Investment Rating - The report maintains a Neutral rating on Zhejiang Jingsheng Mechanical & Electrical (JSG) and lowers the target price to CNY27 from CNY30, reflecting weaker-than-expected results and a likely continued decline in solar equipment order backlog [4][6]. Core Insights - The company's 2024 revenue declined by 2% year-on-year to CNY17,577 million, which is 9% lower than the Bloomberg consensus estimate, primarily due to a 20% decline in the materials business [1][2]. - The earnings per share (EPS) for 2024 fell by 45% year-on-year to CNY1.92, which is 36% lower than the consensus estimate, attributed to gross margin contraction, increased operating expenses, and a significant rise in asset impairment losses [1][4]. - The solar sector outlook remains negative, with solar demand softening, which is expected to continue impacting JSG's earnings in 2025 [2][3]. Financial Summary - For FY24, JSG reported revenue of CNY17,577 million, with a projected decline to CNY16,051 million in FY25F and a slight recovery to CNY16,119 million in FY26F [5]. - The reported net profit for FY24 was CNY2,510 million, with forecasts of CNY2,212 million for FY25F and CNY2,181 million for FY26F [5]. - The normalized EPS is expected to decrease to CNY1.69 for FY25F and CNY1.67 for FY26F, down from CNY2.29 and CNY2.39 respectively [4][5]. Market Position and Risks - JSG's inventory and contract liabilities have decreased by 30% and 48% year-on-year as of December 2024, indicating a softening order backlog from solar clients [2]. - The potential downside in sales and earnings could be partially mitigated by a stable semi-equipment order backlog and delayed revenue recognition from ongoing projects [3][4]. - The stock currently trades at a P/E of 17x for FY25F, while the revised target price reflects a P/E of 16x [4][6].

Investment Rating - The report has lowered its forecasts for the TOPIX and Nikkei 225 to 2,700 and 36,000 for end-2025, and 2,900 and 39,000 for end-2026, reflecting the impact of tariffs and other factors [2][70]. Core Insights - The report anticipates a 14% dent in TOPIX EPS due to tariffs, with an overall decline of approximately 7% in FY25, but expects normalization from FY26 [1][27]. - The sectors favored for investment include electric appliances & precision instruments, banks, construction, real estate, and land transportation, with longer-term themes focusing on 100-year firms, safety & security, and content [2][77]. - The report highlights that the deterioration in earnings has largely been priced in, as evidenced by a 21% decline in the TOPIX between March 26 and April 7 [1][27]. Summary by Sections Market Outlook - Earnings downside appears to have been priced in significantly, with a focus on the impact of tariffs on earnings and market sentiment [9][1]. - The report notes that the revision index for analysts' forecasts has just started to be revised down, indicating potential further declines in earnings expectations [15][28]. Supply-Demand Dynamics - Nonfinancial corporations have been the largest buyers of Japanese equities, while nonresident investors have been significant sellers, particularly through futures [31][35]. - The report indicates that share buybacks are expected to tighten equity supply-demand conditions over the long term [2][70]. Valuation and Sentiment - The report identifies considerable pessimism in the market, with the weighted DI in the QUICK Monthly Market Survey showing the highest level of pessimism since August 2020, which is viewed as a contrarian indicator [49][50]. - Current valuations show a 12-month forward P/E of over 13x, a P/B of over 1.2x, and a dividend yield of 2.8%, suggesting some support from undervaluation [56][57]. Economic Policy and Forecasts - The report emphasizes low policy uncertainty in Japan compared to the US and Europe, which is expected to provide reassurance to global investors [59][60]. - The forecast for TOPIX EPS is projected to fall from 179 in FY24 to 167 in FY25, with a return to growth expected from FY26 [72][69].

Investment Rating - The report does not explicitly provide an investment rating for the consumer electronics sector in Japan Core Insights - The potential for a decline in US consumer spending due to tariff costs being passed on to consumers warrants attention, although there are positives for companies investing in the US [1] - Companies with significant production in China are likely to face the largest impacts from tariffs, particularly in the smartphone and PC categories [2] - Companies aggressively investing in US manufacturing may benefit from tariff policies aimed at reviving the US manufacturing sector [3] - The appreciation of the yen could provide benefits that outweigh the negatives from tariffs for certain companies with low sales exposure to the US [4] Summary by Sections Consumer Spending and Tariffs - There is a risk of decline in US consumer spending as tariffs increase costs for consumer electronics, with global smartphone shipments rising 1.5% year-on-year to 304.9 million and PC shipments increasing 4.9% to 63.2 million [1] Impact of Tariffs on Production - A significant portion of smartphones and PCs are produced in China, while large appliances are primarily made in Mexico. The US has imposed additional tariffs of 145% on China and 10% on other countries, with temporary exemptions for smartphones and PCs [2] Opportunities for US Investments - Companies like Panasonic Holdings and Fujifilm Holdings are making substantial investments in US manufacturing, which may provide them with a competitive advantage over rivals lacking a US presence [3] Currency Effects - Companies with low sales exposure to the US may benefit from yen appreciation, potentially improving their cost of goods sold (COGS) ratios and profits despite tariff impacts [4]

Investment Rating - The report provides a detailed analysis of the Agency MBS market, indicating a cautious investment rating due to fluctuating issuance trends and market conditions [1]. Core Insights - The report highlights a significant decline in gross issuance of Agency MBS, with April 2025 showing a total issuance of $49.3 billion, down from $72.6 billion in March 2025, representing a decrease of approximately 32% [3]. - The net issuance also reflects a downward trend, with April 2025 reporting a net issuance of $6.4 billion, compared to $15.6 billion in March 2025, indicating a reduction of about 59% [4]. - The report emphasizes the impact of interest rate changes and market volatility on the issuance patterns, suggesting that investors should closely monitor these factors [1]. Summary by Sections Gross Issuance - In April 2025, the gross issuance of Agency MBS totaled $49.3 billion, a significant drop from $72.6 billion in March 2025, marking a 32% decline [3]. - The report details monthly gross issuance figures, showing fluctuations across different months, with February 2025 at $69.5 billion and January 2025 at $92.1 billion [3]. Net Issuance - The net issuance for April 2025 was reported at $6.4 billion, down from $15.6 billion in March 2025, reflecting a 59% decrease [4]. - The report provides a comprehensive breakdown of net issuance over the past months, indicating a consistent downward trend since the beginning of 2025 [4]. Market Trends - The report discusses the broader market trends affecting Agency MBS, including interest rate fluctuations and investor sentiment, which have contributed to the observed declines in both gross and net issuance [1]. - It suggests that ongoing economic conditions and policy changes will continue to influence the Agency MBS market dynamics in the near future [1].

Investment Rating - The report maintains a "Buy" rating for Contemporary Amperex Technology (CATL) and raises the target price to CNY 331, implying an upside of approximately 48% from the closing price of CNY 224 on April 14, 2025 [6][26]. Core Insights - CATL reported a revenue growth of 6% year-on-year to CNY 84.7 billion in 1Q25, despite an 18% quarter-on-quarter decline, attributed to lower product ASPs and a longer revenue recognition cycle in the ESS segment [1][2]. - The company's gross profit margin improved by 1.2 percentage points year-on-year to 24.4%, driven by lower material costs and effective cost control measures [1]. - Earnings grew by 33% year-on-year to CNY 14 billion, with a net margin expansion of 3.3 percentage points to 16.5%, primarily due to an improved margin profile and higher investment income [1]. Summary by Sections Financial Performance - In 1Q25, CATL achieved a gross profit of CNY 20.7 billion, reflecting an 11% increase year-on-year, while operating income adjusted was CNY 11.8 billion, a 13% increase year-on-year [16]. - The company expects revenue for FY25 to reach CNY 423.6 billion, with a normalized net profit forecasted at CNY 64.5 billion, representing a 27.2% growth [5][17]. Market Position - CATL holds a 38% global market share in EV battery usage, with a 43% share in the European market, and anticipates further market share expansion in Europe due to product competitiveness and localized manufacturing [2]. - The German plant of CATL turned profitable in 1Q25, indicating successful operational strategies in the European market [2]. Future Outlook - The report projects a slight increase in FY25-27 earnings by 4.8-5.3%, reflecting a better margin profile and higher investment gains [4]. - The target price of CNY 331 is based on a 19x FY26F EPS of CNY 17.42, which is 1x standard deviation below the historical average forward P/E [4][18].

Investment Rating - The report maintains a "Buy" rating for several companies including Bizlink, Airtac, Eclat, and Makalot, indicating a positive outlook for their performance in the market [10][12][15][25]. Core Insights - Investors are concerned about potential sales and earnings cuts due to global tariffs, leading them to focus on segments and individual stocks that are less impacted [2]. - The report highlights that any reductions in US reciprocal tariffs would be beneficial, especially for companies with diversified capacity locations like Taiwan suppliers [2]. - The demand for AI server components is expected to grow significantly, benefiting companies like Bizlink, which specializes in active electrical cables [3]. - In the consumer discretionary sector, the impact of tariffs on retail prices is expected to be minimal, with only a mid-single-digit percentage increase anticipated even if tariffs are enforced [4]. - The automotive and industrial automation sectors are facing uncertainty due to pending tariff confirmations, but government stimulus policies are expected to support growth in companies like Airtac [5]. Summary by Segment AI Component - Bizlink is expected to see stronger growth in AI server demand due to low global penetration rates and increasing demand for inference algorithms [3]. Consumer Discretionary - Concerns exist regarding textile OEMs in Southeast Asia due to high reciprocal tariffs, but retail price increases are expected to be limited, suggesting a lower-than-expected impact on companies like Makalot and Eclat [4]. Automotive / Industrial Automation and IoT - The automotive sector is awaiting tariff confirmations, with potential negative impacts on demand. However, government stimulus is expected to drive growth for Airtac [5]. - E INK faces challenges in eReader demand but is expected to benefit from its ESL project in the US, which will continue to be manufactured in Mexico [5].

Investment Rating - The report maintains a "Buy" rating for BYD (1211 HK), XPENG Inc. (XPEV US), and Desay SV (002920 CH) [70][72][78]. Core Insights - The China auto market showed solid performance in March 2025, with wholesale shipments reaching 2.5 million units, a year-on-year increase of 10.4% and a month-on-month increase of 36% [1][9]. - The penetration of electric vehicles (EVs) rebounded to 50.4% in March 2025, indicating a strong recovery in the EV segment [1][9]. - The report highlights the limited direct impact of recent US-China tariffs on the auto sector, with only 116,000 vehicles exported to the US in 2024, representing 1.8% of total auto exports [2][43]. Market Performance - For the first quarter of 2025, the report notes a healthy year-on-year growth in both passenger vehicle (PV) and EV markets, with PV wholesales at 6.4 million units, up 12.9% year-on-year [10]. - Retail sales of EVs during the quarter reached 2.4 million units, reflecting a year-on-year growth of 36% [10]. - BYD's retail shipments in March 2025 were 290,200 units, with a market share of 29.3%, although it experienced a decline from the previous month due to a high base effect [12][17]. Supply Chain and Tariff Impact - The report suggests that the reciprocal tariffs should have limited direct impact on the auto supply chain, as both auto and parts are excluded from the new tariffs [3][46]. - The ongoing negotiations between China and the US regarding minimum pricing for China-made EVs could act as a positive catalyst for the auto market [4][40]. Competitive Landscape - The report emphasizes the need for OEMs to adapt to a competitive environment, with potential shifts in focus towards pricing strategies if demand remains weak [5][64]. - Key models to monitor include Xiaomi YU7, Seres AITO M8, and XPENG G7, which may influence the competition dynamics in the premium auto market [5][66]. Future Outlook - The report expresses a cautiously positive outlook for the China auto market, driven by rapid development in the EV sector and ongoing geopolitical uncertainties [6]. - The upcoming Shanghai Auto Show in April 2025 is expected to provide further insights into market trends and consumer preferences [65].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The 1980s US-Japan trade friction had profound impacts on Japan's economy and industries, leading to a shift in manufacturing strategies, particularly in the automotive sector [3] - The US tariff policies significantly affect Asian manufacturing, especially Japan's automotive industry, which relies heavily on exports to the US [5][6] - Japanese automakers are adopting various strategies to cope with US tariffs, including price increases and relocating production bases, although these strategies come with challenges [6][7] - Non-tariff barriers from the US exacerbate trade tensions, impacting market access for foreign products [7] - The semiconductor industry has transitioned from a peak to a decline due to trade tensions and competitive pressures [4][14] Summary by Sections Impact of US Tariffs on Japanese Manufacturing - The US tariffs have led to increased costs for Japanese manufacturers, particularly in the automotive sector, where exports constitute over 35% of their business [5] - Japanese automakers like Toyota are less affected due to higher local production, while others like Nissan face greater challenges due to their export reliance [6] Strategies of Japanese Automakers - Japanese car manufacturers are considering price hikes or shifting production bases to mitigate tariff impacts, but both options present significant challenges [6][8] - Honda's analysis indicates that a 25% tariff on 550,000 vehicles could reduce profits by over 500 billion yen [6] Non-Tariff Barriers and Trade Friction - Non-tariff barriers, such as safety standards and market access discrepancies, further complicate trade relations and increase operational costs for Japanese firms [7] - The historical context of US-Japan trade friction includes various sectors, with the automotive and semiconductor industries being particularly affected [9][10] Semiconductor Industry Dynamics - The semiconductor sector has faced severe challenges due to trade tensions, with the US implementing measures to limit Japanese market access and promote local production [13][14] - The decline of Japan's semiconductor industry is attributed to strategic missteps and increased competition from US firms [14] Future Implications of Tariffs - The anticipated increase in US tariffs in 2025 is expected to significantly impact the technology sector, particularly electronics, which are heavily reliant on Asian manufacturing [16] - Companies like Apple are exploring various strategies to manage tariff pressures, including price adjustments and supply chain restructuring [17] Domestic Alternatives and Opportunities - The report identifies potential opportunities in domestic substitution for products previously sourced from the US, particularly in semiconductor manufacturing [20][23] - Companies like Texas Instruments are positioned to navigate tariff challenges due to their high domestic production rates [21]

Investment Rating - The report does not explicitly provide an investment rating for the automotive industry or the specific companies involved. Core Insights - The integration between Honda and Nissan was expected to generate over 1 trillion yen in operating profit but faced significant challenges due to Nissan's operational crisis and deteriorating cash flow, requiring a consolidated operating profit of 600 billion yen by FY2026, which is three times the guidance for FY2024 [2][10] - Both companies are struggling against fierce competition from Tesla and BYD in the Chinese and American markets, with traditional fuel and hybrid vehicle market shares being eroded and a lack of competitive electric vehicle offerings [2][5] - Internal structural issues at Nissan have led to a lack of product strength and understanding of consumer demand, resulting in aging key models and difficulties in maintaining sales even with increased price subsidies [2][7] Summary by Sections Integration Challenges - The rapid breakdown of the integration decision announced in December 2024 was primarily due to differences in shareholding ratios, with Honda pushing for Nissan's operational reform and a subsidiary structure, while Nissan preferred an equal merger [3] - The integration faces multiple challenges, including electrification, intelligence, and cultural differences between the companies, making it difficult to surpass competitors like Tesla and BYD in the electric vehicle sector [14][15] Market Competition - Honda and Nissan are experiencing intense competition in the Chinese and American markets, with Tesla leveraging software innovations and BYD utilizing low-cost components and aggressive pricing strategies [5] - The inability of Japanese automakers to lead in electric vehicle adoption is attributed to high battery costs and insufficient charging infrastructure, which hinder vehicle pricing and sales [17] Strategic Directions - Honda and Nissan may pursue two strategic directions: continuing collaboration in key subfields while ensuring sufficient funding, or abandoning the partnership in favor of alliances with other companies like Mitsubishi or Hon Hai [6][11] - Honda plans to fully control the electric vehicle supply chain, having established a battery factory in Ohio and investing in a battery materials and vehicle production facility in Canada [4][18] - Nissan aims to establish 60GWh of battery capacity in North America by 2030, potentially collaborating with AESC, which has plans for 90GWh of battery capacity in the U.S. [19] Product and Business Structure - Honda's business structure is more diversified, covering various sectors, while Nissan has streamlined its operations by divesting non-core businesses [20] - Both companies lack competitive electric vehicle models, which remains a critical issue to address [20] Cost Reduction through Integration - The integration of factories could lead to the reduction of excess capacity and improved equipment utilization, thereby lowering fixed costs [21] Collaboration in Smart Vehicle Development - Honda and Nissan announced a collaboration focused on software-defined vehicles, including SOC chips and software platforms, to share development costs and enhance their competitive edge in the smart vehicle market [22]

China: The PBoC may still be concerned about long-term CGB yields While U.S. Treasury Secretary Scott Bessent expressed intentions to bring down US long- term Treasury yields, China's PBoC remains concerned about systemic risks from a one- sided decline in long-term CGB yields, despite their recent rebound. Compared with the Q4 MPC meeting, the PBoC's Q1 MPC meeting did not mention the trading of CGBs, reiterated the need to closely monitor long-term yields and added that it will observe and assess bond mar ...