ab Global Research 30 June 2025 China Economic Comment China Weekly: Sliding Home Sales, Trade-In to Continue, Trade Talks, Weak May Profits High frequency: sliding home sales, softer port activities in June 30-city property sales declined further to -11% YoY in the first 28 days of June from -3% YoY in May. That in tier 1 cities slid to -7% YoY, tier 2 cities narrowed decline to - 11% YoY and tier 3 cities weakened to -17% YoY (also see latest China housing survey). Port cargo throughput and container thro ...

UBS Group AG (UBS) is looking like an interesting pick from a technical perspective, as the company reached a key level of support. Recently, UBS's 50-day simple moving average crossed above its 200-day simple moving average, known as a "golden cross."There's a reason traders love a golden cross -- it's a technical chart pattern that can indicate a bullish breakout is on the horizon. This kind of crossover is formed when a stock's short-term moving average breaks above a longer-term moving average. Typicall ...

Core Insights - The American dream of owning a large house with a white picket fence is fading for many, yet 379,000 new millionaires emerged in the U.S. last year, indicating a shift in wealth accumulation [1][2]. Group 1: Millionaire Growth - According to UBS, over 1,000 new millionaires are created daily in the U.S., with the ultra-high-net-worth population growing by 1.5% [2]. - The U.S. has the highest number of millionaires globally, four times that of China, and surpasses the combined total of millionaires in France, the UK, Germany, Canada, Japan, and Australia [3]. Group 2: Wealth Composition - The surge in millionaire numbers is primarily driven by real estate appreciation, alongside record performance in the stock market [4]. - The "middle-class millionaire" segment, defined as those with assets between $1 million and $5 million, is becoming the main growth driver, holding a total wealth of approximately $107 trillion, which is over four times that of the early 2000s [5]. - In the U.S., real estate and mortgages account for 30% of wealth, while securities and financial instruments make up 37%, highlighting the effectiveness of investment strategies [5]. Group 3: Future Wealth Transfer - An estimated $83 trillion in wealth will be transferred globally over the next 20 to 25 years, with $74 trillion expected to be passed down through generations, suggesting a continued rise in new millionaires [6]. Group 4: Economic Disparities - Despite the increase in millionaires, many Americans face economic challenges, with the top 20% of households holding an average net worth of $4.3 million, representing 71% of national wealth, while the bottom 50% average only $60,000 [7]. - Ordinary Americans are accumulating wealth through insurance and retirement plans, although younger generations have yet to fully embrace these methods [7]. Group 5: Real Estate Investment Advice - Real estate mogul Barbara Corcoran advises potential investors to act quickly in the current market, suggesting that a decrease in interest rates could lead to a surge in property prices [7].

Core Viewpoint - The upcoming U.S. non-farm payroll data for June is highly anticipated, especially after the unexpected decline in private sector employment reported by ADP, indicating significant weakness in the labor market, which may prompt the Federal Reserve to consider interest rate cuts sooner than expected [1][2]. Employment Data Expectations - Media surveys predict that June's non-farm payroll will increase by 106,000, down from 139,000 in May, with the unemployment rate expected to rise slightly from 4.2% to 4.3% [2][3]. - UBS forecasts a more conservative increase of 100,000 jobs, while Citigroup is even more pessimistic, predicting only 85,000 new jobs, with the unemployment rate potentially reaching 4.4% [2][3]. - Analysts warn that if the non-farm payroll data falls below 60,000, it could raise concerns about stagflation [2][3]. Labor Market Indicators - Various labor market indicators have shown signs of weakening, with a notable increase in ongoing unemployment claims, which rose by 67,000 between May and June [5][8]. - Citigroup highlights a significant slowdown in hiring activity, particularly in the private sector, which typically sees an increase of around 800,000 jobs in June [8][10]. Wage Growth and Immigration Policy - Wage growth is expected to slow, with Citigroup predicting a month-over-month increase in average hourly earnings to drop from 0.4% in May to 0.2% in June, reflecting weak labor demand [11]. - Changes in immigration policy may also impact employment data, as recent court rulings could affect the temporary work permits of many recent immigrants, introducing uncertainty into the job market [13][14]. Market Reactions and Federal Reserve Outlook - Goldman Sachs indicates that market volatility following the non-farm payroll report is expected to be limited, with a focus on stagflation risks [16][18]. - The Federal Reserve's policy direction is under scrutiny, with expectations of potential rate cuts in September, especially if June's employment data is weak [19][20]. - UBS and Citigroup both suggest that if the labor market continues to show weakness, the Fed may act sooner than anticipated, with a cumulative rate cut of 100 basis points expected by the end of the year [20][21].

Core Viewpoint - UBS has upgraded the luxury goods sector rating from underweight to benchmark allocation based on tactical and structural considerations, indicating a potential bottoming out of the sector after significant declines [1][2]. Group 1: Market Performance and Projections - UBS reports that the luxury goods sector has reached an extreme oversold condition, with a 100% probability of outperforming the market over the next six months [2][4]. - The sector is currently at a near three standard deviation oversold state, a rare occurrence historically [3]. - The expected earnings revisions for the luxury sector are less severe than the overall market, suggesting that stock prices have already reflected more pessimistic expectations than warranted [6]. Group 2: Valuation and Structural Support - The luxury goods sector's 12-month forward P/E ratio premium relative to the market is currently at 80%, which, while above the historical average of 63%, is only slightly higher than normal levels [7]. - The valuation metrics have returned to levels seen a decade ago, with major European luxury companies' earnings per share only 9% above trend lines, compared to peaks of 50% above [7]. - The U.S. market provides structural support for luxury goods, accounting for approximately 21% of the luxury market and nearly 33% of its growth, driven by factors such as stock market wealth effects and excess savings among high-income households [9][11]. Group 3: Long-term Structural Advantages - The luxury goods industry possesses unique structural advantages, including high brand value, long brand lifespans, and the appreciation of high-end luxury goods, alongside growth in the middle class in emerging markets [11]. - For instance, in India, the highest income quintile is expected to grow at a compound annual growth rate of 15% from 2024 to 2030, significantly outpacing the overall population growth rate of 1.3% [11].

瑞银资产管理公司全球主权市场策略与咨询主管马克斯•卡斯泰利表示，这些担忧表明，"非常明显"的 是，关税措施改变了储备管理者对美元的看法。 调查称，29%的受访者希望减少对美国资产的敞口，以应对近期的事态发展。然而，在未来一年，25% 的央行表示，在剔除那些希望增加美元敞口的央行后，它们预计将减少美元敞口，略低于过去一年。 卡斯泰利说:"当你问:你认为美元的主导地位真的会发生重大变化吗?答案是否定的。"他补充称，储备管 理者需要时间进行调整。 近80%的受访者预计，美元(目前占外汇储备的58%)仍将是全球储备货币。在未来一年，黄金是最大的 赢家，52%的央行希望增加黄金储备。 卡斯泰利表示，这主要反映出新兴市场央行对制裁风险的担忧，主要涉及存放在美国的黄金。特朗普的 政策也重新引发了德国对其央行黄金储备的质疑，其中一些黄金储备存放在纽约联邦储备银行。 智通财经APP获悉，瑞银资产管理公司周四公布的一项调查显示，三分之二的央行管理者担心美联储的 独立性受到威胁，近一半的官员认为美国的法治可能会恶化到足以严重影响他们的资产配置。 近40家央行中有35%认为，美国可能会要求盟友将长期债务转换为其他工具，如超长期零息债 ...

瑞银：特朗普对越南的20%关税处于预期范围的低端 金十数据7月3日讯，瑞银经济学家William Deng在一份研究报告中说，美国对越南商品征收的20%关税 处于预期范围的低端。越南允许美国商品免税进入该国的决定"在很大程度上是意料之中的"，因为美国 产品在技术和能源等领域的更多准入应该有利于越南的经济增长。该贸易协议的细节对于确定对越南的 经济影响至关重要，尤其是对转运货物的影响，转运货物将面临40%的关税。今后一个关键的观察点 是，是否有进一步向美国和国际资本开放金融市场的细节。 ...

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - China's GDP growth is expected to remain robust at 5.0-5.2% YoY for Q2 2025, supported by front-loading of exports and earlier government stimulus measures [4][32] - The property market continues to face challenges, with 30-city property sales declining by 10% YoY in June, and top 100 developers' contract sales volume down by 35% YoY [9][19] - Manufacturing PMIs show slight improvements, with NBS manufacturing PMI at 49.7 and Caixin manufacturing PMI at 50.4 in June, indicating a less negative growth momentum [7][10] Economic Data Summary - **GDP Growth**: Q2 GDP growth is projected at 5.0-5.2% YoY, with a slower sequential growth compared to Q1 [4][32] - **Industrial Production**: Expected to soften to 5.4% YoY in June, down from 5.8% YoY in May [3][16] - **Retail Sales**: Anticipated to moderate to 6% YoY in June, slightly down from 6.4% YoY in May [23] - **Fixed Asset Investment (FAI)**: Overall FAI growth likely recorded 3% YoY in June, with property investment declining by 10-12% YoY [20] - **Exports and Imports**: Export growth expected to edge down to 4% YoY in June, while imports may improve to 1% YoY [23] Sector-Specific Insights - **Manufacturing Sector**: NBS manufacturing PMI increased by 0.2ppt to 49.7 in June, with improvements in new orders and production indices [7][10] - **Property Sector**: The property market continues to weaken, with significant declines in sales and new starts [9][19] - **Automotive Sector**: Auto retail sales growth picked up to 24% YoY in June, driven by a low base and trade-in subsidies [23][38] High-Frequency Data - **PMIs**: NBS non-manufacturing PMI edged up to 50.5 in June, indicating slight growth in services, while construction PMI improved significantly [8] - **Port Activities**: Port cargo throughput growth moderated to 1% YoY in June, reflecting a slowdown in trade activities [9][17] - **Credit Growth**: Total social financing (TSF) credit growth likely edged up to 8.8% YoY in June, with new RMB loans at approximately RMB 1.85 trillion [30][31]

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies involved in the US-Vietnam trade deal Core Insights - The US-Vietnam trade deal announced by President Trump includes a 20% tariff on goods sent to the US from Vietnam and a 40% tariff on transshipments, while allowing US products to enter Vietnam at zero tariff [1] - The announced 20% tariff is at the low end of local expectations in Vietnam, where communities anticipated a range of 20%-25% [2] - Vietnam is expected to further open its market to US products, particularly in sectors like automobiles and energy, which aligns with prior expectations [3] - The classification of "transshipment" goods and the rules surrounding it are critical to understanding the economic impact of the trade deal [4] - A product-specific exemption list is anticipated to significantly affect the overall tariff landscape, with Vietnam's exposure to consumer electronics potentially leading to lower effective tariffs [6] Summary by Sections Trade Deal Details - The trade deal allows Vietnam to provide total market access to the US, which is expected to benefit the sales of US products, particularly SUVs [1] - Vietnam has already begun lowering import tariffs on various products, including automobiles and LNG, prior to the US tariff announcement [3] Tariff Implications - Products with high Vietnam content may face lower tariffs, with those having 100% Vietnam content potentially facing tariffs as low as 10% [2] - The effective average incremental tariff against Vietnam has been reduced to around 9% due to product-specific exemptions, significantly lower than the initially announced 43% [6] Market Access and Economic Impact - The easing of administrative processes for US companies in Vietnam is expected to enhance market access and stimulate growth [3] - The report highlights the importance of monitoring further details regarding financial market access for US and international capital [3]

Core Viewpoint - International investors are increasingly focused on Chinese assets, as evidenced by multiple foreign institutions hosting "China-themed" forums and raising GDP growth forecasts for China by 2025 [1][2][3] Group 1: Economic Growth Predictions - Foreign institutions have raised their GDP growth forecasts for China in 2025 due to reduced external disturbances and enhanced domestic growth policies [1] - Morgan Stanley's chief economist for China, Xie Ziqiang, predicts a fiscal package worth 500 billion to 1 trillion yuan to support urban renewal and infrastructure [2] - Nomura's chief economist for China, Lu Ting, has also raised GDP growth predictions for 2025, citing stronger-than-expected retail data supported by the "trade-in" policy [2] Group 2: Capital Market Outlook - UBS's head of China equity strategy, Wang Zonghao, believes that foreign capital will return to the Chinese stock market in the coming quarters, with Hong Kong's IPO market raising $9 billion so far this year, a 320% increase year-on-year [3] - Goldman Sachs has raised its 12-month target for the MSCI China Index and the CSI 300 Index to 84 points and 4600 points, respectively, indicating potential upside of 11% and 17% [3] - Morgan Stanley has also adjusted its target indices for major Chinese stock indices, reflecting ongoing structural improvements in the Chinese economy [3] Group 3: Earnings Performance - Morgan Stanley's chief Asia and China equity strategist, Liu Mingdi, noted that the MSCI China Index had a strong performance last year, with actual EPS growth reaching 16%, surpassing the initial expectation of 14% [4] - The market's consensus EPS growth expectation for the MSCI China Index this year is 8%, with leading internet companies continuing to perform well [4] - Liu Mingdi projects the MSCI China Index to reach 80 points under baseline and 89 points under optimistic scenarios this year [4]