Investment Rating - The report indicates a tactical escalation in tariffs, with the overall effective tariff rate expected to rise to 21-22%, which may lead to stagflationary shocks and increased recession probabilities [57]. Core Insights - Tariffs are being used as a tool for negotiation, with the US administration focused on reducing goods trade deficits while not perceiving substantial risks from tariff escalations [57]. - The weighted average tariff rate on Asia could rise to 27% and above, but it is anticipated that most large economies in Asia will reach trade agreements before August 1 [57][11]. - The implications for the copper market are significant, with a 50% tariff on copper expected to negatively impact LME copper while benefiting COMEX copper [57][27]. - The US economy may experience a stagflationary shock due to the announced tariffs, with inflation expected to remain above 2% for an extended period [57]. Summary by Sections Tariff Implications - The report highlights that the US is exploring its negotiating space through tactical tariff escalations, with current levels remaining below earlier fears [57]. - The potential for tariffs to rise on select sectors, particularly semiconductors and pharmaceuticals, remains a concern [16][57]. Trade Negotiations - Current trade negotiations involve several countries, with key issues such as agricultural access and tariff reductions on automobiles still unresolved [15][57]. - The report suggests that if agreements are not reached by the deadline, tactical tariff increases may occur, impacting trade dynamics [16][57]. Economic Outlook - The report anticipates a slowdown in capital goods imports and exports over the next 2-3 months, indicating potential economic drag [17]. - The report emphasizes the importance of monitoring Asia's export price index for signs of tariff burden sharing and its effect on corporate profit margins [19][57].

Investment Rating - The report indicates a weaker credit impulse expected from Q3, suggesting a cautious outlook for the industry [4][13]. Core Insights - Strong government bond issuance has driven a 10bps increase in broad credit year-on-year, reaching 9.1% [3][13]. - Private credit demand remains weak, with bank loans unchanged at 7.1%, reflecting subdued private credit amid a softer property market and external tariff impacts [3][13]. - A supplementary budget of Rmb0.5-1 trillion is anticipated from Beijing in September/October to address slowing GDP growth, projected to dip to 4.5% year-on-year [5][13]. Summary by Sections - **Credit Impulse and Government Bonds**: The fiscal-led credit impulse peaked due to strong government bond issuance, which has improved liquidity for local governments and infrastructure entities [3][4]. - **Future Projections**: The remaining quota for government bond issuance in the second half of 2025 is expected to be below Rmb6 trillion, leading to a reversal in the credit impulse trend [4][5]. - **Economic Growth Outlook**: The report forecasts a slowdown in real GDP growth to 4.5% year-on-year in Q3, influenced by the payback of front-loaded exports and a negative deflationary feedback loop [5][13].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Exports to the US have shown a significant contribution to year-on-year growth, with a +2.6 percentage point increase, while exports to the rest of the world (RoW) decreased by -1.6 percentage points, indicating a mixed performance in export markets [2] - Imports have turned positive year-on-year for the first time this year, primarily due to higher commodity prices and a low base effect, although month-on-month growth remains soft at -0.6% seasonally adjusted [3] - A slowdown in global trade is anticipated in the second half of the year, with estimates suggesting that payback from front-loading could reduce year-on-year growth by 2 percentage points compared to the first half [4] Summary by Sections Trade Balance and Exports - The trade balance for June 2025 was reported at 115 billion USD, with exports totaling 325 billion USD, reflecting a year-on-year growth of 5.8% [6] - Exports to the US decreased by -16.1% year-on-year, while exports to Japan and the EU increased by 6.6% and 7.6% respectively [6] Imports - Total imports in June 2025 were 210 billion USD, with a year-on-year growth of 1.0% [6] - Mechanical and electrical products saw a year-on-year growth of 6.0%, while steel products and crude petroleum oil experienced declines of -13.1% and -14.3% respectively [6] Future Outlook - The report anticipates a slowdown in China's exports in the second half of the year, which may impact aggregate demand and inflation [10] - The stabilization of rare earth exports is noted, following a rapid deceleration earlier in the year [10]

Investment Rating - The report maintains a target for the TOPIX at 2,900 points for Q2 2026, with a base case EPS growth forecast of 1% for 2025 and 8% for 2026 [7][9]. Core Insights - The report suggests a strategic shift from high volatility stocks to high-dividend stocks, anticipating a cautious outlook during the April–June earnings season and an increased preference for cash flow among investors [6]. - External pressures include US tariff hikes, which have increased from 10% to 25%, creating uncertainty in trade negotiations, particularly in the auto sector [6]. - The upcoming Upper House election is expected to influence sectors such as defense, retail, real estate, and utilities, depending on the ruling coalition's performance [6]. - The Financial Services Agency (FSA) plans to revise Japan's Corporate Governance Code, which may lead to renewed interest in cash-rich stocks [6]. Summary by Sections Economic Outlook - The report anticipates a cautious economic environment with potential political shifts post-election affecting fiscal and monetary policies [6]. - The demand for infrastructure investment is expected to grow, enhancing the performance of national resilience-related sectors over the medium to long term [6]. Sector Preferences - Domestic demand-oriented sectors are favored over external demand-driven sectors, with a net overweight position in the financial sector [18][20]. - Specific sectors such as pharmaceuticals, retail, and construction materials are highlighted for their growth potential, while export-oriented sectors may face challenges [17][21]. Focus List - The focus list includes companies with a cautious view on cyclical large-scale external demand stocks and a bullish view on domestic demand growth stocks [21]. - Companies such as Kajima, Japan Tobacco, and Cosmos Pharmaceutical are rated as Overweight, indicating strong potential for returns [21].

Investment Ratings - Banks: In-Line [3] - Insurance: Attractive [3] - Brokers & Other Financials: Cautious [3] Core Insights - The Japanese financial industry is experiencing a new cycle in global corporate and investment banking (CIB) business, with significant revenue opportunities in wealth management and the mass affluent space [7] - The insurance sector is focusing on acquiring new premiums and product development while addressing latent losses from rising long-term interest rates [7] - The competition in the financial sector is intensifying due to new entrants, particularly in the digital banking space [7][60] Summary by Category Banks - Earnings improvement in domestic banking is expected to be gradual, with a focus on capital allocation and unwinding cross-shareholdings [7] - Major banks are projecting consolidated net profits (NP) for F3/26, with Sumitomo Mitsui FG at JPY 1,300 billion (up 10.4% YoY) and Mizuho FG at JPY 940 billion (up 6.2% YoY) [9] - The overall loan and deposit trends indicate a consistent demand for financing in real estate capital expenditures, maintaining above JPY 3 trillion [34] Insurance - The insurance sector is addressing challenges from rising interest rates and focusing on capital policies that balance growth investments with shareholder returns [7][10] - Tokio Marine HD is projecting a decrease in consolidated adjusted profit to JPY 1,100 billion for F3/26, down 9.5% YoY [10] - The property and casualty insurance sector is also capturing growth opportunities overseas through mergers and acquisitions [7] Brokers & Other Financials - The global capital market cycle is influencing the performance of brokers, with a notable shift of individuals moving from savings to investing [7] - Nomura HD is projecting a consolidated NP of JPY 340.7 billion for F3/25, with a return on equity (ROE) of 10% [9] - The digital banking landscape is evolving, with Rakuten Bank leading in customer acquisition and deposits, reaching JPY 11,476 billion as of March 2025 [60]

Investment Rating - The report does not explicitly state an investment rating for the industry or specific securities Core Insights - The People's Bank of China (PBoC) has been lowering the fixings, reaching new year-to-date lows below 7.15, indicating a potential shift in currency management strategy [4][6] - There are expectations for significant dividend payouts from Chinese companies, estimated at approximately $23 billion in July, which may create near-term resistance for the USD/CNY exchange rate [4][16] - Anticipation of domestic policy stimulus and a potential summit between President Trump and President Xi is increasing, which could impact market sentiment and currency strength [4][20] Summary by Sections Currency Management - The PBoC's recent actions to lower fixings are seen as a response to the multi-month weakness of the dollar and narrowing tariff rate differentials, allowing for a stronger CNY [4][6] - The PBoC has also relaxed capital controls, increasing the overseas investment quota for Qualified Domestic Institutional Investors (QDII) for the first time since May 2024, which may enhance capital flows [9][12] Dividend Payouts - The report highlights that heavy dividend payouts in July could exert downward pressure on the CNY, with expectations of a peak in outflows around this time [4][16] - Major companies are scheduled to make significant dividend payouts, which could influence market dynamics and currency performance [19] Market Sentiment and Policy Expectations - There is speculation regarding potential housing market support from upcoming policy meetings, which could lead to a rally in property stocks and overall market sentiment [20][25] - The report notes that while speculation-driven rallies in China can be short-lived, current market conditions may allow for further equity gains, impacting the USD/CNY exchange rate [20][25]

Investment Rating - The report maintains an "Overweight" rating for GigaDevice and AP Memory, while upgrading AP Memory's price target to NT$390.00 from NT$235.00 [6][12][13]. Core Insights - The wafer-on-wafer (WoW) stacking technology is expected to significantly enhance edge AI computing capabilities by improving memory bandwidth and reducing power consumption, thus facilitating the adoption of advanced AI tools in various devices [8][10][39]. - The total addressable market (TAM) for WoW technology is projected to grow from US$10 million in 2025 to US$6 billion by 2030, indicating a compound annual growth rate (CAGR) of 257% [10][40][84]. - Specialty memory players are anticipated to benefit the most from WoW technology due to their technological readiness and market positioning [12][13][40]. Summary by Sections Industry View - The report highlights a shift in investment ratings for specific companies, with GigaDevice's price target raised to Rmb169.00 and AP Memory upgraded to "Overweight" [6]. Key Takeaways - WoW technology is set to unlock the potential of edge AI devices by addressing limitations in size, shape, and layout through 3D memory stacking [8]. - The current mainstream solution, high-bandwidth memory (HBM), is not suitable for edge devices due to cost and form factor constraints, making WoW a more viable alternative [9][10]. Market Potential - The TAM for WoW is expected to reach US$622 million by 2027, with significant growth anticipated in the automotive and consumer electronics sectors [40][84]. - The report identifies key beneficiaries of WoW technology, including niche memory players like Winbond and GigaDevice, which are well-positioned to capitalize on the emerging market [12][13][40]. Technology and Adoption - WoW stacking technology is compared favorably against HBM, with potential improvements in memory bandwidth by 10-100 times and a significant reduction in power consumption [10][39]. - The report outlines the main hurdles for edge AI deployment, including power consumption, memory bandwidth, and cost, which WoW technology aims to overcome [38][46].

Investment Rating - Overweight on Japanese equities with an end-of-year target for TOPIX at 3,000 and Nikkei Average at ¥40,000 [8][9][10] Core Insights - Corporate earnings remain resilient, particularly in domestic demand-oriented sectors, with no change in guidance at manufacturers and upward revisions at non-manufacturers [6][8] - The report anticipates a gradual yen appreciation to ¥140/$ by December 2025, with manageable impacts on share prices [8][10] - The impact of reciprocal tariffs is expected to be manageable, with a 10% reciprocal tariff already priced in by the market [8][10] Summary by Themes Theme 1: Impact of Trump Tariffs - Expect only a 4-6% EPS decline for Japanese companies due to US tariffs, with the largest impact on the autos sector [10][62] - Share prices in the autos sector have already factored in successful negotiations, assuming tariffs are lowered to 10% [10][62] Theme 2: Domestic Economic Activity and Bank of Japan Outlook - Moderate improvement in domestic economic activity is anticipated due to peaking import inflation and spring wage hikes [10][8] - The Bank of Japan is gradually moving toward policy normalization, with expectations for the next rate hike in late 2025 [10][8] Theme 3: Forex Rate Impact on Japanese Stocks - A moderate yen appreciation is expected, with a cross-asset view assuming dollar strength and yen weakness [10][8] Theme 4: Corporate Reform and ROE Improvement - More companies are committing to balance sheet reforms, with total payout ratios over 100% and management restructuring initiatives [10][8] Theme 5: Fund Flow - Fund flow trends indicate a shift towards buying European and Japanese stocks post-tariff shock, with NISA purchases continuing for both foreign and domestic stocks [10][8] Political Landscape - The report highlights key political events in 2025, including the Upper House election and potential impacts on the ruling coalition's status [11][19] - The consumption tax cut is a hot topic ahead of the Upper House election, with various party pledges regarding tax policies [21][28]

Investment Rating - The report maintains a cautious outlook on the industry, projecting average effective tariff rates to settle in the mid- to high-teens, which is expected to weigh on growth and boost inflation in the second half of the year [1][2]. Core Insights - The new tariff rates announced are mostly similar to or slightly lower than those from April 2, with the effective tariff rate rising to 13.4% following the Vietnam framework [2][9]. - The report anticipates that the effective tariff rate could increase by approximately 1.2% due to new reciprocal tariffs for 14 countries, with an additional potential increase of 1.7% if other countries revert to their April 2 levels [9]. - Future tariffs on specific sectors, such as a proposed 50% tariff on copper and a 200% tariff on pharmaceuticals, could significantly impact the overall effective tariff rate [9]. Summary by Sections Tariff Rate Updates - President Trump delayed the tariff rate reset until August 1, with new rates for 14 countries to take effect on that date [1]. - The average effective tariff rate is expected to settle in the mid- to high-teens, impacting growth and inflation [1][2]. Sector-Specific Tariffs - The report highlights potential tariffs of 50% on copper and 200% on pharmaceuticals, which could significantly raise the overall effective tariff rate [9]. - The BRICS countries may face an additional 10% tariff, which could further increase the effective tariff rate by 1.8% [9]. Future Outlook - The outlook for tariff rates remains uncertain, with the possibility of country-specific carve-outs and trade deals being negotiated before the August 1 deadline [7]. - The report outlines a static estimate of effective tariff rates using 2024 trade weights, indicating various potential changes based on different scenarios [8].

Investment Rating - The industry investment rating is "In-Line" [5] Core Insights - June total excavator sales in China rose by 13% year-over-year (YoY), with a six-month increase of 17% [1][2] - Domestic sales increased by 6% YoY, with a six-month growth of 23%, surpassing market expectations of negative to flat YoY [1][5] - Export sales saw a significant rise of 19% YoY, with a six-month increase of 98%, exceeding expectations [1][2] - The machinery utilization rate was reported at 56.9% in June, down 7.5 percentage points YoY, which may impact sales outlook for July [1][5] - A modest recovery of 10-15% YoY in domestic sales is anticipated for 2025 [1] Summary by Sections Sales Performance - Total excavator sales in June reached 18,804 units, marking a 13% increase YoY and a 3% increase month-over-month (MoM) [2] - Domestic sales accounted for 8,136 units, reflecting a 6% YoY increase but a 3% decrease MoM [2] - Export sales totaled 10,668 units, showing a 19% YoY increase and a 9% MoM increase [2] Market Expectations - The report indicates that the domestic sales growth is higher than market expectations, which anticipated a decline or flat performance [1][5] - The weak machinery utilization rate is a concern for future sales, particularly in the off-season of July [1][5] Future Outlook - The report projects a modest recovery in domestic excavator sales of 10-15% YoY for 2025, indicating a cautious but positive outlook for the industry [1]