Investment Rating - The report maintains a positive view on the long-term structural story of the Chinese equity market, suggesting a balanced approach with both tech/growth and cash return exposure [2][17]. Core Insights - Market volatility is expected to rise in the near term due to several upcoming global trade and tariff events, which could dampen market risk appetite [3][9]. - The report highlights a normalization trend in MSCI China's earnings results, predicting that the 2Q results will be in line with expectations, but warns of potential skepticism in the second half of 2025 [10][11]. - There is a rising trend in return on equity (ROE) driven by regulatory reforms and corporate governance improvements, alongside a shift towards high-quality large-cap tech and financial companies [19]. - The report anticipates a gradual return of global capital to China's market over the next 6-12 months, driven by diversification needs amid potential USD weakness [17][21]. Summary by Sections Upcoming Events - Key dates include July 9, marking the expiration of a tariff pause, and August 12, which signifies the end of a China-specific tariff pause, both of which could lead to increased market uncertainty [3][9]. - The report notes that the upcoming 2Q results season may reignite concerns over earnings, particularly as it coincides with tariff negotiations [10][11]. Market Dynamics - The report emphasizes the importance of maintaining exposure to high-quality tech and Internet companies with strong AI and R&D capabilities, while also considering dividend yield plays [21]. - It suggests that the structural improvements in the Chinese equity market identified since 2H2024 remain intact, with potential for fund inflows [16][17]. Stock Recommendations - The report recommends removing Pop Mart (9992.HK) from the focus list due to regulatory concerns and adding PICC P&C (2328.HK) for its attractive yield and resilience during market volatility [13].

Investment Rating - The report provides an investment rating for various pharmaceutical companies, with several companies rated as "Overweight" (OW), "Neutral" (N), and "Underweight" (U W) [5][10][11]. Core Insights - The pharmaceutical sector is projected to experience varying growth rates, with specific companies showing strong potential for earnings growth and valuation improvements over the next few years [5][10]. - The report highlights the importance of evaluating companies based on key financial metrics such as P/E ratio, EV/EBITDA, and growth rates in EBITDA and EPS [5][11]. Company Summaries - **AbbVie (ABBV)**: Rated OW with a target price of 200, showing a P/E of 15.2x for FY25E and an EBITDA CAGR of 8.9% from FY26-29 [5]. - **AstraZeneca (AZN)**: Rated OW with a target price of 14,000, P/E of 15.5x for FY25E, and an EBITDA CAGR of 6.7% from FY26-29 [5]. - **Eli Lilly (LLY)**: Rated OW with a target price of 1,100, P/E of 36.1x for FY25E, and an impressive EBITDA CAGR of 16.1% from FY26-29 [5]. - **Gilead Sciences (GILD)**: Rated OW with a target price of 130, P/E of 13.5x for FY25E, and an EBITDA CAGR of 5.7% from FY26-29 [5]. - **Johnson & Johnson (JNJ)**: Rated N with a target price of 185, P/E of 14.2x for FY25E, and an EBITDA CAGR of 5.9% from FY26-29 [5]. - **Regeneron Pharmaceuticals (REGN)**: Rated OW with a target price of 800, P/E of 14.6x for FY25E, and an EBITDA CAGR of 14.3% from FY26-29 [5]. - **Pfizer Inc (PFE)**: Rated N with a target price of 30, P/E of 8.0x for FY25E, and an EBITDA CAGR of -2.7% from FY26-29 [5]. Valuation Metrics - The report includes detailed valuation metrics for each company, such as market capitalization, P/E ratios, P/B ratios, and EV/EBITDA ratios, providing a comprehensive overview of the financial health and market positioning of the companies [5][10][11]. - The average P/E ratio across the companies analyzed is approximately 14.0x for FY25E, with a weighted average of 18.3x [5][10]. Growth Projections - The report projects significant growth in the pharmaceutical sector, with various companies expected to achieve substantial increases in earnings per share (EPS) and EBITDA over the next several years [5][10]. - Specific CAGR estimates for EBITDA and EPS growth are provided, indicating the expected performance trajectory for key players in the industry [5][10].

Equity Strategy Rie Nishihara AC (81-3) 6736-8629 rie.nishihara@jpmorgan.com J P M O R G A N Global Markets Strategy 20 June 2025 Japan Equity Strategy Direction of Japan-US tariff negotiations after G7 summit and impact of Section 899 Japanese and US tariff negotiators did not reach an agreement during the G7 meeting in Canada. However, negotiations appear to be moving forward and are not at a complete standstill, perhaps reflecting a strategic aspect of refraining from producing clear results before Japan ...

Investment Ratings - ResMed (RMD AU) is rated Overweight (OW) with a price target of A$45.00 [24][30] - Sonic Healthcare (SHL AU) is rated Neutral (N) with a price target of A$29.00 [30][32] Core Insights - ResMed is expected to benefit from rising awareness of obstructive sleep apnoea, leading to increased demand for CPAP treatments [2][12] - Sonic Healthcare faces funding pressures that are likely to undermine its margin expansion potential [6][15] Summary by Sections ResMed - **Earnings Growth**: ResMed's earnings are projected to be approximately 5% ahead of consensus due to expected gross margin improvements and stronger revenue growth [4][12] - **Margin Expansion**: The company is on track to achieve further gross margin increases supported by production efficiency and favorable currency movements [3][24] - **Valuation**: ResMed trades at a 23x FY26E PE, which is below its historical average, indicating potential undervaluation [5][24] Sonic Healthcare - **Funding Pressures**: Sonic Healthcare is experiencing reimbursement pressures in key markets, particularly Germany and Australia, which are expected to negatively impact revenues [6][10] - **US Operations**: The US business has underperformed, and challenges are anticipated to persist in 2025 [7][9] - **Long-term Margin Decline**: Sonic's pathology margins have been in long-term decline, attributed to expansion into lower-margin markets and a tight funding environment [10][15]

Investment Rating - The report indicates a positive investment sentiment towards Emerging Markets (EM) equities, with a notable increase in inflows, particularly in ETFs [1][50]. Core Insights - EM equity inflows surged to +$4.1 billion from +$1.2 billion the previous week, primarily driven by large ETF subscriptions of +$5.0 billion, while non-ETFs experienced outflows of -$904 million [1][50]. - Year-to-date (YTD) EM equity flows have improved, narrowing to -$14.3 billion from nearly -$20 billion last month, indicating a recovery trend [1][50]. - Regional fund inflows were positive across all areas, with GEM funds leading at +$2.4 billion, followed by Asia ex-Japan at +$1.4 billion, LatAm at +$213 million, and EMEA at +$59 million [1][50]. Summary by Sections Overall EM Equity Flows - Total EM equity flows for the week were +$4.1 billion, with a YTD total of -$14.3 billion [4]. - The inflow of +$4.1 billion represents a significant increase compared to the previous week's inflow of +$1.2 billion [1][4]. Regional Fund Flows - GEM funds saw inflows of +$2.4 billion, while Asia ex-Japan attracted +$1.4 billion, up from +$843 million last week [1][4]. - LatAm funds recorded inflows of +$213 million, an increase from +$178 million last week, and EMEA funds received +$59 million, up from +$29 million [1][4]. Specific Market Performance - Taiwan experienced inflows of +$869 million, down from +$1.7 billion last week, while Korea saw inflows narrow to +$190 million from +$2.3 billion [2]. - India faced outflows of -$480 million after a previous inflow of +$780 million, and Brazil continued its positive streak with inflows of +$190 million [2]. - South Africa's outflows accelerated to -$666 million from -$275 million last week, indicating a negative trend in that market [2].

Investment Rating - The report does not explicitly state an investment rating for the lithium industry or specific companies within it [1]. Core Insights - Lithium hydroxide exports from China in May 2025 decreased by 54% year-over-year to 5.6kt, with year-to-date net exports down 70% compared to the same period last year [2][4]. - Lithium carbonate imports in May 2025 fell by 14% year-over-year to 21.1kt, while year-to-date net imports are 15% higher than in 2024 [2][7]. - The average lithium carbonate import price decreased by 23% year-over-year in May 2025, averaging $9,392 per ton [2][10]. - The average export price for lithium hydroxide in May 2025 was $12,093 per ton, down 44% year-over-year [2][10]. Summary by Sections Lithium Hydroxide Trade Data - Exports in May 2025 were 5.6kt, a 54% decrease from 12.0kt in May 2024 [2]. - Year-to-date net exports are 15.1kt, down 70% compared to the same period last year [2][4]. - Full-year 2024 net exports are projected at 113kt, which is 11% lower than 2023 [2][4]. Lithium Carbonate Trade Data - Imports in May 2025 were 21.1kt, a 14% decrease from 24.6kt in May 2024 [2]. - Year-to-date net imports are 98.0kt, which is 15% higher than in 2024 [2][7]. - Full-year 2024 net imports are expected to reach 231kt, a 55% increase compared to 2023 [2][7]. Price Trends - The lithium carbonate import price averaged $9,392 per ton in May 2025, down 2% month-over-month and 23% year-over-year [2][10]. - The lithium hydroxide export price averaged $12,093 per ton in May 2025, reflecting a 15% month-over-month decrease and a 44% year-over-year decline [2][10].

Investment Rating - The report does not explicitly provide an investment rating for the industry but indicates a baseline scenario for the Strait of Hormuz to remain open, suggesting a cautious outlook on geopolitical risks [4]. Core Insights - Geopolitical risks have increased following Israel's attack and Iran's retaliation, with potential disruptions in the Strait of Hormuz posing significant consequences for global oil and LNG supply [4][5]. - Approximately 20% of global oil and LNG supply passes through the Strait, with major producers, including Iran, heavily reliant on this route [4][5]. - The current market assigns a probability of less than 20% for a closure of the Strait, with oil prices potentially surging to $120-130 per barrel in the event of a full closure [1][4]. Summary by Sections Oil Exports and Reliance - The Strait of Hormuz is critical for oil exports, with a total of 21.2 million barrels per day passing through it as of May 2025 [6]. - Countries like Bahrain, Kuwait, and Qatar have no alternative routes, making them particularly vulnerable to disruptions [3][6]. - Saudi Arabia and the UAE have limited pipeline capacities to redirect some hydrocarbon flows, but disruptions would still have a major impact [3][7]. Economic Impact - Hydrocarbon activities account for about one-third of aggregated GCC GDP, with Kuwait being the most reliant and Bahrain the least [7]. - In 2024, net oil and gas current account revenues represented about 21% of GDP, with significant variances across GCC countries [7][11]. - A $10 per barrel increase in oil prices could improve GDP by approximately 2.6% for current accounts and 2.4% for fiscal balances [11]. Sensitivity to Oil Prices - Current higher oil prices, assuming no disruption, could benefit GCC balances due to high sensitivity to price changes [11]. - The report maintains a baseline Brent price forecast of $66 per barrel for 2025, with geopolitical premiums currently adding $10-12 per barrel [11][12]. Conclusion - The report concludes that while risks and uncertainties regarding oil prices and geopolitical stability are present, macroeconomic forecasts for GCC countries remain unchanged for now [17].

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The report anticipates weak-form stabilization in the property market but does not foresee a strong recovery in the near term [10] - National residential sales have shown significant declines, with a year-on-year decrease of 6.5% in 2022 and a projected further decline of 17.0% in 2023 [7] - The average selling price of residential properties has seen a slight increase of 2.2% in 2023, but a decrease of 4.8% is expected in 2024 [7] National Forecast - Sales value in 2023 is projected at RMB 11,662 billion, down from RMB 12,473 billion in 2022, reflecting a year-on-year decline of 6.5% [7] - Residential sales volume is expected to decrease to 1,117 million square meters in 2023, down from 1,221 million square meters in 2022, marking an 8.5% decline [7] - The average selling price per square meter is projected to be RMB 10,437 in 2023, with a slight increase from RMB 10,214 in 2022 [7] Sales - Aggregate contracted sales for the top 100 developers are expected to decline significantly, with a year-on-year decrease of 42% in 2023 [11] - National residential sales have shown a downward trend, with a year-on-year decline of 18% expected in 2024 [11] - The report highlights that major developers are experiencing varying levels of sales performance, with state-owned enterprises (SOEs) showing a decline of 6% while private developers face a more significant drop [30] Construction - New construction starts are projected to decrease to 954 million square meters in 2023, down from 1,198 million square meters in 2022, reflecting a year-on-year decline of 20.4% [7] - The area under construction is expected to decline to 8,384 million square meters in 2023, down from 9,050 million square meters in 2022, marking a 7.4% decrease [7] Financing - Real estate investment is projected to decline to RMB 11,217 billion in 2023, down from RMB 12,408 billion in 2022, reflecting a year-on-year decrease of 9.6% [7] - Land sales proceeds are expected to drop to RMB 2,941 billion in 2023, down from RMB 3,339 billion in 2022, indicating a decline of 11.9% [7] Long-term Forecasts - The report projects a continued decline in residential sales, with expectations of a further decrease in 2024 and 2025 [11] - The long-term outlook remains cautious, with potential for gradual recovery contingent on policy support and market stabilization [10]

Investment Rating - The report indicates a positive outlook for the oil drilling industry, with an upward revision of the 2026 crude production forecast by 40 thousand barrels per day (kbd) due to increased hedging activity among shale drillers aiming to secure higher prices [2]. Core Insights - The total US oil and gas rig count decreased by one to 554, with oil-focused rigs down to 438 and natural gas-focused rigs down to 111 [2]. - Despite a slight decrease in rig counts, the report suggests that the overall supply trend remains constrained by low drilling activity, with productivity gains being the primary driver of production growth in the near term [2]. - The report highlights that while recent geopolitical tensions may provide short-term support to oil prices, operators are maintaining a cautious approach, emphasizing capital discipline in spending decisions [2]. Summary by Sections Rig Count Analysis - The rig count in the five major tight oil basins remains unchanged at 424 rigs, while the count in two major tight gas basins increased by one to 74 rigs [2]. - The report notes that losses in rig counts were concentrated in key areas such as Midland (-1), Delaware TX (-3), and Anadarko (-4), offset by gains in Delaware NM (+3), Eagle Ford (+2), and Niobrara (+3) [2]. Production Forecast - The US crude and condensate production forecast for 2026 is projected to reach approximately 13,723 kbd, with contributions from various basins including the Permian and Bakken [31]. - The report provides detailed monthly production estimates for 2023, 2024, and 2025, indicating a gradual increase in production levels across the years [22][25][28]. Market Dynamics - The report emphasizes that higher prices have slowed the rate of rig cuts, but not enough to significantly alter operational behavior among drillers [2]. - The overall sentiment in the industry remains cautious, with operators focusing on maintaining capital discipline despite fluctuations in oil prices [2].

Investment Rating - The report indicates a strong performance in the Asia EM equity strategy, particularly highlighting Japan's earnings as a standout with a net beat ratio of +25 percentage points [2][7]. Core Insights - The earnings results for 1Q25 showed a strong performance across the Asia EM region, with Japan leading at +23.3%, followed by Korea (+20.3%), Singapore (+11.9%), and Thailand (+10.5%) [2][3][26]. - Emerging Markets (EM) overall reported a moderate earnings beat of +4.7%, while Asia Pacific ex-Japan (APxJ) saw a slightly higher beat of +6.0% [2][12]. - The report notes that the strong earnings in Japan are attributed to corporate and consumer activities that were brought forward ahead of tariff announcements in early April [1]. Summary by Region - Japan reported a remarkable earnings surprise of +23.3% with a net beat ratio of 25%, marking the second consecutive quarter of strong performance [7][26]. - Korea and Singapore also performed well, with earnings surprises of +20.3% and +11.9% respectively, while Thailand reported +10.5% [3][26]. - In contrast, Brazil experienced significant misses with an earnings surprise of -7.8%, and Turkey reported a substantial decline of -29.1% [3][26]. Summary by Sector - Major sectors showing strong earnings beats include Industrials (+16.6%), Communication Services (+11.6%), and Health Care (+10.3%) [4][32]. - Consumer Staples and Materials sectors reported slight misses, with Consumer Staples at -1.6% and Materials at -1.1% [4][32]. - The Capital Goods and Telecom Services industries were particularly strong, with earnings surprises of +24.4% and +21.5% respectively [4][32]. Stock-Level Surprises - The report highlights key stock-level surprises, focusing on companies rated Overweight (OW) that are expected to see increases in 12-month consensus estimates following strong earnings beats [5]. - Conversely, Underweight (UW) rated companies are anticipated to experience downgrades due to earnings misses [5]. Revenue Surprises - Revenue results across the region showed slight beats, with EM at +1.3%, APxJ at +1.1%, and Japan slightly missing at -0.1% [2][3]. - The report emphasizes that revenue surprises were generally positive, contributing to the overall strong earnings performance in the region [2][3].