Investment Rating - The report suggests a tactical shift to a neutral stance on long-end Japanese Government Bonds (JGBs) [8][40]. Core Insights - The weakness in long-end JGBs is a primary concern, but a temporary pause in this trend is anticipated as pension funds may rebalance their portfolios in June [7][11]. - The recommendation is to close long positions on the 10-year JGB in a 5s10s30s fly and switch to an outright long position on the 10-year JGB, which is currently viewed as relatively cheap [16][40]. - The report indicates that a more stable market may require increased purchases by the Bank of Japan (BoJ) and/or a reduction in the Ministry of Finance's (MoF) offerings [7][34]. Summary by Sections Market Dynamics - The report highlights a recent sell-off in long-end JGBs, with market participants closely monitoring domestic investor behavior [7][20]. - It is expected that supply and demand dynamics will receive a temporary boost in June due to pension funds' rebalancing activities [11][21]. Investment Strategy - The report advises shifting from bearish to neutral on super-long JGBs, suggesting that 10-year JGBs will likely be favored for their superior carry and rolldown in a declining volatility scenario [16][33]. - The report emphasizes the importance of monitoring the banking sector's participation in JGB auctions, as reluctance from banks could pose risks to the investment strategy [16][40]. Valuation and Trade Ideas - The report presents specific trade ideas, including maintaining a long position on the 10-year JGB at 1.505% and a JGB 5s10s ASW box flattener [40][42]. - The rationale for these trades is based on the expectation of attractive carry and rolldown amid ongoing market conditions [40][42].

Investment Rating - The report maintains an "Overweight" rating for Meituan (3690.HK) with a revised price target of HK$160, down from HK$200, implying a 24% upside from the current price of HK$129.40 [6][8][36] Core Views - The food delivery volume growth is expected to sustain at 10.5% in Q2 2025, but operating profit (OP) is anticipated to decline due to intensified competition [1][3] - Despite near-term margin pressures and widening losses from new initiatives, the long-term competitive moat of Meituan in food delivery remains strong [1][6] - The report highlights a successful expansion in Hong Kong and ongoing efforts in the Middle East, particularly in Saudi Arabia [4][6] Financial Performance - In Q1 2025, total revenue grew by 18% year-over-year, with adjusted EBITDA of Rmb12.3 billion, exceeding market expectations [30] - The core local commerce (CLC) revenue also increased by 18%, with an operating profit of Rmb13.5 billion, reflecting a 39% year-over-year growth [30] - New initiatives revenue rose by 19%, but operating losses were recorded at Rmb2.3 billion, attributed to narrowing losses from Meituan Select and increased overseas investments [30] Revenue and Profit Estimates - For Q2 2025, CLC revenue is estimated at Rmb67 billion, a 10% year-over-year increase, while OP is projected to decline by 24% year-over-year to Rmb7.7 billion due to higher investments and a challenging comparison base [3][31] - The report has cut revenue estimates by 2% and non-IFRS net profit estimates by 14-19% for 2025-26, reflecting the impact of competition and new initiative losses [31][32] Market Dynamics - The competitive landscape has intensified since May 2025, particularly with peers launching promotional activities for the 618 festival, which is expected to affect Meituan's operating profit [3][5] - The report notes that while regulatory changes regarding platform fees are being implemented, Meituan's take rates and subsidies have remained stable [5][6] Expansion and Initiatives - The report anticipates stable losses from new initiatives in Q2 2025, estimated at Rmb2.5 billion, but warns of potential further downside in FY25 due to the Brazil expansion [4][6] - The focus for expansion remains on the Gulf Cooperation Council (GCC) region, with successful operations in Saudi Arabia [4][6]

Investment Rating - The industry view is rated as In-Line [3] Core Insights - The report maintains a positive outlook on cloud AI demand, supported by strong AI capital expenditure (capex) from US cloud service providers [1][3] - Concerns exist regarding semiconductor tariffs and foreign exchange (FX) impacts, but these are not expected to significantly affect the long-term profitability of TSMC, identified as the top pick [1][3] - AI semiconductor demand is projected to accelerate due to generative AI, expanding into various sectors beyond the semiconductor industry [5] Summary by Sections AI Semiconductor Outlook - The report highlights a recovery in AI semiconductor demand, with expectations for a 62% year-over-year growth in capex among the top six companies, reaching RMB 373 billion [47] - The total addressable market (TAM) for cloud AI in China is anticipated to be USD 48 billion by 2027 [52] - The self-sufficiency ratio for domestic GPUs in China is expected to rise from 34% in 2024 to 82% by 2027, indicating a significant shift towards local fulfillment of AI demand [50][53] Valuation Comparisons - TSMC's current price is 979.0 TWD with a target price of 1,288.0 TWD, indicating a 32% upside potential [6] - Other notable companies include Winbond with a target price of 25.0 TWD (39% upside) and MediaTek with a target price of 1,888.0 TWD (44% upside) [5][6] - The report provides a detailed valuation comparison across various segments, including foundry, memory, and backend, with specific P/E ratios and expected EPS growth rates for 2024-2026 [6][7] Market Dynamics - The report notes that the semiconductor inventory days have declined, historically a positive indicator for stock price appreciation [5][14] - The impact of FX fluctuations on TSMC's gross margin is quantified, with a 1% appreciation in TWD against USD translating to a 40 basis points decline in gross margin [28] - The report emphasizes that while tariffs may affect short-term recovery, the long-term demand drivers remain robust due to technological diffusion and price elasticity in tech products [5][14]

Investment Rating - The report maintains an equal-weight rating on MSCI China within the global EM/APxJ framework, indicating a balanced outlook despite structural improvements and ongoing macro challenges [4]. Core Insights - MSCI China is experiencing structural improvements in return on equity (ROE), investability, and earnings estimate revisions, with a notable shift from regulatory rectification to revitalization, which is more supportive of the private sector [18][19]. - The report highlights that MSCI China's ROE has likely bottomed out and is expected to catch up with MSCI EM's by the end of 2026, driven by corporate self-help initiatives and a less macro-influenced offshore Chinese universe [19][20]. - The earnings estimate cuts for MSCI China have concluded, with the first in-line results reported in Q4 2024, continuing into Q1 2025, suggesting a stabilization in earnings expectations [19][46]. Summary by Sections Earnings and Valuation Forecasts - The report provides a detailed forecast for various indices, including MSCI China, with a target price of 4,000 by December 2025, reflecting a 3% increase from the current price [6]. - Consensus earnings per share (EPS) growth for MSCI China is projected at 15% for 2025 and 8% for 2026, indicating a recovery trajectory [41][43]. Sector Performance - The report outlines sector-specific EPS contributions, with the Consumer Discretionary sector expected to grow by 16% in both 2025 and 2026, while Information Technology is projected to grow by 33% in both years [41][43]. - The report notes that the high-quality group, particularly tech-focused companies, is gaining more representation in the offshore China equity universe, reflecting a shift towards higher-quality investments [24]. Market Dynamics - The report indicates that MSCI China trades at a 10% discount compared to MSCI EM, with a forward P/E ratio of 11.1x, suggesting potential value opportunities in the Chinese market [62][67]. - The report emphasizes that foreign ownership in MSCI China constituents has decreased, with US investor representation dropping significantly from 17.4% in 2018 to 10.8% in 2024, indicating a shift in investment dynamics [85][87].

Investment Rating - The report maintains an "Overweight" rating for SHKP (0016.HK) and HSBC (0005.HK), while Henderson (0012.HK) and Kerry (0683.HK) are rated "Equal Weight" [4][5]. Core Insights - The recent decline in 1m HIBOR from 3.98% to 0.59% is attributed to significant liquidity injections by HKMA and reduced demand for HKD, leading to extreme spreads with US rates [2][10]. - The report anticipates a modest GDP growth of 2.1% in 2025, with a slight increase to 2.2% in 2026, as the impact of US tariffs and the limited support from HIBOR decline are considered [3][62]. - The property market is expected to stabilize with flat prices in 2025, driven by lower mortgage rates and improved rental yields, although these benefits may be temporary [4][68]. - For banks, the short-term impact of HIBOR decline on net interest margin (NIM) is expected to be modest, but longer-term pressures may arise if rates remain low [5][58]. Summary by Sections HIBOR and Economic Impact - The 1m HIBOR has dropped sharply, leading to the widest spread with the Fed funds rate since 1988, indicating a temporary liquidity condition [2][10]. - The report suggests that HIBOR may rebound due to upcoming dividend payments and potential increases in EFBN issuance [31][43]. Property Market - The effective mortgage rate has decreased significantly, providing a potential boost to homebuyers and developers, with a forecast of flat property prices in 2025 [4][68]. - Positive carry for homebuyers is expected as rental yields exceed mortgage rates, potentially improving developers' net profits by at least 5% [4][68]. Banking Sector - The decline in HIBOR is projected to have a modest impact on quarterly NIM for banks, with a preference for international banks like HSBC and Standard Chartered [5][58]. - Loan growth is anticipated to remain soft in 2025, but signs of increased corporate demand may lead to a recovery in 2026 [5][58]. Trade Recommendations - The report recommends a trade strategy of paying 5-year HKD IRS versus receiving 5-year USD IRS, targeting a normalization of the yield spread [44][50].

Investment Rating - The report has revised the real GDP growth forecast for China to 4.5% in 2025 and 4.2% in 2026, indicating a positive outlook despite ongoing deflationary pressures [3][34]. Core Insights - The report highlights that while tariffs have de-escalated, challenges remain, particularly with persistent deflation affecting the economy [3][34]. - Consumption weakness is noted, driven by a sluggish job market, despite policy-driven improvements [15][18]. - The report emphasizes a supply-centric policy approach, with a focus on infrastructure and manufacturing investments as key areas for potential growth [24][27]. Summary by Sections Economic Growth - Real GDP growth is projected at 4.5% for 2025 and 4.2% for 2026, reflecting a lower tariff path [3][34]. - The GDP deflator is expected to remain negative, indicating ongoing deflation [34]. Tariff and Trade - US tariffs on China's exports have decreased but remain elevated, with potential for further escalation [9][10]. - China's export growth is anticipated to remain robust in the second quarter of 2025 before declining in the latter half of the year [10][11]. Consumption and Employment - Retail sales and consumption have shown weakness, particularly in goods related to housing and automobiles [14][15]. - Employment indicators suggest a challenging job market, impacting consumer confidence and spending [16][15]. Policy Measures - The report discusses a lighter and delayed domestic stimulus, with a focus on front-loading a Rmb2 trillion stimulus package in the second and third quarters of 2025 [18][21]. - A supplementary budget is expected in the fourth quarter of 2025, with a smaller size than initially anticipated [21][34]. Investment Opportunities - Key investment areas identified include manufacturing upgrades, urban infrastructure renewal, and basic scientific research [23][24]. - The report suggests that infrastructure and manufacturing fixed asset investments are likely to remain robust [23][24].

Investment Rating - The report rates the North American Internet industry as Attractive [5] Core Insights - The report highlights key trends and debates shaping the future of the US Internet industry, emphasizing the significant growth potential in online advertising and e-commerce sectors [5][12][71] Summary by Sections Online Advertising - The total advertising spend in the US exceeds $350 billion, with over 70% allocated to online platforms [53] - The total addressable market (TAM) for online advertising could be nearly three times larger when including marketing services and retailer rent [56] - Current penetration of online advertising is estimated at around 25%, indicating substantial room for growth [59] E-Commerce - E-commerce accounts for approximately $4.6 trillion of total US retail spending, with only about 26% occurring online [73] - The grocery and consumer packaged goods sectors represent significant opportunities for further e-commerce penetration, with major players like Amazon and Walmart expected to drive 70-80% of future growth [78] Data Center Capital Expenditure - The report anticipates over $300 billion in data center capital expenditures in 2025, with major companies like Amazon, Google, and Meta leading the investments [29] GenAI and Digital Advertising - The report discusses the rising importance of first-party data and scaled distribution, with companies leveraging these advantages to enhance their advertising effectiveness [26] - GenAI is projected to generate significant incremental revenue, with around 60% expected from advertising and e-commerce by 2028 [37] Market Dynamics - The online advertising market remains largely dominated by three key players: Google, Meta, and Amazon, which are critical in determining advertising dollar allocation [67] - The report notes that while new entrants are emerging, the competitive landscape is still heavily influenced by these established companies [69] Gaming and Mobile Apps - The total addressable market for gaming is expected to reach $378 billion by 2030, driven primarily by mobile gaming [105] - The report indicates that time spent on games is on an upward trajectory compared to other entertainment forms, suggesting a robust growth outlook for the gaming sector [110]

Investment Rating - The industry view is rated as Attractive [8] Core Insights - The petrochemical industry in Japan is undergoing significant restructuring, with companies focusing on improving profitability and efficiency while expanding non-petrochemical operations [3][4][5] - Major firms are exploring potential alliances and strategies to enhance capital efficiency [2][4][12] Company Summaries Asahi Kasei - Asahi Kasei is aware of its lower profitability compared to other Asian chemical firms, but its ROE has improved from -5.5% in F3/23 to 7.4% in F3/25, with expectations to reach about 8% upon transitioning to IFRS [4] - The company is pursuing restructuring in housing, healthcare, and materials sectors [4] Sumitomo Chemical - In F3/24, Sumitomo Chemical faced a challenging environment, leading to significant losses, but it achieved a core operating profit of approximately ¥140 billion in F3/25, surpassing initial guidance [5] - The company aims for a real core OP of ¥100 billion in F3/26 and is focusing on restructuring its petrochemical operations while expanding non-chemical earnings [5] Mitsui Chemicals - Mitsui Chemicals reports a downtrend in ROIC, currently around 4-5%, which is unsatisfactory [6] - The company is restructuring weak petrochemical operations and aims to enhance competitiveness through joint service firm creation and advanced petrochemical complexes [11][15][16] Mitsubishi Chemical Group - Mitsubishi Chemical Group has undertaken significant rationalization efforts, incurring over ¥100 billion in restructuring charges, and is focusing on improving profitability in its industrial gas segment [12] - The company plans to decide on structural reforms for underperforming operations in the first half of 2025 while pursuing aggressive investments in three growth areas [12]

Investment Rating - The industry investment rating is "In-Line" [7]. Core Insights - The Computex 2025 event showcased evolutionary advancements rather than revolutionary changes, with a focus on the Blackwell Ultra platform and new products like RTX PRO 6000 and DGX Spark, leading to a slightly more bullish outlook on full-year rack shipments [1][6]. Summary by Sections Rack Shipments - GB300 NVL72 and B300 HGX servers were prominently featured, representing a modest upgrade from previous models. The transition from Cordelia to Bianca design is expected to expedite time to market for GB300 racks, with mass production anticipated in Q4 2025 [2][3]. - OEMs/ODMs expect GB300 racks to be ready for shipping by Q3, with volume production commencing in Q4. This is a positive shift compared to earlier expectations of a late Q4 ramp-up [3][9]. Power and Cooling Solutions - The introduction of 800V HVDC power solutions was highlighted, with Delta and Vertiv showcasing their high-efficiency power racks designed for upcoming AI factories. These solutions are expected to alleviate investor concerns regarding competition among Nvidia suppliers [4][10][12]. - Liquid cooling designs for GB300 racks are ongoing, with mass production expected in Q3 2025. The focus remains on enhancing cooling performance and system reliability [13][15]. New Product Launches - The RTX PRO 6000 enterprise AI servers are set to begin shipments in Q4 2025, supporting up to 8x NVIDIA Blackwell GPUs. The DGX Spark is expected to ship in late Q3, while the DGX Station's delivery timing remains uncertain, likely in Q4 [23][28]. - Accton introduced its first turnkey open infrastructure solution for enterprise AI, targeting small to midsize data centers with reduced delivery lead times and lower total cost of ownership [78][79]. Market Trends - There was a noticeable decrease in focus on AI PCs compared to the previous year, with less investor interest and fewer incremental innovations presented at Computex 2025 [29][30].

Investment Rating - The report maintains an Overweight (OW) rating on US stocks, Treasuries, and US Investment Grade Corporate Credit, emphasizing a focus on quality assets [3][4][5]. Core Insights - The report highlights a significant structural shock to the global trading order due to the broad imposition of tariffs by the US, leading to a forecasted slowdown in global growth from 3.5% in 2024 to 2.5% in 2025 [2][7]. - The US economy is expected to experience a decline in real GDP growth from 2.5% in 2024 to 1.0% in both 2025 and 2026, with asymmetric risks associated with the trade shock [2][12]. - Despite the slowdown, risky assets may perform well, and treasuries are expected to rally due to anticipated Federal Reserve rate cuts in 2026 [2][3]. Economic Outlook - Global growth is projected to slow, with the US facing additional drags from immigration restrictions and tariffs impacting demand and supply [7][12]. - The euro area is expected to see a decline in exports and investment due to tariffs, while China's demand shock is only partially mitigated by modest policy stimulus [7][12]. - Japan's nominal GDP reflation remains intact, but global economic slowdown is expected to weigh on exports and investment [7]. Sector Recommendations - In the US, the report favors quality cyclicals, large caps, and defensives with lower leverage and cheaper valuations [5]. - Key sectors recommended for Europe include defense, banks, software, telecoms, and diversified financials, with a cautious stance on cyclical exporters [5]. - Emerging markets are favored towards financials and profitability leaders, with a preference for domestic-focused businesses over exporters [5]. Earnings Forecasts - The report provides earnings forecasts for major indices, with the S&P 500 expected to reach a price target of 6,500 by June 2026, reflecting a year-over-year EPS growth of 7% in 2025 and 9% in 2026 [6]. - The MSCI Europe index is projected to have a price target of 2,250, with modest EPS growth of 1.3% in 2025 and 2.2% in 2026 [6]. Currency and Commodities Outlook - The report anticipates a significant depreciation of the USD due to fading growth and yield differentials compared to the rest of the world [3][15]. - Oil prices are expected to face downward pressure due to potential supply increases, leading to a reduction in Brent forecasts by $5-10 per barrel [17]. - Gold is highlighted as a top pick due to strong central bank demand and safe-haven appeal amid growth concerns [19].