Inflation Trends - The August CPI showed a significant rebound, with a month-on-month increase from 0.2% in July to 0.38% in August, slightly above the market expectation of 0.33%[5] - Year-on-year CPI growth rose from 2.7% to 2.9%, indicating a return to an upward trend[5] - Core CPI month-on-month growth increased from 0.32% to 0.35%, also exceeding market expectations of 0.31%[5] Employment Concerns - The number of first-time unemployment claims rose by 27,000 to 263,000, the highest level since October 2021, significantly surpassing the market expectation of 235,000[6] - The projected increase in employment from April 2024 to March 2025 was revised down by 91,100, with average monthly job growth adjusted from 136,000 to 60,000[6] - The risk of employment deterioration is now seen as greater than the risk of uncontrolled inflation, leading to an 81% probability of three rate cuts this year[1] Federal Reserve Actions - The Federal Reserve is expected to cut rates twice, in September and December, totaling a 50 basis point reduction, with the year-end target for the federal funds rate set at 3.75%-4%[1] - Further rate cuts are anticipated next year, potentially bringing the year-end target down to 3.25%-3.5% as economic growth stabilizes and inflation recedes[1]

Report Summary Industry Investment Rating - No industry investment rating is provided in the report. Core Viewpoints - The fixed - income market shows mixed performance. New issues generally tightened, while the secondary IG space was largely unchanged. Greater China high - beta credits were mostly stable, and there were price movements in various bonds across different regions [2]. - LGFVs had a mixed performance, with demand for higher - grade USD issues but lackluster performance for higher - yielding names due to supply jams. Trading volumes were thin ahead of US consumer inflation data [3]. Section Summaries Market Performance - **Yesterday's Performance**: The new NSINTW 5 7/8 03/17/41 tightened up to 15bps from RO at T + 185 and closed 10bps tighter. Other TW lifers CATLIFs/SHIKON/FUBON closed 1 - 2bps tighter. The new KHFC 3 7/8 09/17/30 and the new KOMATS 4.196 30 tightened 2 - 3bps. Secondary IG space was largely unchanged. In Chinese properties, VNKRLE 27 - 29s were down 0.5pt, and GRNLGR 28 - 31s were 0.3 - 0.5pt lower. LNGFOR 28 - 32s were 0.2 - 0.3pt higher. Japanese insurance hybrids and AT1s were up 0.3pt, and their Yankee counterparts were 0.1pt firmer. The new SMPHPM 4.75 09/16/30 was 0.1pt higher than RO at 99.8. PTTGC 51 - 52s tightened 1 - 13bps [2]. - **This Morning's Performance**: The new NSINTW 5 7/8 03/17/41 tightened another 7bps. The rest of TW lifers CATLIFs/SHIKON/FUBON were 2 - 5bps tighter. The recent HYUELE 28 - 30s were 1 - 2bps tighter. BBLTB sub - curve tightened 5bps. The recent MUFG Perp/SUMILIF 55/FUKOKU rose 0.5 - 1pt. HYSAN 7.2 PERP was up 0.5pt. TOPTBs were unchanged [4]. - **Top Performers and Underperformers**: Top performers included CCAMCL 5 02/08/48 (up 3.0), FAEACO 12.814 PERP (up 2.9), etc. Top underperformers included BIMLVN 7 3/8 05/07/26 (down 0.7), VNKRLE 3 1/2 11/12/29 (down 0.5), etc. [5] Macro News - On Thursday, S&P (+0.85%), Dow (+1.36%) and Nasdaq (+0.72%) were higher. The US Aug'25 Core CPI was +0.3% mom, and the US CPI was +2.9% yoy, both in line with market expectations. The US Aug'25 CPI was +0.4% mom, higher than the market expectation. The US Initial Jobless Claims was +263k, higher than the prediction. UST yield was lower, with 2/5/10/30 - year yields at 3.52%/3.59%/4.01%/4.65% [7]. Company - Specific Analysis (HYSAN) - Hysan raised junior subordinated 5NC2 notes of USD17mn, rated Ba1 by Moody's, callable at 103.375 in Sep'27, with a coupon rate of 6.75% and deferrable and cumulative coupon [8]. - The small private placement is to build a cushion of junior securities to keep the rating of HYSAN 7.2 PERP at IG. In 1H25, Hysan's turnover and EBIITDA grew 2.1% and 1.4% yoy to HKD1.7bn and HKD1.3bn respectively. Occupancy rates of retail/office/residential were 94%/92%/70% as of Jun'25. Its liquidity profile is solid with cash to ST debts at 2.3x, and it has a capital recycling plan of HKD8bn over the next 5 years. The net gearing ratio (perp as debt) was 33% as of Jun'25 [9][10]. - Analysts are neutral on HYSANs on valuation but consider HYSAN 7.2 PERP to offer the best risk - return profile compared to other Hysan bonds [11]. New Issues - There were no offshore Asia new issues priced or in the pipeline on the reporting day [12][13]. - Regarding onshore primary issuances, 101 credit bonds were issued yesterday with an amount of RMB160bn. Month - to - date, 658 credit bonds were issued with a total amount of RMB638bn, representing an 18.6% yoy increase [15]. Other News - Adani and Vedanta are bidders for bankrupt GVK Energy. Alibaba uses its own microprocessors for AI model training. BHP will divest a 15% stake in iron ore deposit. Evergrande's property management arm received non - binding bids. Fosun signed a USD910mn sustainability - linked syndicated loan. Meituan plans to issue dim sum bonds. POSCO International signed a deal for LNG import. Pertamina plans subsidiary reorganization. PTT Global Chemical issued USD1.1bn unsecured subordinated perp. Reliance boosted asset - backed notes size. Yuexiu Property signed a HKD200mn term loan facility agreement [15].

Global Market Overview - The Hang Seng Index closed at 26,086, down 0.43% for the day but up 30.04% year-to-date [1] - The Shanghai Composite Index rose by 1.65% to 3,875, with a year-to-date increase of 15.62% [1] - The US markets saw the Dow Jones increase by 1.36% to 46,108, with a year-to-date gain of 8.38% [1] Sector Performance - In the Hong Kong market, the healthcare, energy, and consumer discretionary sectors led the decline, while materials, utilities, and industrials saw gains [3] - The semiconductor and rare metals sectors performed notably well, with significant inflows from southbound funds amounting to HKD 189.89 billion [3] Economic Indicators - The European Central Bank (ECB) maintained interest rates and revised down its inflation forecast for 2027 to 1.9% [3] - The US Consumer Price Index (CPI) showed a month-on-month increase of 0.4% and a year-on-year increase of 2.9%, aligning with market expectations [3] Investment Recommendations - Geely Automobile is rated as a "Buy" with a target price of HKD 25.00, representing a potential upside of 33% [4] - Luckin Coffee is also rated as a "Buy" with a target price of USD 44.95, indicating a 19% upside [4] - Semiconductor companies like Horizon Robotics and Beike Micro are rated as "Buy" with target prices of HKD 12.30 and HKD 93.00, respectively, showing potential upsides of 19% and 76% [4]

Macro Analysis - The CPI in China fell to -0.4% YoY in August due to a sharp decline in food prices, while the core CPI rose to 0.9% YoY [2][5] - PPI's YoY decline narrowed to -2.9%, indicating a potential recovery in upstream material prices [5] - The continuation of deflation is expected to prompt further policy actions, with a focus on countering "involution" [2][5] Industry Insights - The technology sector saw significant developments with Apple's recent product launch, including the iPhone 17 series and AirPods Pro 3, which are expected to drive a replacement cycle [6] - The pricing strategy for Apple's new products was better than market fears, with most prices remaining stable except for a $100 increase on the iPhone Pro [6] - The demand for AI-related products remains strong, as evidenced by TSMC's sales growth of 33.8% YoY in August [5][6] Stock Recommendations - Geely Automobile (175 HK) is rated as a "Buy" with a target price of 25.00, representing a 37% upside potential [7] - Luckin Coffee (LKNCY US) is also rated as a "Buy" with a target price of 44.95, indicating a 21% upside [7] - Tencent (700 HK) and Alibaba (BABA US) are both rated as "Buy" with target prices of 705.00 and 158.80 respectively, showing potential upsides of 11% and 10% [7]

Group 1: Market Overview - Global markets showed mixed performance, with the Hang Seng Index closing at 25,938, up 1.19% year-to-date, while the Shanghai Composite Index fell by 0.51% [1][3] - Southbound capital recorded a net inflow of HKD 10.231 billion, indicating strong interest in Hong Kong stocks [3] - Commodities displayed divergence, with precious metals, coal, and steel prices rising, while chemicals and agricultural products declined [3] Group 2: Company Analysis - 康方生物 (Summit) - 康方生物's AK112 showed improved overall survival (OS) data in long-term follow-up, with a median OS of 16.8 months compared to 14.0 months for chemotherapy alone, indicating a positive trend [6][7] - The company is expected to present further OS data from the HARMONi-2 study in the next six months, which could enhance investor confidence [6][7] - The target price for 康方生物 is maintained at HKD 182.12, reflecting a strong outlook for its first-line indications in NSCLC [7] Group 3: Company Analysis - 江南布衣 - 江南布衣 reported encouraging retail sales growth, improving from low single-digit growth in Q1 to double-digit growth in July-August, driven by low base effects and strong performance in outlet channels [8][9] - The management provided a conservative sales growth guidance for FY26, aiming for high single-digit growth, supported by multiple drivers including new brand contributions [8][9] - The target price for 江南布衣 has been raised to HKD 23.30, based on a 12x FY26 forecast P/E ratio, reflecting confidence in its sales and profit resilience [9][10]

Macro Strategy - The global economy is slowing down, but U.S. industrial revival and China's anti-involution policies may drive inflation rebound, posing challenges for central banks [1][3] - The U.S. is expected to implement high tariffs, low tax rates, and trade agreements to boost domestic manufacturing, while China will moderately expand fiscal stimulus and support households [1][3] - Global bond yields may slightly decline, the U.S. dollar may weaken, stock markets could see modest gains, and commodity prices may rise moderately [1][3] United States - GDP growth is projected to slow from 2% in the first half to 1.7% in Q3 and 1.3% in Q4, with a further decline to 1.7% in 2025 [3][4] - The unemployment rate is expected to rise from 4.3% to 4.5% by year-end, indicating a weakening labor market [4] - Inflation is anticipated to rise initially, with PCE inflation increasing from 2.4% in Q2 to 2.7% in Q3, before slightly declining to 2.6% in Q4 [5][6] - The housing market is expected to remain stagnant, with potential for slight improvement following interest rate cuts [6][7] United Kingdom - The UK economy is expected to slow down, with GDP growth decreasing from 1.3% in Q1 to around 1% in the second half of the year [15][16] - The unemployment rate is projected to rise to 4.9%-5% by Q4, reflecting a weakening job market [16] - Inflation is expected to peak around 4% in September before gradually declining, with CPI growth anticipated to be 3.4% for the year [17][18] - The housing market is showing signs of recovery, with transaction volumes expected to increase in Q4 due to falling inflation and potential interest rate cuts [18] Eurozone - Economic growth in the Eurozone is gradually slowing, with GDP growth expected to decline from 1.5% in Q1 to 0.8% in Q4 [27][28] - Consumer spending is anticipated to weaken slightly, influenced by a cooling job market and declining consumer confidence [28] - Fiscal policy may become moderately expansionary, focusing on defense and infrastructure spending to support economic growth [27] China - China's economy is expected to weaken slightly, with GDP growth projected to decline from 5.2% in Q2 to 4.6% in Q4 [1][3] - Deflationary pressures are expected to persist, but anti-involution policies may improve inflation expectations in the latter half of the year [1][3] - Fiscal policy is likely to expand to boost consumption, while monetary policy remains accommodative [1][3]