Investment Rating - The report does not explicitly provide an investment rating for the industry. Core Insights - The success of China-US trade talks is focused on stabilizing the truce, with potential for reduced export controls, but significant breakthroughs on trade issues may take time [3] - China has announced new guidelines to support people's livelihoods, emphasizing social welfare coverage and targeted support for low-income groups, youth, and gig workers [8][9] - The People's Bank of China (PBoC) injected RMB1 trillion into the banking system to address liquidity needs, indicating a proactive approach to economic stability [13] Summary by Sections Trade Relations - Recent China-US trade tensions have led to high-level talks aimed at addressing export controls, with both sides showing willingness to negotiate [2][3] - China's exports to the US have seen a decline, but high-frequency data indicates a rebound in container exports, suggesting recovery from tariff impacts [4][62] Domestic Policies - China released 10-point guidelines to improve social welfare, including childcare subsidies and minimum wage increases, aimed at enhancing living standards [9][11] - The government plans to allocate RMB158.7 billion in fiscal support for low-income households, indicating a commitment to social safety nets [12] Economic Activity - The operating rates in various sectors, such as semi-steel tyres and chemicals, show mixed trends, with some sectors experiencing a decline while others see growth [14][16] - National box office revenues and postal delivery volumes have shown fluctuations, reflecting broader economic activity [32][30] Financial Measures - The PBoC's liquidity injection is a response to a maturity wall of interbank NCDs and ongoing government bond issuance, highlighting the need for immediate liquidity support [13] - Interbank rates have remained low, indicating a stable financial environment [29] Housing Market - New home sales in Tier-1 cities have started to rebound, while second-hand home sales in major cities have also seen an uptick, suggesting a recovery in the housing market [43][45] - Land sales remain below historical levels, indicating cautious market sentiment [47] Consumer Behavior - The report highlights the need for improved business confidence to stabilize employment, particularly for the youth entering the job market [12] - Consumer spending patterns are influenced by government policies aimed at boosting disposable incomes and consumption [10]

Investment Rating - The report indicates a positive outlook for OPEC+ with expectations of accelerated supply hikes in the coming months, suggesting a desire to regain market share [10]. Core Insights - OPEC+ is set to increase its quota by 411 thousand barrels per day (kbd) for July, with further hikes anticipated in August and September [2][3]. - The report highlights that while summer demand is expected to absorb these increases, a surplus is projected for the fourth quarter of 2025 due to deteriorating fundamentals [10]. - The analysis suggests that Saudi Arabia's oil policy is influenced by multiple factors, including managing overproduction by certain members and regaining market share from non-OPEC producers, particularly US shale [4][5]. Summary by Sections OPEC+ Supply Adjustments - OPEC+ confirmed a quota increase of 411 kbd for July, with expectations for additional hikes of 411 kbd in August and 274 kbd in September [2][3]. - The new scenario anticipates regular hikes from October to December, with voluntary cuts fully unwound by the end of 2025 [3]. Market Dynamics - The supply-demand model indicates a surplus of 0.3 million barrels per day (mbd) for 2026, an increase from previous estimates due to higher OPEC+ volumes [6]. - The market is expected to remain balanced in the second and third quarters as demand rises during the summer [6]. Refining Margins and Demand - Healthy refining margins suggest that oil demand is currently stable, although the impact of tariffs on consumption may become more apparent later in the year [7][63]. - The report notes that refinery closures in Europe and the US are supporting margins, despite potential future impacts from tariffs [63].

Investment Rating - The report assigns a "Buy" rating to Tencent, NetEase, Alibaba, Kuaishou, and Bilibili, indicating a favorable outlook for these companies [8][9][10]. Core Insights - Content consumption in the gaming and entertainment sectors has shown resilience compared to goods and services year-to-date, creating a high entry barrier for new competitors, benefiting established players like Tencent and NetEase [2][3]. - The outlook for AI has been tempered by lower-than-expected capital expenditure and cloud revenue growth, but confidence is expected to return with improved user statistics and cloud growth acceleration [2][3]. - E-commerce remains highly competitive, with the 618 shopping festival seen as a pivotal moment for food delivery services, impacting the competitive landscape [2][3]. Summary by Sections Investment Preferences - The report favors sub-sectors with higher earnings visibility and less exposure to macroeconomic conditions, particularly online games, with Tencent expected to benefit from robust earnings growth driven by popular titles and new launches [3][8]. - NetEase is also highlighted for its recovery in mobile game growth and new game launches, while Alibaba is noted for potential cloud growth acceleration that could enhance its AI valuation [3][8]. - Bilibili has been upgraded due to improved margin outlook and resilient performance in games and advertising, while Kuaishou is recognized for its growth visibility in ads and attractive valuation [3][8]. Company Valuations - Tencent's target price is set at HKD630.00, reflecting a 22% upside from its current price of HKD515.00, with a PE ratio of 20.1x for 2025 [9][24]. - NetEase's target price is USD150.00, indicating a 17% upside from USD128.63, with a PE ratio of 17.0x for 2025 [9][24]. - Alibaba's target price is USD176.00, suggesting a 47% upside from USD119.96, with a PE ratio of 17.0x for 2025 [9][24]. - Kuaishou's target price is HKD75.00, representing a 38% upside from HKD54.50, with a PE ratio of 15.0x for 2025 [9][24]. - Bilibili's target price is USD22.50, indicating a 22% upside from USD18.48, with a PE ratio of 27.1x for 2025 [9][24].

Meituan (3690 HK) Buy: NDR key takeaways China | MAINTAIN BUY | | | | | | --- | --- | --- | --- | --- | | TARGET PRICE (HKD) | | PREVIOUS TARGET (HKD) | | | | 160.00 | | 160.00 | | | | SHARE PRICE (HKD) | | UPSIDE/DOWNSIDE | | | | 140.70 | | +13.7% | | | | (as of 04 Jun 2025) | | | | | | MARKET DATA | | | | | | Market cap (HKDm) | 778,126 | Free float | | 89% | | Market cap (USDm) | 99,170 | BBG | | 3690 HK | | 3m ADTV (USDm) | 965 | RIC | | 3690.HK | | FINANCIALS AND RATIOS (RMB) | | | | | | Year to | 12/2 ...

Investment Rating - The report rates HKEX, BOCHK, and BEA as "Buy" with target price adjustments for HKEX from HKD 413 to HKD 438, reflecting positive market conditions and increased activity [5][9][38]. Core Insights - The Hong Kong financial sector is experiencing strong liquidity inflow despite subdued loan demand, with deposits growing 0.6% month-on-month in April and 4.1% year-to-date [2][11]. - The 1-month HIBOR has significantly decreased to approximately 0.6% in late May, which is expected to impact bank revenues and redirect deposits into investments, benefiting HKEX and banks' wealth management businesses [3][16]. - The capital market has seen a substantial increase in activity, with equity market average daily turnover (ADT) rising to HKD 242 billion year-to-date, an 84% increase from 2024, and total IPO funds raised reaching HKD 77 billion, approximately 8 times higher than the same period in 2024 [4][9]. Summary by Sections Liquidity and Loan Demand - Hong Kong sector deposits increased by HKD 706 billion year-to-date 2025, while loan growth was only HKD 49 billion, indicating that deposit growth is primarily driven by external inflows [2][11]. HIBOR Trends - The average 1-month HIBOR in May was 1.72%, significantly lower than the average of 3.82% from January to April 2025, suggesting a potential 10% reduction in BOCHK's earnings with a 100 basis point decline [3][16]. Capital Market Activity - The successful IPOs of companies like CATL and Hengrui, raising HKD 41 billion and HKD 10 billion respectively, are expected to stimulate further listing interests and enhance HKEX's turnover velocity, which is currently at approximately 155% [4][26]. Earnings Estimates - Earnings estimates for HKEX have been raised by 0.2% for 2025, 2.0% for 2026, and 3.3% for 2027, driven by increased ADT assumptions and listing-related revenues, partially offset by reduced investment income [5][28]. Key Financial Metrics - The report highlights that HKEX's consensus forward PE is 33.8x, slightly above its long-term average of 32.5x, indicating a favorable valuation relative to the market [30][32].

Investment Rating - The report assigns a "Buy" rating on Maersk and Evergreen Marine, a "Hold" rating on COSCO Shipping (both A and H shares), Hapag Lloyd, and OOIL in containers, and a "Buy" rating on COSCO Shipping Energy (both A and H shares) [8][9]. Core Insights - Positive momentum is observed in container and air freight sectors, with significant rate hikes expected to support profitability in the near term [4][5]. - Tariff-driven front loading to the US is anticipated to continue, while air cargo rates may see a near-term spike due to increased demand [4][5]. - The SCFI (Shanghai Containerized Freight Index) surged by 31% week-on-week, with rates to the US increasing by 46-58% and to Europe by 21% [4][45]. Summary by Sections Tariffs and Trade - Tariff headwinds are expected to persist despite court interventions, leading to continued front loading as uncertainty remains regarding future policy [2]. - The resumption of shipping routes through the Red Sea is not imminent due to ongoing conflicts, with major carriers opting for alternative routes [3]. Freight Rates and Market Trends - Upcoming rate hikes are likely to be effective, with general rate increases announced for transpacific and Asia-Europe routes [4][20]. - Air cargo rates are projected to rise further in the coming weeks, driven by front loadings, although medium-term demand may shift towards sea freight for low-value goods [5]. Container Shipping Insights - The SCFI's significant increase reflects a surge in bookings from China to the US, with rates to the US West Coast and East Coast up by 58% and 46% respectively [45]. - The report highlights a trend of reactivating transpacific services post-tariff pause, indicating a recovery in shipping activity [22]. Stock Recommendations - Specific stock recommendations include "Buy" on Maersk and Evergreen Marine, and "Hold" on COSCO Shipping (both A and H shares), Hapag Lloyd, and OOIL in containers [9].

Investment Rating - The report maintains a positive outlook on the Chinese equity market, anticipating more policy support to stimulate growth [3][7]. Core Insights - Economic growth in April 2025 showed signs of weakness across various sectors, with retail sales growing by 5.1% year-on-year, industrial production at 6.1% year-on-year, and fixed asset investment (FAI) at 3.5% year-on-year [3][7]. - The property sector is experiencing a downturn, with house sales in 30 major cities weakening since late March and monthly sales by the top 100 developers declining by 8.8% year-on-year in April [3][91]. - Policy support is expected to increase, particularly in social security and consumption, during the upcoming July Politburo meeting [3][7]. Data Highlights - Labour Day holiday tourism traffic and revenue reached 136% and 123% of the 2019 levels, respectively, indicating a 10% decrease in per capita spending [4][32]. - New mutual fund issuance has seen a recovery, up 88% year-on-year [4][45]. - The southbound channel recorded net inflows of HKD603.9 billion year-to-date, although trading has been sideways since mid-April [4][59]. - Foreign fund inflows to mainland China equities were lukewarm in May 2025 [4][57]. - NAND flash and DRAM prices have improved since mid-April [4][79]. - Domestic game license issuance remained high at 118 in April 2025 [4][85]. - Air conditioner exports declined by 0.2% year-on-year in April, marking the first drop since March 2024, while domestic sales grew by 3.7% year-on-year [4][83]. Sector Allocations - The report indicates sector allocations with a focus on growth sectors such as Information Technology, Consumer Discretionary, and Healthcare, all rated as overweight [10]. - The report highlights that the Information Technology sector has a weight of 15.6% and is expected to perform positively despite recent negative earnings revisions [10]. - The Real Estate sector is underweight, with a significant decline in performance noted at -7.0% [10]. Market Focus - The report notes that the overall market is trading at a 14.2% discount compared to emerging markets, with the FTSE China trading at a forward PE of 11.4x versus 13.3x for FTSE EM [11][12]. - The consensus earnings for CSI800 constituents have been revised down by 5.1% year-to-date [21]. Macro Focus - The report discusses the resilience of the US economy, with an unemployment rate stable at 4.2% and inflation below consensus at 2.3% year-on-year [5][7]. - The Federal Reserve is expected to make adjustments to its policy-setting framework, which may influence future Fed policy [5][7]. Liquidity Focus - The margin financing balance stabilized at approximately RMB1.8 trillion in May 2025 [48]. - The turnover of stock ETFs as a percentage of A-share turnover dropped to 6.3% [51]. Growth Sectors - The penetration of new energy vehicles (NEVs) in China reached 51.5%, an increase of 7.4 percentage points year-on-year [68]. - The report notes that the price of lithium iron phosphate (LFP) batteries has edged lower recently [70]. Value Sectors - Monthly sales from the top 100 property developers amounted to RMB284.7 billion in April 2025, down 8.8% year-on-year [91].

Investment Rating - The report maintains a Buy rating on DBAPP and a Hold rating on QAX and Venustech [3][5][9] Core Insights - The demand recovery in the cybersecurity sector remains muted, but there are signs of improvement in emerging subsectors such as data security, cloud security, and managed security services (MSS) [3][9] - DBAPP's 1Q25 revenue grew by 11% year-on-year, with a net loss narrowing by 44% year-on-year, driven by strong demand in emerging security subsectors and effective expense control [3][12] - QAX and Venustech experienced continued revenue contraction in 1Q25 due to weak overall cybersecurity spending [3][4] Summary by Sections Company Performance - DBAPP's 1Q25 revenue growth of 11% year-on-year was supported by a 40% year-on-year increase in the contract value of new data security products, with API security and network data loss prevention growing by 200% and 150% year-on-year, respectively [12][13] - QAX's 1Q25 revenue declined by 3% year-on-year, reflecting a muted recovery in downstream cybersecurity spending [43] Earnings Estimates - Revenue estimates for DBAPP for 2025-26 have been revised upward by 1-3%, while earnings estimates have been lowered due to higher headcount reduction expenses [4][16] - QAX and Venustech's revenue estimates for 2025-26 have been lowered due to cautious views on overall cybersecurity spending [4][45] Valuation and Target Prices - The target price for DBAPP has been lowered to RMB71.00 from RMB83.00, while target prices for QAX and Venustech have been reduced to RMB32.80 and RMB15.00, respectively [5][9][28] - DBAPP is currently trading at a price-to-sales (PS) ratio of 1.9x for 2026 estimates, compared to a peer average of 4.1x [5][30] Future Outlook - The report anticipates that accelerated cloud and AI adoption will boost demand for data security, cloud security, and managed security services [3][9] - DBAPP is expected to achieve a revenue compound annual growth rate (CAGR) of 11% from 2024 to 2027, with net profit projected to grow significantly in 2027 [17][30]

Investment Rating - The report maintains a "Buy" rating for ZTO Express with an unchanged target price of USD 22.00, indicating a potential upside of approximately 25.7% from the current share price of USD 17.50 [5][31]. Core Insights - ZTO's 1Q25 revenues missed consensus estimates by 7%, with adjusted net profit also falling short by 5%. Despite a 19% year-on-year volume growth, ZTO's market share decreased to 18.9% [2][11]. - The report highlights the intense competition in the industry, leading to a significant decline in average selling price (ASP) by 8% year-on-year, which reflects the fragility of pricing in a price-sensitive market [2][3]. - ZTO aims for a volume growth of 20-24% in 2025, with strategic initiatives to penetrate low-value parcels and improve operational efficiency [3][4]. Financial Performance - For FY25, ZTO is expected to achieve a 7% year-on-year growth in EBIT and a 9% growth in recurring EPS, both slightly ahead of consensus estimates [4][11]. - The report projects a 6% decline in average revenue per parcel (ARPP) year-on-year, but anticipates that volume growth and lower unit costs will drive earnings growth [4][25]. - ZTO's 1Q25 adjusted EBITDA grew by only 1% year-on-year, indicating a slowdown in profitability growth [20][11]. Market Position and Valuation - ZTO's market capitalization stands at USD 14.08 billion, with a free float of 73% [7][16]. - The report notes that ZTO's valuation is supported by a 5% total dividend yield and a significant unused buyback quota of USD 772 million as of 1Q25 [5][31]. - ZTO's current enterprise value (EV) is higher than its peers despite having a lower market share, attributed to its superior profitability [31][32]. Earnings Forecast - The earnings estimates for 2025-27 remain largely unchanged, with EPS projected at RMB 12.90 for 2025, RMB 14.18 for 2026, and RMB 15.40 for 2027, reflecting a compound annual growth rate (CAGR) of 9% from 2024 to 2027 [25][29]. - The report anticipates continued volume growth, particularly in reverse logistics, which may help buffer against ASP erosion [11][25]. Operational Data - ZTO's parcel volume in 1Q25 reached 8.54 billion, growing 19% year-on-year, although it lagged behind the industry growth of 22% [20][21]. - The report forecasts a 21% year-on-year growth in parcel volume for 2Q25, with an expected market share increase to 20.7% [21][23].

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - OPEC+ is expected to announce another significant output hike for July, following the previously announced hikes for May and June, with a pause anticipated in Q1 2026 [7] - Key drivers for OPEC+'s decisions include Kazakhstan's overproduction, seasonal demand increases, and the group's aim to regain market share from non-OPEC producers, particularly US shale [7][8] - The report indicates rising downside risks to Brent price forecasts, now projected at USD 68.5/b for 2025 and USD 65/b for 2026 and beyond [7] Supply and Demand Summary - The updated supply and demand model shows a surplus of 0.2 million barrels per day (mbd) for 2025 and 0.7 mbd for 2026, which is smaller than previously estimated due to a higher demand baseline and a faster decline in Venezuelan output [3][8] - Kazakhstan's crude output is expected to remain flat at 1.80 mbd, with an increase of 150 thousand barrels per day (kbd) in 2025 and 110 kbd in 2026 [11] - Venezuela's production estimate has been cut by 130 kbd on average over 2025-26 due to anticipated earlier and steeper declines in output [11] - The report notes that demand in Gulf countries rises seasonally in summer, with Saudi Arabia's oil consumption increasing by 400 kbd compared to winter [7] Geopolitical Factors - The likelihood of an Iran-US nuclear deal in the near term is low, which reduces the prospects for sanctions relief and higher Iranian supply [7] - Potential disruptions to Venezuelan and Libyan supply are highlighted, with concerns over Chevron's Venezuela oil export license and civil unrest in Libya [7]