Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - China is Thailand's third-largest source of foreign direct investment, with approximately $3 billion invested in the first half of 2025, primarily driven by Chinese automotive manufacturers in the electric vehicle sector [1][3] - Over 70% of respondents in a UBS survey indicated increased availability of Chinese products, with 60%-70% purchasing them more frequently, particularly in consumer electronics and retail, due to value for money, promotions, and quality [1][4] - Thailand's tourism industry faces challenges from safety concerns of Chinese tourists and changing travel preferences, leading to a shift towards attracting higher-value tourists and promoting cultural soft power [1][6] - The hotel industry in Thailand is expected to see a decline in RevPAR in 2026, with high-end hotels facing pricing pressure, although government strategies for high-end positioning could benefit the industry in the long term [1][7] - China's dominance in global chemical and petrochemical production significantly impacts Thailand's chemical market, with potential benefits for Thai companies if China reduces overcapacity [1][8] Summary by Sections Economic Connectivity - China has become Thailand's largest trading partner, with about 25% of Thailand's intermediate goods imports coming from China, particularly in electronics, machinery, and steel [3] - Chinese investments in the electric vehicle supply chain are increasing, prompting significant land sales by Thai industrial park operators [3] Chinese Brand Influence - Chinese brands have gained a competitive edge in the ASEAN market, especially in Thailand, with over 70% of respondents noting increased availability of Chinese products [4][5] - In the retail sector, brands like Miniso and Pop Mart excel in fashion and quality, respectively, meeting consumer demands for value and style [9] Tourism Industry Challenges - Thailand's tourism sector is at a crossroads, with a decline in inbound tourism, particularly from China, due to safety concerns and changing preferences [6][13] - The government aims to reposition Thailand as a high-end tourist destination, focusing on cultural and niche tourism, although significant impacts may not be seen until 2028 [6][14] Hotel Industry Outlook - A decline in RevPAR is anticipated for 2026, with domestic tourism providing some support, but high-end hotels may face pricing pressures due to oversupply [7][13] - Successful government strategies for high-end positioning could create long-term benefits for the industry [7] Chemical Market Dynamics - China's policies on reducing overcapacity in the chemical sector could lead to a more balanced global supply-demand environment, benefiting Thai companies [8][15] - The potential exit of older Chinese chemical plants could improve global operational efficiency and support a cyclical recovery [8] Retail Market Performance - Chinese brands dominate the low-priced segment in Thailand's electronics and home appliances market, with Xiaomi leading in brand recognition [10][11] - Local brands maintain strong positions in dairy, grocery retail, and beverages, reflecting consumer trust in domestic products [12]

Investment Rating - The report indicates a positive outlook for the semiconductor industry, driven by the growth of the AI sector and its demand for semiconductor products [1][2]. Core Insights - The AI industry is a key driver for semiconductor demand, with significant growth expected in DRAM, NAND Flash, and HBM markets, suggesting a sustained semiconductor industry cycle for over three years [1][2][3]. - China's semiconductor market is closely linked to the global market, and despite a weaker performance in 2023, it is expected to regain investor interest due to advancements in AI infrastructure and cloud computing [1][4]. - Significant progress has been made in China's AI infrastructure, particularly with Huawei's chip iterations and HBM cluster capabilities, leading to a projected 1.5% growth in semiconductor equipment capital expenditure by 2025 [1][5]. - The report highlights a trend of increasing capital expenditure among semiconductor manufacturers, with about 50% of surveyed respondents indicating plans for expansion in the second quarter of 2025 [1][8]. Summary by Sections Semiconductor Industry Growth - The global semiconductor industry is projected to grow by approximately 17% in 2025, with an expected increase to 22% in 2026, primarily driven by the AI sector [2]. - AI technology significantly enhances the demand for various semiconductor products, with DRAM and NAND Flash markets expected to see marginal increases in the coming quarters [3]. China's Semiconductor Market - China's semiconductor index shows a high correlation with the global index, and future developments in AI infrastructure and cloud computing are expected to improve its market performance [4]. - The domestic semiconductor equipment sector is anticipated to see a 1.5% increase in capital expenditure by 2025, with a potential 5% growth in 2026 [5]. AI Infrastructure and Developments - China has made notable advancements in AI infrastructure, with significant contributions from companies like Huawei in chip development and HBM capabilities [5]. - The report indicates a positive outlook for the automotive sector, particularly in smart driving technologies, with a forecasted penetration rate of over 33% for SoCs by 2029 [9][10]. Investment Opportunities in PCB Sector - The report identifies investment opportunities in the PCB sector, particularly in BT packaging substrates and traditional copper-clad laminates, which are experiencing price increases due to rising demand and material costs [14][19].

Investment Rating - The report indicates a positive outlook for the data center industry in China, highlighting the potential for valuation improvement despite current uncertainties in chip supply [1][2]. Core Insights - The report emphasizes that the valuation of Chinese data centers is significantly discounted due to uncertainties in chip supply, but this has already been reflected in current valuations. The rental outlook for data centers is better than other asset classes, suggesting potential for future valuation increases [1][2]. - The report notes that the EV/EBITDA multiple is commonly used for evaluating data centers due to their capital-intensive nature and high leverage, which allows for a better reflection of operational cash flow [3][4]. - It highlights the differences in market performance and development cycles between Chinese and overseas data center companies, with Chinese companies experiencing higher EBITDA growth from 2018 to 2021, but facing a supply surplus cycle from 2021 to mid-2024 [5]. - The report discusses the contrasting layouts of data centers in the US and China, with the US facing power supply challenges due to concentrated deployments, while China is preparing for AI demand through its "East Data West Computing" initiative [6]. - The development of REITs in China is seen as beneficial for the data center industry, providing liquidity and stable rental returns for investors [7][9]. Summary by Sections Data Center Valuation - Chinese data centers are undervalued compared to global peers due to chip supply uncertainties, but strong infrastructure support is expected to enhance their valuation as asset quality improves [2]. - The rental outlook for data center REITs is optimistic, with current valuations lower than other asset classes, indicating room for growth as investor awareness increases [9]. Market Dynamics - The report outlines that the rental market for data centers is expected to stabilize, with slight downward pressure in the short term but a long-term upward trend anticipated as AI demand grows [19]. - It also notes that large tech companies are likely to build their own data centers when demand is stable, but will opt for leasing in rapidly changing environments [20]. AI and Cloud Computing - Short-term monetization of AI is primarily seen in cloud computing and advertising, with significant growth in demand for cloud services driven by large models and generative AI [15]. - Long-term potential for AI commercialization is highlighted, with various sectors expected to benefit from AI integration, particularly in content generation and recruitment [16][18]. Competitive Landscape - The report indicates that the competitive landscape for data centers in China is evolving, with a stable supply-demand relationship expected post-2024, leading to a more favorable rental environment [19]. - It also discusses the ongoing efforts of Chinese tech companies to enhance GPU utilization and explore domestic solutions to mitigate chip supply uncertainties [23].

Investment Rating - The report reiterates a Buy rating on TSMC as the leading Cloud/Edge AI foundry [4] - ASE is also rated as a Buy due to its position as a key beneficiary of advanced packaging and testing [4] - GPTC is upgraded to a Buy with a new price target of NT$1,800, implying a 35% upside [4][22] Core Insights - TSMC's N3 capacity is forecasted to reach 170kwpm by the end of 2026, up from 120kwpm at the end of 2025 [1] - Cloud AI is expected to account for 35-40% of N3 demand in 2026, with smartphones and PCs making up 60-65% [1] - CoWoS capacity is anticipated to be tight in 2026, with TSMC likely to accelerate capacity expansion [2] - Demand forecasts for CoWoS have been raised significantly for Nvidia (13% increase), AMD (56% increase), and Broadcom [3] Summary by Sections N3 Foundry Supply-Demand Analysis - TSMC's N3 capacity is projected to increase to 170kwpm by end-2026 from 120kwpm at end-2025 [1] - Cloud AI products are expected to represent 35-40% of N3 demand in 2026, with other devices accounting for 60-65% [1] - N3 utilization is expected to be tight, particularly in Q4 2026 [1] CoWoS Capacity and Demand - CoWoS capacity is forecasted to reach 110kwpm by Q3 2026, with potential upside in late 2026 [2] - Demand for CoWoS from Nvidia is expected to reach 3 million units in 2026, with AMD's demand forecast raised by 56% [3] - Broadcom's CoWoS demand is projected to increase to 260-280k units in 2026, up from 90-100k in 2025 [3] Stock Recommendations - TSMC's capex for 2026/27 is raised to US$50bn/52bn from US$46bn/50bn, with a price target increase to NT$1,800 [4] - ASE is highlighted as a key beneficiary of advanced packaging and testing [4] - GPTC's long-term earnings CAGR is forecasted at 20% over 2027-29, with a significant market share in advanced packaging [22]

Investment Rating - The report maintains a positive outlook on the Chinese stock market, indicating a "slow bull" market trend for 2026, supported by various economic and policy factors [1]. Core Insights - The shift in China's policy focus towards stabilizing the economy and supporting private enterprises and the stock market is expected to lay a solid foundation for market stability [1]. - Innovations in sectors such as Deepseek technology, innovative pharmaceuticals, and semiconductors are driving growth, alongside traditional industries like renewable energy and electric vehicles, enhancing export resilience [1]. - The central bank's liquidity injections and increased foreign investment are providing substantial support for the stock market, with overall trading volumes remaining high [1][4]. - Despite challenges from U.S. technology sanctions, China's negotiation leverage, particularly in rare earths, has led to better-than-expected outcomes in tariff negotiations, which is helping to stabilize investor confidence [1][4]. Summary by Sections Policy Support - Since September 2024, there has been a notable shift in policy to support the economy and stock market, including changes in real estate policy and enhanced support for private entrepreneurs [3]. - The introduction of the "Private Economy Promotion Law" and increased governance requirements for listed companies are part of this supportive framework [3]. Innovation and Growth - China is showcasing significant innovations in various fields, with a clear trend towards domestic substitution in technology and pharmaceuticals, while traditional sectors continue to grow [3][5]. - The ongoing advancements in AI and semiconductor industries are expected to create new growth points for the market [5]. Liquidity and Market Dynamics - The central bank's liquidity measures, including reverse repos, are facilitating a flow of funds into the stock market, with insurance and foreign capital increasing their positions in A-shares and Hong Kong stocks [4][10]. - The financing balance has reached historical highs but remains within historical averages, indicating no overheating in the market [11]. Geopolitical Considerations - The geopolitical risks are perceived as manageable, with clearer boundaries established in U.S.-China negotiations, which is fostering a more stable investment environment [6]. - The report suggests that addressing the issue of "involution" in various industries could significantly boost overall earnings per share (EPS) growth [6]. Market Performance Expectations - The report anticipates a 6% growth in A-share earnings for 2025, with further acceleration expected in 2026 due to improved profit margins and PPI influences [8][9]. - The overall sentiment among investors is expected to improve, driven by the influx of personal, leveraged, and institutional funds into the stock market [14].

Investment Rating - The report upgrades the rating for lithium carbonate due to unexpected demand from energy storage orders [5] Core Insights - The aluminum and copper sectors are fundamentally solid, driven by demand growth from the energy transition, with global copper demand expected to grow by 3% and prices potentially reaching $11,000 [4][5] - The photovoltaic (PV) industry faces severe overcapacity, with supply far exceeding demand, leading to widespread losses among companies [8][9] - The steel industry shows strong demand resilience, with no significant need for production cuts, while the cement industry struggles with low capacity utilization and regional management challenges [6][7] Summary by Sections Aluminum and Copper - The copper market is tightening, with global mine supply expected to increase by only 1% in 2026, while demand is projected to grow by 3% [4] - The aluminum sector mirrors copper's demand dynamics, with limited new capacity from Indonesia and Mozambique [4] Lithium and Energy Storage - Lithium carbonate's rating has been upgraded due to a surge in energy storage orders, with significant increases in production utilization rates for upstream materials [5][14] - The lithium battery market's demand has exceeded expectations, with total demand rising to 2,000-2,270 GWh [14] Steel and Cement - The steel industry maintains strong demand, with no immediate need for production cuts, while the cement sector faces challenges due to low utilization rates and regional management difficulties [6][7] Photovoltaic Industry - The PV industry is experiencing a critical turning point, with overcapacity issues leading to significant losses, despite expectations for gradual improvement in profitability starting in 2025 [8][13] - Government intervention is necessary to address overcapacity, as market-driven measures have proven insufficient [9][11] Future Outlook - The report anticipates that global PV demand growth may slow, with China's installation expected to stabilize between 200-250 GW in the coming years [12] - The lithium battery supply chain is expected to see a 25% increase in global production by 2026, with a corresponding rise in prices for certain materials [20]

Investment Rating - The report maintains an optimistic outlook for the electricity, utilities, and renewable energy sectors over the next 12 months, with an average stock return exceeding 100% in 2025 [2]. Core Insights - China's electricity demand is projected to grow at a compound annual growth rate (CAGR) of 8%-9% from 2028 to 2030, surpassing market expectations by 4-5 percentage points, driven by AI data centers, manufacturing electricity demand from exports, and the electrification process [1][3]. - The global shortage of power equipment presents opportunities for Chinese companies to act as major international brand suppliers and to increase their market share [3][8]. - Investment in power supply equipment for AI data centers accounts for approximately 15% of total capital expenditure, creating new market opportunities for related companies [4][5]. Summary by Sections Electricity Demand Growth - China's electricity demand is expected to grow at a CAGR of 8%-9% from 2028 to 2030, with additional growth driven by AI data centers, manufacturing electricity demand from exports, and the electrification process [3][4]. - The construction scale of data centers in China is projected to be 5-6 GW from 2025 to 2027, significantly lower than the 40-45 GW expected in the U.S. during the same period, indicating substantial growth potential for China [4][5]. Power Equipment Exports - Chinese companies are positioned to benefit from global power equipment shortages, with opportunities to serve as suppliers for major global brands and to enhance their international market share [3][8]. - The penetration rates for transformers and switches in the global market are currently low at 7%-8%, and even lower for gas turbine blades at 1%-2%, suggesting significant room for growth [8][9]. AI Data Centers - The demand for high-power equipment in AI data centers is increasing, with capital expenditure in this area expected to create new market space for related enterprises [4][5]. - The anticipated growth in electricity demand from manufacturing, particularly due to exports, is expected to contribute an additional 1.5 percentage points annually to manufacturing electricity consumption [4][6]. Investment Opportunities - The "14th Five-Year Plan" indicates that electricity demand growth will drive related capital expenditures to increase by 12%, higher than the 11% growth during the previous plan, reflecting stronger government support for the sector [5]. - Recent policy changes encouraging the use of domestic chips for data center construction and providing additional subsidies may accelerate the resolution of supply chain issues, further promoting industry growth [5].

Investment Rating - The report indicates a cautious outlook on the Chinese real estate market, highlighting significant challenges and potential shifts in consumer behavior [1][3]. Core Insights - The Chinese real estate market is transitioning from new homes to second-hand homes and now to rental properties, with increasing rental demand but persistent oversupply issues [1][3]. - The supply of affordable housing is expected to divert demand from the commercial housing and rental markets, with the 14th Five-Year Plan aiming to construct 8.7 million affordable housing units, accounting for about 20% of new home transactions annually [1][3]. - New development models include optimizing affordable housing supply and abolishing the pre-sale system, which may hinder private developers' ability to sustain real estate projects [1][3]. - High-end retail in mainland China shows signs of recovery, benefiting from a favorable stock market and rising gold prices, while shopping center supply is expected to decrease, enhancing rental income potential [1][4][6]. - In Hong Kong, residential rents have increased by approximately 5%-6% annually over the past two years, driven by policies attracting talent, with the current rent-to-sale ratio around 3.7% [1][9][10]. - The demand for office space in Hong Kong is rising, particularly in the financial sector, with expectations for Central office rents to stabilize by 2026, although other areas may continue to decline [1][12]. Summary by Sections Mainland China Real Estate Market - The rental market is experiencing increased demand, but oversupply remains a critical issue, particularly in first-tier cities where the rent-to-sale ratio is low [1][3]. - The introduction of a large number of affordable housing units is expected to pressure the commercial housing market [1][3]. - The cancellation of the pre-sale system could lead to a decrease in overall project numbers, despite potential growth in high-end luxury demand [1][3]. Hong Kong Real Estate Market - The high-end retail sector in Hong Kong is showing signs of recovery, influenced by macroeconomic factors such as stock market performance and gold price increases [1][5][6]. - The residential rental market has seen consistent growth, attributed to government policies attracting skilled talent [1][9]. - The office market is expected to see increased demand, particularly in Central, while other regions may face continued rental declines [1][12]. Commercial Real Estate Outlook - The outlook for commercial real estate in both mainland China and Hong Kong varies, with opportunities arising from the recovery of high-end retail and the rise of domestic brands [1][6]. - The anticipated reduction in shopping center supply in mainland China is expected to enhance the bargaining power of existing malls, potentially increasing rental income [1][4][6]. - In Hong Kong, the retail sector faces challenges from domestic brand competition, tax policies, and e-commerce impacts, despite short-term improvements in high-end retail [1][13].

Investment Rating - The report provides a positive outlook for the pharmaceutical industry in China, with an expected annual growth rate of 7% leading to a market size of $2.1 trillion by 2030 [1][2]. Core Insights - The primary driver of growth in the Chinese pharmaceutical market is the aging population, with the proportion of individuals aged 65 and above expected to rise to 27% by 2040, significantly increasing healthcare spending [1][2]. - The market is primarily funded through health insurance and out-of-pocket expenses, with commercial insurance projected to grow at a compound annual growth rate (CAGR) of 15% over the next five years [1][4]. - Innovative drugs, medical devices, healthcare services, and traditional Chinese medicine are identified as high-growth potential segments, with innovative drugs expected to achieve a CAGR of 20% over the next five years [1][5]. Summary by Sections Market Growth and Trends - The Chinese healthcare market is anticipated to add $700 billion in market size over the next five years, reaching $1.4 trillion in 2024 and $2.1 trillion by 2030, driven by an aging population [2]. - By 2024, individuals aged 65 and older will account for 15% of the population, increasing to 27% by 2040, leading to a significant rise in healthcare expenditures [2]. Funding Sources - The main funding sources for the Chinese pharmaceutical market include health insurance, out-of-pocket payments, commercial insurance, social spending, and government funding, with health insurance and out-of-pocket payments being the most significant [4]. Growth Potential in Sub-sectors - The report highlights that innovative drugs, medical devices, healthcare services, and traditional Chinese medicine have substantial growth potential, with innovative drugs projected to capture nearly 60% of the market by 2030 [5]. Biotech and CDMO Developments - Biotech companies are expected to reach breakeven by 2025-2026, with a significant increase in licensing activities, and Chinese innovative drugs now represent one-third of the global pipeline [6][11]. - CDMO companies with high overseas revenue are favored, as the domestic investment environment improves, despite ongoing price competition [8]. International Participation - Chinese pharmaceutical companies are becoming key players in global innovation, with 30% of global clinical trials conducted by Chinese firms in 2024, up from 5% in 2014 [9]. Online Pharmaceutical Sales - The online pharmaceutical market is projected to grow significantly, with a current penetration rate of only 13%, indicating substantial room for growth [17][25].

Investment Rating - The report assigns a favorable investment rating to the Chinese internet sector, highlighting its attractiveness compared to U.S. tech stocks due to lower valuations and promising earnings growth [1][2]. Core Insights - The Chinese internet stocks have risen due to improved sentiment, catch-up effects, and relatively low valuations, with a projected PE ratio of 17 times for 2025, significantly lower than the 31 times for U.S. tech stocks [1][2]. - The consumption market in China is experiencing significant emotional consumption growth, with online retail growth at 6.3%, surpassing offline growth of 3.7% [1][4]. - AI technology is being widely applied across various sectors, including e-commerce recommendations, game design, and education, with companies like Alibaba leveraging AI to enhance cloud services and user engagement [5][18]. Summary by Sections 1. Overall Performance of the Internet Industry - The Chinese internet sector has seen a stock price increase of approximately 37% from the beginning of 2025, despite a 19% decline in profit expectations due to pressures from e-commerce and retail investments [2]. 2. Changes in the Consumption Market - Emotional consumption has become a highlight, particularly in gaming, music, and tourism, with a notable increase in online retail driven by algorithm optimization and a growing number of online shoppers [3][4]. 3. AI Development in China - China is advancing in AI through self-developed chips and local GPU efficiency, with Alibaba Cloud experiencing a growth increase from 18% to 26% in recent quarters [5]. 4. Development of Instant Retail - Instant retail has emerged as a significant trend, with companies like JD and Alibaba increasing their investments in food delivery, although growth rates have slowed due to seasonal factors and regulatory influences [6]. 5. Competition in the Food Delivery Sector - The food delivery market is highly competitive, with low-price strategies affecting user experience and merchant profits, while machine retail is accelerating the shift from offline to online [7]. 6. Regulatory Changes in Platform Economy - The government has implemented new policies to encourage healthy competition and protect small businesses, resulting in a more manageable regulatory environment for internet companies [8]. 7. Policy Environment for the Gaming Industry - The gaming industry has seen a positive shift in policy, with a significant increase in the issuance of new game licenses and recognition of efforts to protect minors [9]. 8. Future Focus of the Gaming Industry - The gaming sector should focus on evergreen games and the launch of new titles, with major companies expected to continue leveraging their IPs for sustained performance [10]. 9. Recent Changes in Long Video Industry Regulations - New measures from the broadcasting authority aim to enhance content supply in the long video sector, which could increase user subscriptions [11]. 10. Impact of New Advertising Regulations - The new advertising tax policy may increase marketing costs for certain industries, posing a potential downside risk for the advertising sector [12]. 11. Current Status and Future of the Education Sector - The education market remains robust despite economic challenges, with a significant demand-supply gap expected to drive long-term growth [13]. 12. Opportunities for Chinese Internet Companies Overseas - Chinese online games have a competitive edge due to lower development costs and a large talent pool, enabling them to expand internationally [14][15]. 13. Recent Developments in Cross-Border E-commerce - Cross-border e-commerce GMV has stabilized and shows signs of recovery, driven by innovative business models and improved logistics efficiency [16]. 14. Impact of ChatGPT on E-commerce - The introduction of ChatGPT's e-commerce features may have limited impact on China's e-commerce landscape, as major platforms already dominate traffic [17]. 15. Growth Potential and Competition in the Domestic Gaming Industry - The domestic gaming industry is expected to grow at around 5% in the coming years, with AI playing a crucial role in game development and player interaction [18][19].