Investment Rating - The report indicates a positive outlook for asset owners in the Asia Pacific region regarding sustainability investments, suggesting a favorable investment rating for the sector. Core Insights - Asset owners in Asia are continuing to allocate significant funds towards sustainability, with at least US $5.4 billion announced since 2024 [2][14]. - The report highlights that Asia's role in global sustainability investments is underappreciated, estimating that only 10% of global assets are allocated to Asia sustainability, which is considered conservative [3][21]. - A survey reveals that 80% of asset owners in the Asia Pacific expect assets under management (AUM) in sustainable funds to grow over the next two years, indicating strong confidence in the sector [4][34]. Summary by Sections Asset Allocations - Several asset owners in Asia have publicly announced sustainability mandates, focusing on climate change and incorporating ESG factors into their investment processes [14][15]. - Notable asset owners like the Government Pension Investment Fund (GPIF) of Japan and the Hong Kong Monetary Authority (HKMA) have updated their policies to promote ESG integration [15][18]. Market Positioning - The report argues that the current allocation of 10% to Asia sustainability is too conservative when compared to Asia's share of global GDP (47%), population (56%), and GHG emissions (60%) [24][25][28]. - The report cites that APAC sustainability funds represent only 3% of global sustainability funds, contrasting with the broader definition used by the Global Sustainable Investment Alliance (GSIA), which reports 18% [26][29]. Growth Expectations - The Morgan Stanley Institute for Sustainable Investing survey indicates that 82% of APAC institutional investors expect AUM in sustainable funds to increase, with growth opportunities being the primary driver [34][36]. - Concerns regarding data availability and unrealistic expectations about sustainability outcomes are noted, with 67% of APAC institutional investors having net-zero targets [37][38]. Focus List Performance - The Asia Sustainability Focus List has shown a total return of 24.5% since inception, outperforming the MSCI AC Asia Pacific Index [61]. - The report includes specific companies and their performance metrics, indicating a strong interest in sectors related to energy transition and circular economy [60][62].

Investment Rating - The report does not explicitly provide an investment rating for the fintech industry or specific companies mentioned Core Insights - The fintech sector is experiencing significant growth, with notable M&A activities and funding rounds indicating robust investor interest and market expansion M&A / Fundraises - Revolut is set to acquire Banco Cetelem, a small bank in Argentina, for an undisclosed amount, marking its entry into South America's second-largest economy, with Cetelem's assets valued at $6.4 million [1] - Klar, a Mexican digital bank, achieved an $800 million valuation after raising $190 million in a Series C funding round, with plans to accelerate product development and target $500 million in annual revenue [2] - Natech Banking Solutions, a Greek banking technology platform, secured $33 million in Series B funding to support the launch of its digital bank, Snappi, and expand its Banking-as-a-Service initiatives [3] - Robinhood launched stock tokens for EU users, allowing them to trade US stocks indirectly, which led to a 13% increase in Robinhood's shares [7] - Erebor, a crypto-focused bank led by tech leaders including Peter Thiel, aims to serve startups in the US innovation economy and has applied for a national trust bank charter [8] - Circle submitted an application for a national trust charter to strengthen its USDC infrastructure, following the passage of the GENIUS Act [9][10] - Wise applied for a national trust bank charter in the US to access the Fed's payment network, aligning with its strategy to capture growth in the US market [12] Funding Trends - Global fintech funding reached approximately $24.2 billion year-to-date, with US fintechs leading at around $10.9 billion, followed by Europe at $5.6 billion, Asia at $3.6 billion, and Latin America at $1.3 billion [17][18][20][22][26]

Haibin Zhu (852) 2800-7039 haibin.zhu@jpmorgan.com J P M O R G A N Asia Pacific Economic Research 04 July 2025 China: A preview of the July Politburo meeting We have now entered July, another eventful month. On the external front, US trade negotiations with China (the 90-day window ends in early August) and other trading partners (90-day window ends on July 9) may come up with new developments that affect international trade. On the domestic front, the 2Q GDP report will be released on July 15, followed by ...

Investment Rating - The report maintains an "Overweight" (OW) rating on Naura, AMEC, and ACMR, with revised target prices reflecting positive outlooks for these companies [6][37][55]. Core Insights - The outlook for China's wafer fab equipment (WFE) market remains strong, driven by better-than-expected demand from logic foundries and ongoing localization efforts [1][2]. - The total addressable market (TAM) forecast for China WFE has been raised from $36.6 billion (down 12% year-over-year) to $40.3 billion (down 3% year-over-year) for 2025, and from $35.1 billion (down 4% year-over-year) to $36.2 billion (down 10% year-over-year) for 2026 [3][9]. - China is expected to continue gaining market share in WFE, with approximately 25% of foundry capital expenditures allocated to domestic WFE in 2025, up from 20% in 2024 [4]. Market Demand and Supply Dynamics - Strong demand for logic foundries in China is anticipated in the second half of 2025, with expectations of increased spending related to AI applications [2][9]. - Despite concerns regarding oversupply in mature nodes, the report suggests that government initiatives may prioritize localization over economic rationale in the second half of 2025 [5]. - The report indicates that imports of semiconductor equipment into China may recover starting in July 2025, following a decline in early 2025 [21]. Company-Specific Developments - Naura has expanded its product portfolio, launching new ion implant equipment, and is expected to benefit from the increasing localization of semiconductor manufacturing in China [4][37]. - The report highlights that leading Chinese WFE players are likely to capture larger shares of the market due to their expanding product pipelines and advanced R&D capabilities [6][37]. - Naura's revenue growth is projected to be supported by increased capital expenditures from logic foundry and memory customers in 2025 [37][51]. Financial Projections - The report revises Naura's earnings estimates upward for 2025-2027, reflecting strong demand and market share gains [51][52]. - Naura's net sales are projected to increase from Rmb 41.88 billion in 2025 to Rmb 61.42 billion by 2027, with corresponding net income growth [63][66].

Investment Rating - The report rates the China Healthcare industry as Attractive [4][47]. Core Insights - The NHSA and NHC have released measures to support the high-quality development of innovative drugs, including establishing a new drug list for commercial insurance and encouraging investment funds for innovative drug development [2]. - Sino Biopharma has received approval for anlotinib in combination with chemotherapy for the first-line treatment of advanced or metastatic soft tissue sarcoma, marking a significant milestone as the first combination therapy approved globally for this indication [2]. - Hengrui has gained approval for an additional indication for its JAK1 inhibitor, ivarmacitinib, now also indicated for severe alopecia areata [2]. Summary by Sections Regulatory Developments - New measures from NHSA and NHC include a drug list for commercial insurance that will not count towards DRG/DIP budgets and a commitment to ensure hospital access for newly listed drugs within three months [2]. Company Updates - Sino Biopharma has achieved multiple approvals, including for anlotinib and recombinant human coagulation factor VIIa N01, enhancing its product portfolio [2]. - Hengrui's ivarmacitinib has expanded its indications, showcasing the company's innovative capabilities in the biopharmaceutical sector [2]. Market Trends - The report highlights ongoing R&D progress among covered companies, indicating a robust pipeline and potential for future growth in the healthcare sector [10].

Investment Rating - Industry View In-Line [2] Core Insights - The China housing market continues to face challenges, but there are accelerating consolidation opportunities in the shopping mall market, presenting alpha opportunities for commercial players [9][33] - CR Land is identified as having a three-stage re-rating potential amid its business transformation [9][48][97] - Preference is given to mall operators for faster market consolidation and stronger cash collection [9][116] Market Overview - National sales value dropped 3.8% year-on-year in the first five months of 2025, with national sales volume down 2.9% year-on-year [14] - The primary inventory in 70 cities remains high at 24 months [14] - The physical market is still challenging due to weakened resident sentiment and high inventory levels [11][18] Shopping Mall Market Dynamics - There are approximately 6,300 shopping malls in operation in China as of 2024, with an annual opening of 300-400 new malls [34] - The shopping mall market is highly fragmented, providing significant consolidation opportunities [35][40] - CR Land has consistently outperformed peers in same-store sales growth, indicating its position as an alpha generator [37] CR Land's Business Transformation - CR Land managed an asset portfolio of RMB 462 billion in 2024, with 64% derived from shopping malls [54] - The company recorded over RMB 25 billion in gross rental income from its shopping malls in 2024, reflecting a compound annual growth rate (CAGR) of approximately 25% since 2016 [62] - CR Land's total mall portfolio is expected to reach 200 malls by 2040, with a focus on a "invest-build-operate-divest" asset management strategy [86][90] Financial Projections - CR Land's recurring income is projected to exceed RMB 64 billion by 2030, supporting potential increases in dividend payout ratios [90][92] - The gross mall rental income is forecasted to reach RMB 70 billion by 2040, sustaining a rental CAGR of approximately 7% [82] Investment Strategy - The report outlines a three-stage re-rating process for CR Land, with expectations of increasing valuation multiples as the company transitions to an asset manager model [97][100]

Investment Rating - The report maintains a bullish outlook for the equity market over a 6-12 month horizon, anticipating a recovery in earnings and favorable monetary policy shifts [5]. Core Insights - The equity markets have shown resilience since hitting lows in April 2025, with a rally driven by fundamental factors rather than speculation [5]. - Earnings revisions breadth has improved, currently at -5%, up from a trough of -25% in mid-April, supporting the rise in equity prices [5]. - The Federal Reserve is expected to cut rates seven times in 2026, which will likely provide a tailwind for equity valuations in the second half of 2025 [5]. - Historical data indicates strong equity performance during Fed cutting cycles, even if the market begins to price in these cuts ahead of time [5]. Summary by Sections Narrative - The report suggests that the current economic environment is characterized by a boom-bust cycle, with expectations for a hotter but shorter cycle ahead [11][15]. Earnings & Valuation - The S&P 500's earnings per share (EPS) targets for 2025 are projected at $259, with a potential increase to $283 in 2026 [39]. - The report highlights that the market has priced in a strong rebound, with leading economic indicators showing signs of recovery since mid-2023 [22][51]. Sector Views - Financials are rated overweight due to average relative valuation levels and potential for earnings revisions to improve [40][91]. - Industrials are also rated overweight, benefiting from domestic infrastructure initiatives and a recent bottoming in earnings revisions [105]. - Energy stocks are considered undervalued relative to oil prices, presenting an opportunity for investment [106]. Macro & Miscellaneous - The report notes that the equity risk premium remains historically low, indicating potential for equity market growth [60]. - The dispersion of returns has returned to median levels, suggesting a normalization in market behavior [78].

Investment Rating - Industry View: In-Line [2] Core Insights - The report highlights the adoption of liquid cooling in AI server racks, which is expected to benefit mechanical component offerings significantly [5][8] - Fositek is projected to achieve a 39% revenue CAGR, driven by the growth in server demand [8] - The earnings impact from TWD strength in Q2 2025 shows significant changes in gross and net margins across various companies in the technology hardware sector [11] Summary by Relevant Sections - **Liquid Cooling Adoption**: The report discusses the increasing penetration of liquid cooling in servers and data centers, which is anticipated to enhance the performance and efficiency of AI server racks [5][8] - **Fositek's Growth Projections**: Fositek's revenue is expected to grow at a compound annual growth rate of 39%, with a focus on their new liquid-cooled Trainium 3 server rack [8] - **Earnings Impact Analysis**: The analysis of earnings impact due to currency fluctuations indicates varying effects on gross and net margins for companies like AUO, Innolux, and Hon Hai, with some experiencing significant declines [11] - **Power Architecture Roadmap**: The transition to 800V HVDC power solutions is outlined, with Delta Electronics providing a detailed breakdown of the value per power rack [19]

Investment Rating - Industry View: In-Line [3] - Top Pick: Daiichi Sankyo [5] - Other Recommendations: Overweight (OW) for Takeda and Chugai; Mid Cap OW for Kaken [5][9] Core Insights - The pharmaceutical industry in Japan is currently rated as In-Line, indicating a stable outlook with potential for growth [3] - Daiichi Sankyo is highlighted as a top investment opportunity, with a price target of ¥4,750, reflecting a significant upside from its current price of ¥3,319 [7] - Takeda and Chugai are also recommended for their strong market positions and growth potential [5][9] Valuation and Performance - Takeda's market cap is ¥6,991 billion with an estimated EPS growth from ¥491.2 in 2024 to ¥706.0 in 2029, indicating a P/E ratio decreasing from 8.9x to 6.2x over the same period [7] - Daiichi Sankyo's market cap is ¥6,287 billion, with an EPS forecast increasing from ¥147.6 in 2024 to ¥291.7 in 2029, showing a P/E ratio decline from 22.5x to 11.4x [7] - Chugai's market cap stands at ¥12,151 billion, with EPS expected to grow from ¥241.3 in 2024 to ¥372.2 in 2029, and a P/E ratio decreasing from 30.0x to 19.4x [7] Company Summaries - Daiichi Sankyo: Strong growth potential with a focus on innovative therapies [6] - Takeda Pharmaceutical: Diversified portfolio with robust pipeline [6] - Chugai Pharmaceutical: Strong R&D capabilities and market presence [6] - Kaken Pharmaceutical: Mid-cap with promising growth prospects [6]

Investment Rating - The report assigns an "Attractive" investment rating to the China Internet and Other Services industry, specifically focusing on Entertainment and OTAs [1]. Core Insights - The report highlights a sharp recovery in the gaming sector, particularly driven by PC games, with a low base effect expected to end in Q3 2025 [5]. - The gaming revenue forecast indicates a significant year-on-year growth, with PC games grossing expected to reach Rmb 39,471 million in FY25, reflecting a 54% growth from the previous year [14]. - The report emphasizes the importance of new game releases and the expansion of mobile and PC gaming as key drivers for revenue growth [12][14]. Summary by Sections Online Entertainment - The gaming industry is experiencing a recovery, with a notable increase in PC game contributions [6]. - The report provides a detailed game pipeline for NetEase, showcasing upcoming titles that are expected to enhance revenue streams [12]. Revenue Forecasts - Total game revenue is projected to grow significantly, with mobile games grossing expected to stabilize around Rmb 56,800 million in FY25, showing a 0% growth year-on-year [14]. - The report outlines specific revenue forecasts for various game titles, indicating a diverse portfolio that supports revenue stability [14]. Market Share - The report analyzes the market share of major players in the gaming industry, with Tencent and NetEase being the leading companies [11]. - It highlights the competitive landscape and the potential for market share shifts as new games are released [10]. Financial Performance - Non-GAAP net profit margins are expected to improve, driven by effective cost management and revenue growth strategies [16][46]. - The report indicates a strong capital return strategy, with buybacks and dividends projected to increase over the coming years [21]. OTA Sector - The report notes that Trip.com is positioned for solid profit growth in its core OTA business, with revenue expected to grow 14% year-on-year in 2025 [98]. - The analysis of the overseas total addressable market (TAM) presents significant opportunities for growth in international travel services [89].