Investment Rating - The report does not explicitly provide an investment rating for the industry Core Viewpoints - The report discusses the potential for Asia to achieve a sustainable rebalancing, suggesting that while the current account surplus may narrow, the consumption-to-GDP ratio is unlikely to change significantly, indicating that true and lasting rebalancing may not be achieved [2][8][35] Summary by Sections Current Account Trends - The report details the trends in bilateral current account balances between Asia and the US, highlighting that Asia's trade surplus with the US reached USD 760 billion, accounting for 55% of the US trade deficit [7][12] - It predicts that Asia's current account surplus as a percentage of GDP will narrow, primarily due to a slowdown in trade cycles and potential increases in purchases from the US [7][34] Economic Structure and Growth Model - Asia's persistent current account surplus reflects a manufacturing-driven growth model, with high savings relative to investment [8][24] - The report notes that Asia has maintained a current account surplus for 35 consecutive years, with a historical high of USD 1.1 trillion in Q1 2025, representing 4.1% of GDP [12][13] Investment Position - Asia's international investment position has grown to USD 45 trillion, surpassing both the US and Eurozone [49][50] - The report indicates that since 2018, Asia's holdings in US securities have increased by USD 2.8 trillion, now totaling USD 8.6 trillion, with the share of US assets in Asia's portfolio rising from 37% to 41% [65][72] Future Projections - The report forecasts a slight narrowing of the current account surplus to USD 0.9 trillion (3.1% of GDP) in 2025, down from USD 1.0 trillion (3.6% of GDP) in 2024 [34][36] - It emphasizes that the expected narrowing of the current account surplus should not be viewed as a sustainable rebalancing, as structural changes in savings and consumption patterns are not anticipated [35][66]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report discusses the volatility in developed market (DM) yields due to fluctuating tariff headlines and significant movements at the long end of the yield curve, particularly following the US downgrade by Moody's and weak long-dated bond auction results [1][4][5] - The report anticipates further rate cuts from the European Central Bank (ECB) and the Reserve Bank of New Zealand (RBNZ), with the ECB expected to lower rates by 25 basis points to 2% [1][33] - The term premium in 5Yx5Y EUR rates has increased since the start of 2025 but remains below the peaks observed in 2022, indicating a complex interaction of supply and demand dynamics in the long end of the curve [1][10][13] Summary by Sections Market Dynamics - Recent weeks have seen choppy movements in DM yields, influenced by tariff announcements and the US credit rating downgrade, leading to a bear steepening of curves that has since retraced [1][2][4] - The long end of the yield curve has been particularly volatile, with Japan experiencing the largest one-day swings in 30Y JGB yields in a decade [1][7][9] Central Bank Actions - The RBNZ has cut policy rates by 25 basis points to 3.25%, with a hawkish tone suggesting limited further cuts in the near term, while the ECB is expected to cut rates next week without signaling future moves [1][33] - The report highlights that the RBNZ is likely to hold rates through the second half of 2025 and implement further cuts in early 2026 [33] Term Premium Analysis - The report notes that term premia uncertainty is more impactful on 5Yx5Y or 10Y yields than on longer maturities, with current term premiums in EUR intermediate swaps appearing excessive relative to macroeconomic drivers [10][18][19] - The estimated term premium has increased since the start of 2025 but remains subdued compared to 2022 levels, indicating potential mispricing in the market [13][16][18] Yield Curve Comparisons - The report compares 5s/30s curves across different markets, noting a strong positive correlation between the curves in the US, UK, and Eurozone, with the UK exhibiting a higher beta relative to the US [24][25][22] - It concludes that the excessive steepness of the 5s/30s curves globally has moderated but is unlikely to fully normalize, particularly for USD and GBP curves due to limited political appetite for fiscal tightening [25][30]

Investment Rating - The report maintains an Overweight (OW) rating for Sany Heavy Industry, with a price target of Rmb25.00 set for December 31, 2026 [4][10]. Core Insights - Sany Heavy Industry is experiencing robust performance in both domestic and international markets, with domestic demand remaining resilient despite fluctuations [2][5]. - The company is strategically focusing on medium and large excavators to enhance profitability, while also maintaining market share through competitive pricing [2][6]. - Exports are a significant growth driver, with successful market share expansion in Southeast Asia and Africa, despite challenges in regions like Russia and the Middle East [2][7]. - The mining equipment segment presents substantial opportunities, particularly for large excavators linked to commodity prices, with Sany well-positioned in open-pit mining operations [2][7]. - Sany's strong cash flow generation and focus on high-margin products contribute to its financial stability and self-sufficiency in core components [2][8]. Summary by Sections Domestic Market Trends - Domestic demand for construction machinery remains strong, with a year-on-year growth rate of approximately 10% for excavators [5]. - Management anticipates a 10-15% annual growth rate in the industry, driven by ongoing infrastructure projects and government stimulus policies [5]. Pricing and Competition - The competitive landscape in the construction machinery sector remains intense, particularly for small excavators, but Sany is committed to maintaining stable market share and profitability through strategic pricing [6]. Export Performance - Sany has successfully increased its market share in key regions, with promising demand in Southeast Asia and Africa, while facing challenges in Russia and the Middle East due to economic conditions [7]. Mining Equipment Opportunities - The mining sector offers significant opportunities for Sany, especially in large excavators for open-pit mining, supported by robust mining activity despite commodity price fluctuations [7]. Financial Stability - Sany prioritizes cash flow over revenue growth, ensuring financial stability and minimizing credit risk, with a focus on innovative financing solutions and strategic partnerships [8].

Investment Rating - The report does not explicitly provide an investment rating for the global credit market Core Insights - US Investment Grade (IG) spreads tightened by 3 basis points (bp) last week, resulting in an excess return of 32 bp, with inflows of $1.9 billion for the week and a year-to-date (YTD) total of $12.6 billion [2] - US High Yield (HY) spreads tightened by 16 bp, leading to an excess return of 39 bp, with inflows of $0.2 billion for the week and a YTD total of $2.7 billion [3] - US Leveraged Loans saw spreads tighten by 2 bp, yielding a total return of 22 bp, with inflows of $0.3 billion for the week and a YTD total of $2.5 billion [4] - EU Investment Grade spreads tightened by 4 bp, resulting in an excess return of 23 bp, with net inflows of €2.1 billion for the week and €19.1 billion YTD [5] - EU High Yield spreads tightened by 17 bp, translating into an excess return of 50 bp, with net inflows of €606 million for the week and €0.6 billion YTD [6] - Asia Credit spreads tightened by 2 bp, with IG spreads tightening by 3 bp and HY spreads widening by 6 bp [7] Summary by Sections Global Credit Snapshot - US IG current spread is 88 bp, with a 1-year change of 32% and a 12-month change of 2 bp [12] - EU IG current spread is 100 bp, with a 1-year change of 34% and a 12-month change of -8 bp [12] - Asia IG current spread is 78 bp, with a 1-year change of 27% and a 12-month change of 0 bp [12] Performance Across Asset Classes - US IG funds saw inflows of $1.9 billion, with YTD issuance reaching $866 billion, a 7.4% increase year-over-year [2] - US HY funds experienced inflows of $0.2 billion, with YTD supply tracking at $106 billion, a 26% decrease year-over-year [3] - EU IG funds had net inflows of €2.1 billion, with YTD volumes at €356 billion, a 7% increase year-over-year [5] - EU HY funds saw net inflows of €606 million, with YTD supply at €56 billion, a 13% decrease year-over-year [6] Credit Demand and Supply - Weekly supply for US IG reached $24 billion, raising YTD issuance to $866 billion [2] - Weekly supply for US HY was $5 billion, with YTD supply at $106 billion [3] - Weekly supply for EU IG was €12 billion, lifting YTD volumes to €356 billion [5] - Weekly supply for EU HY was €1 billion, with YTD supply tracking at €56 billion [6] Sector Performance - In US IG, media, telecoms, and retail sectors delivered the best performance, while basic industry, automotive, and services lagged [2] - In US HY, transportation, technology, and real estate sectors delivered the highest excess returns, while banking, telecoms, and insurance lagged [3] - In EU IG, leisure, automotive, and insurance sectors outperformed, while services, utility, and transportation lagged [5] - In EU HY, single B rated bonds outperformed [6]

Investment Rating - The report does not explicitly state an overall investment rating for the industry or specific assets [4]. Core Insights - The S&P 500 experienced its best May performance since 1990, indicating strong market sentiment [9]. - US goods imports saw a significant drop of 20% in a month, marking the largest decline ever recorded [9]. - Bloomberg's Fedspeak index has reached its most dovish level in over four years, suggesting a shift in monetary policy outlook [9]. Summary by Sections Equities - S&P 500 forecasted returns range from -15.8% (bear case) to 23.1% (bull case) with a base case return of 19% [4]. - MSCI Europe shows a bear case of -22.8% and a bull case of 23.6%, with a base case return of 16% [4]. - Emerging Markets (MSCI EM) forecasted returns range from -22.1% to 20.2%, with a base case return of 16% [4]. Foreign Exchange - The JPY is forecasted to depreciate to 144 in the bear case and appreciate to 130 in the bull case, with a base case of 143 [4]. - The EUR is expected to range from 1.13 (bear) to 1.25 (bull), with a base case of 1.14 [4]. Rates - The 10-year UST yield is forecasted to range from 4.40% (bear) to 3.45% (bull), with a base case of 4.00% [4]. - UK 10-year yields are expected to range from 4.65% (bear) to 3.95% (bull), with a base case of 4.35% [4]. Credit - US Investment Grade (IG) credit spreads are forecasted to tighten from 88 bps (bear) to 90 bps (bull), with a base case of 130 bps [4]. - US High Yield (HY) spreads are expected to range from 315 bps (bear) to 335 bps (bull), with a base case of 475 bps [4]. Commodities - Brent crude oil is forecasted to range from $64 (bear) to $55 (bull), with a base case of $45 [4]. - Gold prices are expected to range from $3,278 (bear) to $3,250 (bull), with a base case of $2,760 [4]. Market Sentiment Indicator (MSI) - The MSI aggregates survey positioning, volatility, and momentum data to quantify market stress and sentiment, indicating a current negative sentiment [50][55]. Cross-Asset Positioning - In US equities, asset managers are net long at 27%, while hedge funds are net short at -7% [63]. - In commodities, positioning shows 25% net long in gold, while 7% net long in Brent [63]. Cross-Asset Correlations - The current global correlation index stands at 43%, indicating a slight increase from the previous month [72]. - Equity correlations are at 70%, while credit correlations are at 80%, reflecting strong interdependencies [72]. ETF Flows - US equities saw a net inflow of $0.7 billion over the past week, while world equities had a net inflow of $0.8 billion [37]. - Bond markets experienced a significant inflow of $15.1 billion, indicating strong demand for fixed income [37]. Volatility Monitor - The implied volatility for the S&P 500 is currently at 17.0%, reflecting market expectations of future volatility [96]. - Major equity markets show varying levels of volatility, with the Nasdaq at 21.2% [96]. Overall Market Performance - Major developed market equity indices posted gains, with TOPIX up 2.4% and NASDAQ up 2% [98]. - Commodity markets generally posted losses, with copper down 3.3% [98].

Investment Rating - The report maintains an Overweight rating on domestic demand-oriented stocks, banks, IT services, and financials [21][68]. Core Insights - Japanese equities are supported by upward revisions to the global economic outlook following the US-China trade agreement, easing appreciation pressures on the yen due to changes in monetary policy expectations from the Bank of Japan and the Federal Reserve [7][9]. - A recovery in the domestic economy has been delayed by elevated inflation, but the yen's rebound and declining fuel prices are expected to gradually ease inflation and support domestic demand-oriented stocks [7][9]. - The report estimates a 4-6% negative impact on corporate earnings from US tariffs, but corporate forecasts remain resilient, particularly among domestic demand-oriented companies [10][69]. - Ultra-long interest rates have reached record highs, reflecting deteriorating supply-demand conditions and concerns about potential consumption tax cuts after the Upper House election [11][24]. - The decoupling of the equities market and the bond market is expected to continue, with historical trends indicating that bank and real estate sector stocks may outperform during rising interest rate cycles [12][25]. - Corporate reforms are progressing more quickly than anticipated, with significant share buybacks and restructuring efforts, particularly noted in the NTT group [14][70]. Summary by Sections Economic Outlook - The global economic growth expectations have been revised upward, positively impacting Japanese equities, which are closely correlated with the global economic cycle [9]. - The domestic economic recovery is anticipated to improve, supported by a rebound in consumer spending despite current inflationary pressures [21]. Tariff Impact - The report highlights that the market has already priced in tariff cuts, particularly in the auto sector, and further upside will require new catalysts [10][69]. - Corporate earnings guidance for FY2025 indicates a flat sales outlook with a net profit decline of 5.8%, but domestic demand-related sectors are expected to perform better [68]. Interest Rates - The report notes that ultra-long interest rates have risen sharply, with the 30-year JGB yield reaching record highs, which has not yet been fully priced into the equity markets [11][24]. - Rising interest rates are not viewed as a risk event that would lead to a decline in the stock market, as they are occurring alongside improvements in economic fundamentals [24]. Corporate Reforms - Corporate reforms are highlighted as a key investment theme, with larger-than-expected share buybacks and restructuring efforts indicating strong momentum [14][70]. - The report emphasizes the importance of monitoring the outcomes of the Upper House election and potential fiscal policy changes, particularly regarding consumption tax [13][25].

Investment Ratings - NVDA: Overweight, top pick [2][4] - MRVL: Equal-weight [5][6] - AMBA: Overweight [7] - AVGO: Overweight [14][30] Core Insights - NVDA is positioned for business acceleration despite market anxieties about deceleration, with strong performance in gross margins and revenues outside of China [2][3] - MRVL shows potential for recovery as sentiment improves, with expectations of $2 billion in revenue for the year, although optical performance was softer than anticipated [5][6] - AMBA's shift towards Edge AI is seen as a strategic move, but near-term prospects remain uncertain due to challenges in the automotive sector [7][12] - AVGO is expected to report strong earnings driven by ASIC revenue primarily from Google, with solid growth in networking as Ethernet adoption increases [14][15] Summary by Sections NVDA - NVDA is the largest semiconductor company globally and is expected to accelerate its business despite prevailing market concerns [2] - The company reported strong gross margins and revenues outside of China, indicating robust demand [3] - There are concerns about inventory build-up due to rack bottlenecks, but these are expected to resolve as demand strengthens [4] MRVL - MRVL's sentiment has improved, and the company is tracking towards approximately $2 billion in revenue for the year [5] - The impact of the China ban was more significant than previously anticipated, but this is not expected to hinder future performance [5][6] - The stock remains in the AI winner's category, suggesting potential for recovery [6] AMBA - AMBA's pivot towards Edge AI is considered a positive strategic decision, although the immediate outlook is unclear [7] - The company aims to leverage its technology in the automotive sector, but significant investments in new technologies may not yield immediate returns [12] - The focus on understanding new Edge AI opportunities is crucial for future growth [13] AVGO - AVGO is anticipated to report a good quarter, with custom ASIC revenue primarily driven by Google and moderate growth expectations from other customers [14][22] - The company is expected to see strong growth in AI revenue, with a projected $4.4 billion in AI revenue for the upcoming quarter [26] - AVGO's software revenue is also expected to grow significantly, with a forecast of 24% year-over-year growth in FY2025 [24]

Investment Rating - The report maintains an "Overweight" rating for the company with a target price of 96.00 CNY, based on a 30x forward P/E ratio, which is close to the historical average of peers in the A-share market [2][27][28]. Core Insights - The company is transitioning to a pure semiconductor IDM model, with the divestiture of its ODM business expected to eliminate negative profitability factors. This transition is anticipated to enhance growth prospects and improve profitability [7][12][27]. - The company is expected to benefit from the growing demand in the Chinese market and the recovery of the higher-margin European market. The financial burden is expected to decrease, leading to a projected compound annual growth rate (CAGR) of 212% in earnings from 2025 to 2027 [1][12][27]. - The semiconductor business is projected to see revenue growth of 22%, 11%, and 11% in 2025, 2026, and 2027, respectively, despite an expected decline in overall sales due to the divestiture of the ODM business [23][27]. Summary by Sections Financial Forecasts - Adjusted earnings per share (EPS) for 2025 is projected at 1.65 CNY, with a significant recovery expected in subsequent years, reaching 2.53 CNY in 2026 and 3.24 CNY in 2027 [4][11][30]. - Revenue for 2025 is expected to decline to 31,480 million CNY, down 57% year-on-year, but net profit is projected to increase by 173% to 2,057 million CNY [11][23][30]. Valuation and Market Position - The company is currently one of the lowest-valued semiconductor firms covered, trading at a 40% discount compared to peers, with a dynamic P/E ratio of 17x [1][12]. - The report highlights the company's strong position as a leading supplier in the discrete semiconductor market, benefiting from the trend of semiconductor localization in China [12][27]. Market Performance - Year-to-date, the company's stock has decreased by 12.4%, underperforming the A-share technology and semiconductor indices by 8% and 10%, respectively [25][26]. - The report suggests that despite the ongoing divestiture of the ODM assets, the current market conditions present a favorable opportunity to reassess the company's potential due to its improving semiconductor business outlook [25][27].

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific assets discussed Core Insights - The report discusses several key debates regarding US assets and their safe-haven status, fiscal expansion, Chinese risk assets, and future Fed rate cuts, indicating a cautious outlook on certain areas while maintaining a positive view on US assets overall [8][22][27] Summary by Sections Fiscal Expansion and Term Premium - Expected fiscal expansion of approximately US$300 billion next year is anticipated to have a marginal impact on the term premium, with most deficits funded by T-bills [9][10] - Only about US$90 billion is expected from new policy changes in the upcoming US fiscal bill [9] Chinese Risk Assets - The report suggests that it is not the right time to become strategically constructive on Chinese risk assets due to ongoing domestic deflation and tariff uncertainties [14][16] Federal Reserve Rate Cuts - The expectation of 175 basis points of Fed cuts by 2026 is based on the current restrictive rates and a projected unemployment rate increase to 4.8% by the end of 2026, despite not forecasting a recession [17][20] US Assets as Safe Haven - The report argues that fears regarding US assets losing their safe-haven allure are overstated, as the US stock market capitalization is significantly larger than other markets, and a substantial portion of high-grade fixed income is denominated in USD [22][24][26] Tariff Outlook - The report maintains a base case for tariffs, projecting a 10% baseline for most geographies and 30-40% on China, with various legal authorities available to the US administration to maintain or re-establish current tariff levels [27][28]

Investment Rating - The report does not explicitly provide an investment rating for the commodities sector, but it discusses various market dynamics and price expectations for oil and other commodities. Core Insights - Global oil inventories are increasing, yet prices remain stable, with market opinions divided on whether current oil prices are too low or too high. Prices are expected to remain within current ranges before easing into the high $50s by year-end [3][6] - A global oil surplus has widened to 2.2 million barrels per day (mbd), likely necessitating a price adjustment to prompt a supply-side response and restore balance [3][6] - Despite supply pressures, three strong market forces are providing a firm price floor in the $55-60 Brent ($50-55 WTI) range [3][6] - Most OPEC members, excluding Saudi Arabia, are producing at or near maximum capacity following a price hike in July [3][6] - The U.S. administration may begin repurchasing oil for the Strategic Petroleum Reserve (SPR) as early as August [3][6] - U.S. shale wellhead breakeven prices are estimated at around $47 WTI, assuming zero return [3][6] Oil Demand & Inventory Tracker - Global oil demand improved from the previous week, driven by a rebound in U.S. oil consumption, tracking approximately 400 thousand barrels per day (kbd) monthly expansion, yet remains 250 kbd below expectations [10] - Total liquid inventories globally edged up slightly, with crude oil stocks falling by 1 million barrels while oil product inventories increased by 2 million barrels [10] - Month-to-date, global liquid inventories have risen by 63 million barrels, with crude oil stocks up by 67 million barrels [10] Commodity Market Positioning - The estimated value of global commodity market open interest increased by 2.5% week-over-week (WOW) to $1.46 trillion, driven by inflows and rising prices across precious metals and crude oil [9] - Contract-based inflows reached $20 billion WOW, marking the highest aggregate inflows for 2025 at $90 billion year-to-date, surpassing 10-year average levels [9] Price Forecasts - WTI Crude prices are forecasted to average $57 per barrel in Q4 2025, while Brent Crude is expected to average $61 per barrel in the same period [12] - Platinum prices are projected to rise to an average of $1,200 per ounce in Q4 2025 and reach $1,300 per ounce by Q2 2026 [11]