Investment Rating - The report indicates a modest improvement in the US economic outlook due to the recent tariff deal with China, suggesting a positive shift in investment sentiment [7]. Core Insights - The US and China have agreed to reduce reciprocal tariffs by 115 percentage points for 90 days, affecting approximately 6.5% of US imports, which is a larger reduction than previously expected [2][7]. - The new combined tariff rate on Chinese goods is now 30%, while China's tariff rate on US goods is set at 10% [7]. - The report revises GDP forecasts upward and inflation forecasts downward, with expectations for the Federal Reserve to maintain current rates until December 2025 [7][14]. Summary by Sections Tariff Impact - Approximately half of Chinese imports to the US were subject to 145% tariffs, with the recent deal significantly reducing tariffs for a portion of these goods [2]. - The deal primarily impacts consumer electronics, auto parts, and semiconductors, with many goods remaining unaffected [2]. Trade Negotiations - The outlook for US-China trade has improved, but negotiations with other countries have been slow, indicating a potential hard floor of 10% for tariffs [4][6]. - The US-UK trade deal did not lower tariffs below 10%, suggesting a challenging environment for future trade agreements [6]. Economic Projections - The average effective tariff rate is projected to be 4 to 7 percentage points lower than previous estimates, with forecasts for core PCE inflation also adjusted downward [11][14]. - The GDP growth rate for 2025 has been revised to 0.8% and 1.1% in baseline and benign scenarios, respectively, still below trend [14].

Investment Rating - The report maintains a strong base case that the USD/HKD peg will hold, particularly the strong side at 7.750, over the medium term [2][8]. Core Insights - The report discusses the current pressures on the USD/HKD peg, particularly focusing on the strong side of the convertibility undertaking at 7.750, and the potential risks of it being tested [2][3]. - The HKMA's recent liquidity injections have eased some downside pressures on the spot USD/HKD, but concerns remain about the sustainability of the peg [2][4]. - The report highlights that the HKMA can sustain its USD buying interventions for an extended period, which may lead to lower local interest rates [6][7]. - Historical context is provided, comparing current conditions to the capital inflows and currency dynamics observed during 2003-2004, suggesting potential similarities in market expectations [5][10]. Summary by Sections Section 1: Downside Pressure on USD/HKD - The primary cause of the downside pressure on USD/HKD is strong demand for HKD driven by equity-related demand and expectations of currency appreciation in Asia [3]. - The Hang Seng Index has increased by 17% in the past month, contributing to the demand for HKD [3]. Section 2: Short-End Rates and FX Points - Recent HKD liquidity injections have caused the 1M HIBOR to drop from nearly 4% to 2.09% [4]. - If demand for HKD remains high, further liquidity injections could push short-end HKD rates lower, similar to trends observed in 2003-2004 [4]. Section 3: Historical Context - The report draws parallels between current market conditions and those in 2003-2004, noting that the DXY index fell by 21% during that period, which contributed to capital inflows [5]. - Current investor sentiment reflects expectations of medium-term USD weakness, similar to the past [5]. Section 4: HKMA's Intervention - The HKMA's sustained USD buying could lead to excess domestic liquidity, but current domestic price pressures are limited, with CPI at 1.4% year-on-year [7]. - If liquidity concerns arise, the HKMA could issue more exchange fund bills to absorb excess liquidity [7]. Section 5: FX Valuation Models - The average of four FX valuation models suggests that HKD is close to fair value, with some models indicating undervaluation and others overvaluation [9]. - The report notes that the market could interpret a break of 7.750 as a signal for further depreciation of HKD [10]. Section 6: Market Expectations - The report indicates that the market does not show a consistent directional bias for HKD, with risks of viewing a break of 7.750 as leading to a stronger USD/CNH rate [10]. - The report emphasizes the importance of upcoming IPOs and potential arbitrage trades as catalysts for narrowing the HK-US rates spread [15].

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific securities [1]. Core Insights - The model projection for USD/CNY is 7.2373, which is 359 pips higher than the previous projection of 7.2014 and 259 pips lower than the previous official spot close [1]. - The model projection with the counter-cyclical factor is 7.1999, indicating a decrease of 15 pips from the previous fix [1]. Summary by Sections - **Model Projections**: The USD/CNY fix model indicates a significant increase in the projected exchange rate, reflecting market expectations and potential volatility in the currency market [1]. - **Recent Model Errors**: The report includes a figure illustrating recent model errors without counter-cyclical factor adjustments, which may provide insights into the accuracy of the projections [3]. - **Daily Changes**: A figure detailing the daily changes in the USD/CNY fix is presented, which can help in understanding the fluctuations in the currency pair over time [5]. - **Event Calendar**: The report outlines a calendar of significant events involving China, including deadlines for plans related to the Sovereign Wealth Fund and the PBoC's Monetary Policy Report, which could impact market dynamics [9].

Investment Rating - The report recommends an "Accumulate" rating for Alibaba, Kingsoft Cloud, and GDS, with specific upgrades for Kingsoft Cloud ADR to "Buy" and initiation of coverage for Kingsoft Cloud-H at "Buy" [4][14][13]. Core Insights - The global cloud computing market is projected to grow significantly, with penetration still below 20% of total IT workload, indicating ample room for growth [3][43]. - Generative AI is identified as a key growth driver for the cloud market, with China's cloud service providers (CSPs) expected to see capital expenditure (capex) growth exceeding 50% year-on-year in 2025, compared to over 40% for global CSPs [3][9]. - The report highlights the shift from on-premise IT workloads to cloud solutions, with the global enterprise cloud computing market expected to increase from 18% of total IT spending in 2024 to 27% by 2028 [8][54]. Market Dynamics - The global public cloud computing market generated USD496.4 billion in 2023, with a year-on-year increase of 17%, and is expected to exceed USD1,200 billion by 2028 [43][44]. - China's cloud computing market revenue was CNY616.5 billion in 2023, a year-on-year increase of 35.5%, projected to reach CNY2.1 trillion by 2027 [44][51]. - The report emphasizes the importance of AI and cloud infrastructure investment, with significant growth expected in the IaaS, PaaS, and SaaS segments, which are projected to grow at CAGRs of 25%, 20%, and 18% respectively from 2023 to 2028 [45][51]. Key Players and Recommendations - Major players in the AI cloud and IDC sector include Alibaba, GDS, and Kingsoft Cloud, with Alibaba being the top pick in the AI Cloud sector and GDS in the IDC sector [4][14][13]. - The report notes that leading CSPs are expected to benefit from the ongoing AI investment cycle and the demand for AI computing power, particularly from large language models (LLMs) and generative AI applications [3][9][56]. Future Outlook - The report anticipates a multi-year growth cycle for the cloud and AI sectors, driven by technological advancements and increasing enterprise digital transformation initiatives [54][56]. - The shift towards high-margin business segments is highlighted as a key focus for China's CSPs, with expectations for improved margins through expansion into PaaS and SaaS [8][54].

Investment Rating - The report assigns a Neutral rating to Chugai Pharmaceutical and Nxera Pharma, indicating a cautious outlook for these companies in the context of diabetes and obesity treatments [2][4]. Core Insights - Amgen's pharmaceutical sales grew by 11% year-on-year to $7,873 million, driven by strong sales of existing products and the launch of Imdelltra for extensive-stage small cell lung cancer [1] - Biogen reported a 6% year-on-year revenue increase to $2,431 million, supported by favorable foreign exchange effects and product shipment timing [3] - Eli Lilly's revenue surged by 45% year-on-year to $12,729 million, largely due to a 113% increase in sales of its diabetes and obesity drug Mounjaro [7] - ICON's revenue decreased by 4.3% year-on-year to $2,001 million, with a notable decline in adjusted EBITDA margin [10] Summary by Company Amgen - Initiated Phase 3 studies for MariTide in obesity, with key data expected in the second half of 2025 [1] - Strong sales performance attributed to mainstay products and new launches [1] Biogen - Received approval in Europe for the resubmitted marketing authorization request for Leqembi [3] - Anticipates approval for a subcutaneous formulation of Leqembi in August 2025, which would facilitate self-administration for patients [3] Eli Lilly - Facing challenges as CVS Caremark prioritizes Novo Nordisk's Wegovy over Zepbound, potentially leading to patient switches [7] - Plans to file for obesity and diabetes drug approvals in late 2025 and early 2026, respectively [8] ICON - Experienced a 4.3% decline in revenue, with a significant drop in adjusted EBITDA margin [10] - Lowered sales guidance for 2025 due to major cancellations, while still seeing demand from mid-tier drugmakers [10] Implications for Japanese Companies - Chugai Pharmaceutical and Nxera Pharma are expected to face neutral implications from Amgen's MariTide, pending Phase 3 study results [2] - Eisai reported robust growth in revenues from Leqembi, indicating potential for further growth if subcutaneous formulations are launched as planned [4] - Chugai Pharmaceutical may benefit from royalties on Eli Lilly's orforglipron sales, with encouraging Phase 3 study results noted [9]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The property sector in China continues to decline, with new home sale volume growth dropping to -15.9% year-on-year in April from 2.5% in March, indicating ongoing challenges despite policy changes [1] - High-frequency data shows mixed results for exports, with a significant drop in ocean container bookings from China to the US by over 60% since the implementation of new tariffs, while container throughput at major ports in China remains up about 10% year-on-year [1] - Industrial profit growth in China improved slightly in March, posting a positive 2.6% year-on-year, rebounding from -0.3% in January-February, driven by robust industrial production growth [3] - Chinese e-commerce giants are facing challenges due to impending tariff increases, with Shein and Temu adjusting prices by approximately 10% in response to rising costs, which may impact their market presence [4] Summary by Sections Property - New home sale volume growth in major cities fell to -15.9% year-on-year in April from 2.5% in March, indicating a continued decline in the property sector [1] - Secondary home transaction volumes in a sample of 14 major cities increased to 29.7% year-on-year in April from 12.8% a week earlier, with significant growth in Shenzhen [10][12] Trade - Container throughput at major ports showed a slowdown in growth to 9.7% year-on-year on April 27 from 12.4% a week earlier, while cargo throughput increased to 10.6% year-on-year [10] - The number of ship departures from China to the US plunged to -12.6% year-on-year on April 27 from 14.2% a week earlier, indicating a significant decline in trade activity [10] Mobility - Passenger trips via airlines are expected to increase by 8.0% year-on-year during the Labour Day holiday, with cross-border trips anticipated to jump by 27.0% year-on-year [2] Industrial Performance - Industrial profit growth improved to 2.6% year-on-year in March, rebounding from earlier declines, with mixed sector performances noted [3] - The auto manufacturing sector saw profit growth tumble to -6.2% year-to-date year-on-year in March, contrasting with improvements in the electrical machinery and equipment sector [3]

Investment Rating - The report maintains a "Buy" rating for BYD with a target price of HKD 491.00 [6][21][19] Core Insights - BYD reported a revenue of CNY 170 billion in 1Q25, reflecting a year-on-year increase of 36% but a quarter-on-quarter decline of 38% due to a shipment of 1 million NEVs, which is a 60% increase year-on-year [1][8] - The gross profit margin (GPM) for BYD in 1Q25 was 20.1%, down 0.6 percentage points year-on-year, indicating ongoing fierce competition in the market [1][8] - Operating profit for BYD was CNY 5.6 billion, a 39% increase year-on-year, while net profit reached CNY 9.2 billion, doubling year-on-year [1][8] Summary by Sections Financial Performance - Revenue for 1Q25 was CNY 170.36 billion, a 36% increase year-on-year but a 38% decrease quarter-on-quarter [8] - Operating profit was CNY 5.6 billion, up 39% year-on-year, while net profit was CNY 9.2 billion, reflecting a 100% increase year-on-year [1][8] - The GPM was 20.1%, down from 20.7% in 1Q24, indicating a decline in profitability due to competitive pressures [1][8] Market Dynamics - The report highlights that BYD continues to benefit from its business scale despite a competitive environment, with sales and marketing expenses growing at a slower pace than revenue [1][4] - Recent government policies tightening smart driving function promotions have affected order volumes across the industry, prompting a shift in focus towards pricing strategies [2][3] Strategic Initiatives - BYD has initiated time-limited promotions with price cuts of 8-17% on select models to stimulate demand [4] - The company aims to improve liquidity through a proposed distribution of bonus shares, increasing the total number of shares from 3,039 million to 9,117 million [5][21]

Investment Rating - The report downgrades the investment rating of Sungrow Power Supply from Buy to Neutral, with a target price reduced from CNY 100 to CNY 58 [3][5][21]. Core Insights - The earnings for 1Q25 exceeded expectations due to strong growth in the energy storage system (ESS) segment, with revenue growth of 50.9% year-on-year [1]. - Despite strong shipment forecasts for 2025, the report expresses caution regarding potential earnings due to tariff headwinds and increased competition in emerging markets [2][3]. - The company has suspended ESS shipments to the US market, which typically offers better gross margins, impacting future earnings [2][3]. Summary by Sections Financial Performance - Sungrow reported 4Q24 revenue of CNY 27.9 billion, an 8.0% year-on-year increase, and 1Q25 revenue of CNY 19.0 billion, a 50.9% year-on-year increase [1]. - The net profit for 4Q24 was CNY 3,437 million, up 55% year-on-year, and for 1Q25, it was CNY 3,826 million, up 83% year-on-year [1]. Shipment Forecasts - For 2025, solar and ESS shipments are estimated at 160GW (up 9% year-on-year) and over 40GWh (up 43% year-on-year), respectively [2]. - The company reported solar inverter and ESS shipments of 147GW and 28GWh in 2024, aligning with previous estimates [1]. Valuation Metrics - The new target price of CNY 58 is based on a P/E ratio of 11.3x for 2025F, reflecting a decrease from the previous 16x due to anticipated margin pressures [3][13]. - The report indicates a projected normalized EPS decline from CNY 5.67 to CNY 5.12 for 2025F [3][4]. Market Context - The report highlights intensified competition in the Middle East market, which may further limit Sungrow's shipment and earnings growth in 2H25 [2]. - The company is facing challenges from increased anti-dumping and countervailing duties affecting solar module shipments to the US [2].

Investment Rating - The report indicates a shift in investment strategy from "American Exception" to "American Exclusion," suggesting a negative outlook on U.S. assets and a positive outlook on European and Asian markets, particularly in technology sectors [1][2]. Core Insights - The phenomenon of "American Exclusion" is driven by weakening economic growth expectations in the U.S., leading to a significant outflow of funds from dollar-denominated assets into euros, yen, gold, and global technology investments [1][2]. - The rise of AI technology is accelerating the commercialization of China's tech industry, resulting in increased foreign investment in Hong Kong tech companies, which in turn boosts trading volumes in A-shares [1][3]. - There is a notable increase in southbound capital flows contributing over 20% to Hong Kong's trading volume, marking a historical high, while liquidity is primarily flowing into small-cap stocks like the CSI 2000 [1][3][6]. Summary by Sections Global Fund Flow Trends - Since the first half of 2025, a significant trend of capital outflow from U.S. assets has been observed, particularly since April, reinforcing the "American Exclusion" phenomenon [2]. - The performance of the Hang Seng Tech Index and European markets has been strong, contrasting with the average performance of U.S. and Japanese markets [2]. U.S. Economic Uncertainty - Increasing uncertainty regarding U.S. economic growth is a key factor driving the "American Exclusion" trend, with consumer confidence and purchasing manager indices indicating weakened confidence [4]. - The U.S. government’s spending cuts and defense department layoffs are expected to negatively impact employment data [4]. Institutional vs. Retail Investor Behavior - There is a significant behavioral difference between institutional and retail investors, with institutional trading volumes rising and improving market sentiment, while retail investor sentiment remains low [5][6]. - The proportion of financing purchases has been slow to recover, currently around 4%, which is below levels seen in November of the previous year [6]. Future Market Outlook - The report anticipates that the next interest rate cut by the Federal Reserve may occur around December 2025, with potential trading opportunities arising from market adjustments to economic data shifts [10]. - The report highlights that sectors such as technology, AI, high-end manufacturing, and renewable energy are likely to attract investor interest in the coming period [20][21]. Foreign Investment in China - Foreign investors are expected to maintain a positive outlook on the Chinese market, with expectations of further inflows into A-shares and H-shares as U.S. economic data weakens [22].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The ongoing US-China trade conflict is described as a "struggle," with a call for emergency plans to assist affected businesses and accelerate policy easing measures [1] - The report highlights the need for Beijing to adopt bolder actions to address unprecedented challenges, including cleaning up the real estate sector and reforming the pension system to support consumption sustainably [5] - The meeting emphasized the importance of stabilizing employment and prices, particularly in light of the significant tariffs imposed by the US [9] Summary by Sections Economic Policy Measures - The report urges the implementation of "more proactive macroeconomic policies" and emphasizes the need to accelerate policy execution [6] - It suggests that the government should expedite the use of special bonds issued by local and central governments [6] - The report maintains predictions for a 50 basis point reserve requirement ratio cut and a 15 basis point interest rate cut in the second quarter, with similar actions expected in the fourth quarter [6] Support for Affected Industries - New structural monetary policy tools and financial instruments will be introduced to support technological development, expand consumption, and stabilize foreign trade [8] - A new relending plan will be launched to promote service consumption and elderly care services [8] - The leadership has committed to increasing the unemployment insurance fund's return ratio to support employment stability for businesses severely impacted by tariffs [8] Agricultural and Labor Market Stability - The report stresses the need to enhance domestic agricultural production to stabilize prices of essential goods, especially in light of the US's high tariffs on Chinese imports [9] - It highlights the challenges posed by the low substitutability of certain US-imported agricultural products and the time required for domestic production adjustments [9] - The report underscores the importance of providing multifaceted support to struggling enterprises, including improving financing channels [10]