Investment Rating - The report maintains a "Buy" rating for the industry, with an upward adjustment in profit forecasts for key companies like Yili and Mengniu [13]. Core Insights - The dairy industry in China is experiencing a prolonged down cycle in raw milk prices due to rigid supply and weak demand, with prices expected to fall below production costs by July 2024 [1][2]. - The core dairy product categories have seen a decline in both volume and price since 2021, leading companies to adopt discount promotions to reduce inventory, further lowering raw milk purchase prices [1][4]. - The potential for a market reversal in raw milk prices may arise from the active elimination of high-yield farms and the loss of cost-effectiveness of imported bulk powder [5]. Summary by Sections Industry Overview - From 2018 to 2021, China's milk production increased, with fresh milk prices growing at a compound annual growth rate (CAGR) of 6.4%, while imported milk powder prices fell by 5% [1][2]. - The current supply-demand imbalance is exacerbated by high production costs and a significant number of farms facing prolonged losses [1][2]. Market Dynamics - The B-end dairy product consumption is growing rapidly, with fresh milk accounting for approximately 45% of this market, although it is currently dominated by imported brands [6]. - Domestic companies are accelerating their entry into the B-end market, benefiting from policy support and cost advantages [6]. Consumer Trends - There is a noticeable decline in demand for high-consumption categories like ambient milk and yogurt, with significant inventory pressures prompting companies to discount products [4][10]. - The trend towards low-temperature and health-oriented products is evident, with flavored milk beverages emerging as a new growth point [8][9]. Competitive Landscape - Yili has a stronger channel bargaining power compared to Mengniu, with a more efficient deep distribution model and a diversified strategy that has led to leading market shares in several segments [12]. - The report predicts stable performance for liquid milk over the next 2-3 years, while non-liquid dairy products are expected to achieve double-digit growth [13].

Investment Rating - The report indicates a positive outlook for the Japanese economy, suggesting a shift from extreme monetary easing to a neutral interest rate, with expectations of further policy adjustments in the future [1][4][7]. Core Insights - Japan's economy is gradually recovering, with inflation nearing the 2% target, prompting the Bank of Japan to end its ultra-loose monetary policy [1][4]. - The market has largely priced in the December interest rate hike, and the yen depreciated post-hike, but concerns about the Bank of Japan lagging behind have been alleviated [1][4]. - The government's proactive fiscal expansion policy, while increasing debt pressure, is deemed manageable without triggering systemic shocks [1][4][6]. - The likelihood of significant market disruption from the interest rate hike is low due to effective communication from the Bank of Japan and the distinct nature of this rate hike compared to previous instances [1][5]. Summary by Sections Economic Recovery and Monetary Policy - Japan's potential economic growth is expected to remain above 0.5%, supported by fiscal stimulus measures projected to boost GDP by approximately 0.3% in the first half of 2026 [2][4]. - Core inflation is anticipated to gradually rise back to near 2%, despite a potential temporary dip below this threshold in early 2026 [2][4][7]. Market Reactions and Financial Institutions - The banking sector has outperformed the Tokyo Stock Exchange index, benefiting from improved core profitability and low credit costs, despite facing unrealized losses from rising bond yields [2][21]. - Japanese financial institutions are expected to manage risks effectively, reducing the likelihood of systemic risks despite holding significant amounts of government bonds [6][19]. Fiscal Policy and Debt Management - The new government's fiscal policy is characterized as "active but responsible," focusing on balancing economic growth with debt sustainability [18][15]. - Short-term interest payment pressures are manageable, but long-term risks are significant, with projections indicating that new interest payments could match current social security expenditures by 2034 [16][13]. Global Market Implications - The interest rate hike by the Bank of Japan is expected to have a controlled impact on both the domestic financial system and global markets, with particular attention on the divergence between Japan's monetary policy and anticipated U.S. rate cuts in 2026 [23][24]. - The potential for Japanese institutions to sell U.S. Treasuries and repatriate funds is limited due to varying investment strategies among different types of institutions [11][12].

Investment Rating - The report maintains a positive investment outlook for companies focusing on overseas markets, particularly in the Americas and emerging markets, despite challenges in domestic sales [4][5]. Core Insights - The report emphasizes the importance of "going abroad" as a key strategy for growth, with expectations for better investment returns from overseas-focused companies in 2026, especially as domestic demand faces pressures from policy and market conditions [4][5]. - It identifies three main factors suppressing domestic sales of durable goods: the depletion of government subsidies, high base effects, and weak housing transaction demand [5][6]. - The report suggests that companies with strong operational performance and low valuations, as well as those benefiting from policy or technological catalysts, are potential investment opportunities [5][6]. Summary by Sections 2025 Review - The report notes that the home appliance and light industry sectors have underperformed compared to the CSI 300 index, primarily due to weakening domestic demand and external tariff disruptions [9][11]. - It highlights that the home appliance sector has faced challenges from declining government subsidies and ongoing tariff issues, leading to a significant drop in export performance [9][10]. 2026 Outlook - The report anticipates that domestic housing demand will continue to decline, with new housing starts and sales expected to drop by 4.8% in 2026 [36][39]. - It predicts that the overseas sales performance of home appliance and furniture companies may improve in the second quarter of 2026, driven by base effects and potential recovery in the U.S. housing market [78][80]. - The report emphasizes that companies with significant exposure to the U.S. and emerging markets are likely to benefit from improving demand conditions [80][81]. Recommended Stocks - The report recommends furniture companies with a presence in the U.S., Latin America, and Europe, such as Kuka Home, which are expected to benefit from a recovery in U.S. housing transactions [7]. - It also suggests consumer electronics and home appliance companies with operations in Latin America, North America, and Southeast Asia, including Anker Innovations and Haier Smart Home, ranked by their exposure to these markets [7]. - Lastly, it highlights export-oriented companies in Europe, such as Ecovacs and Roborock, noting that while growth potential is strong, profitability may be pressured by increased competition [7].

Asia Insights Global Markets Research Economics - Asia ex-Japan China: The great divides, RMB, and the policy dilemma for Beijing Since 2020 the Chinese economy has been characterized by a great divide between rapidly rising exports and a crashing property sector. This divide in turn has helped to lead to China's surging trade surplus above USD1.0trn this year, which is likely to trigger rising trade tensions and is unlikely to be sustained. The real root cause of the staggering trade imbalance is China's d ...

Asia Insights Economics - Asia ex-Japan China: The Politburo sounded more concerned about the economy China's Ruling Party Politburo convened today and issued a memo after the meeting. The memo sets the tone for the forthcoming annual Central Economic Work Conference (CEWC), which will outline Beijing's macroeconomic policy agenda for 2026. The memo reintroduced "counter-cyclical" policy adjustment, which was absent from the most recent Politburo meeting in July 2025 , signaling Beijing's renewed concerns a ...

Investment Rating - The report suggests a cautious investment approach towards the real estate market, particularly in first-tier cities, while highlighting potential opportunities in non-first-tier cities and developed county economies [10][21]. Core Insights - The Chinese real estate market is fundamentally different from Japan's, with a higher proportion of self-funding and manageable overall leverage, which mitigates systemic risks [1][2]. - Since 2020, China's manufacturing sector has seen an increase in leverage, with high-end manufacturing continuously enhancing global competitiveness, contrasting with Japan's asset-liability issues due to real estate speculation [1][2]. - The report emphasizes the importance of maintaining employment stability and improving household income expectations to avoid a deflationary spiral similar to Japan's [1][2]. - China's regional economy is developing in a multi-point flowering pattern, avoiding the polarization seen in Japan's major cities, with a more balanced distribution of industries [1][5]. - Non-first-tier cities and developed counties present significant growth prospects, with a more equitable distribution of large enterprises and active participation in global competition [1][7]. Summary by Sections Real Estate Market - The report identifies a trend of young people and retirees leaving first-tier cities in search of more suitable living conditions, with significant differences in housing repayment periods across city tiers [21]. - First-tier cities face longer repayment periods for home loans, with Beijing requiring 18 years of income to repay, while non-first-tier cities generally require around 10 years [21]. Consumer Behavior - Lower-tier consumers prioritize brand and symbolic consumption, while higher-tier consumers lean towards shared economy and personalized needs [23]. - The tea beverage industry shows significant growth in lower-tier markets, with brands like Gu Ming achieving a compound annual growth rate of 25.8% from 2022 to 2024 [24]. Economic Development - The report highlights that non-first-tier cities are successfully attracting young talent through improved living conditions and job opportunities, contrasting with the declining attractiveness of first-tier cities [16][17]. - County economies are thriving by leveraging local resources and developing unique economic models, leading to increased property market activity [20]. Investment Opportunities - Investors are advised to focus on consumer companies in non-first-tier cities and developed counties, while exercising caution with investments in first-tier and quasi-first-tier consumer companies [10].

Investment Rating - The report does not explicitly state an investment rating for the industry, but it provides a mixed outlook for various countries in Asia, indicating potential outperformers and underperformers based on economic conditions and growth forecasts [5][10][11]. Core Insights - The strong momentum of tech exports, particularly driven by AI demand and higher memory prices, is expected to sustain through 2026, while non-tech exports are likely to remain soft due to US tariffs and spillovers from China [10][21]. - The report anticipates a North-South monetary policy divide, with North Asian countries likely to maintain an extended hold on rates, while South/Southeast Asian countries may see further rate cuts [12][30]. - The overall GDP growth for Asia is projected at 3.6% year-on-year in 2026, slightly down from 3.7% in 2025, with specific countries like Korea, Malaysia, Japan, Singapore, Taiwan, and India expected to outperform [10][11][18]. Summary by Sections Economic Outlook - The AI supercycle is driving a regional split, with tech exports expected to thrive while non-tech exports face challenges [10][19]. - Domestic demand shows a mixed picture, influenced by supportive policies and political risks [24][28]. Growth Projections - Korea, Malaysia, Japan, Singapore, Taiwan, and India are projected to outperform, while China, Thailand, and the Philippines may disappoint due to weaker domestic demand [11][28]. - Specific growth forecasts include Korea at 2.3%, Malaysia at 5.2%, and India at 6.9% for 2026, all above consensus estimates [18][32]. Inflation and Monetary Policy - Inflation is expected to remain benign, with an average CPI inflation of 1.9% year-on-year in 2026, up slightly from 1.7% in 2025 [29]. - The monetary policy easing cycle is largely complete in North Asia, while South/Southeast Asia may see further cuts [30][31]. FX and Rates Strategy - The report outlines a strategy for Asia FX and rates into Q1 2026, highlighting potential trades such as long EUR/INR and short SGD/JPY [14][15]. - The USD is expected to remain stable, but risks of a weaker USD are noted due to potential triggers [15][30].

Investment Rating - The report assigns a "Buy" rating to Ibiden, indicating a positive outlook for the company's performance in the market [1]. Core Insights - The AI industry is expected to see sustainable growth through application-specific custom AI and packaging technologies that lower inference costs [1]. - Sakana AI focuses on developing innovative algorithms and application-specific AI models, aiming for sustainable growth by specializing in niche areas [2]. - Ibiden is increasing its market share in the custom ASIC packaging sector, with manufacturing difficulties for ASICs approaching those of GPUs, which may lead to a broader customer base for AI accelerator packages [3][5]. Summary by Sections Sakana AI - Sakana AI, founded by notable figures from Google Brain and Mercari Europe, specializes in advanced algorithms and application-specific AI models [2]. - The company aims to improve algorithms efficiently through an evolutionary process rather than relying on large-scale computing resources [2]. - Concerns about sustainability in ultra-large model learning persist, as only a few companies can maintain the necessary infrastructure [2]. Ibiden - Ibiden has refined its manufacturing technologies for large packages since the mid-2010s, with expectations of increased manufacturing difficulty for custom ASICs and GPUs [3]. - The company is likely to expand its customer base for AI accelerator packages due to its capability to stably mass produce EMIB-T, a technology that may see wider adoption by 2027-28 [3]. - Technological advancements in providing LLM inference with stable quality at lower prices are expected to enhance Ibiden's competitive advantage in the market [3][5].

ANCHOR REPORT Global Markets Research 2 December 2025 Asia AI Semi & Server AI bubble? Less likely when supply is constrained AI bubble? We think AI demand is real and fast influencing everyone's life. The "bubble" concern is from the huge (and some circular) investment numbers over the next five years (and elevated valuation accordingly). However, it takes a long way from today to 3-5 years out as the supply chain (e.g. semi, component and power supply) obviously did not prepare for such skyrocketing deman ...

Nomura Quant Insights Global Markets Research Cross-asset - Japan Pause in the sell-off of tech stocks? NVDA stays within breakeven lines / Foreign capital's round trip in South Korean equities / High volatility blocking a proper recovery NVDA price movement in line with options market's expectations / Foreign capital's AI-related round trip into and out of South Korean equities All eyes were on the share price reaction to Nvidia's announcement of earnings results last week. Results as such exceeded market ...