February 26, 2025 11:17 AM GMT US Rates Strategy | North America How Low Can UST Yields Go? For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. A buyers' strike, momentum-driven duration shedding, macro fund reflation trades, and a hawkish pivot from the Fed catalyzed higher yields from September. Every factor reversed after the presidential inauguration save for one. Rhetoric from FOMC participants is less dovish than before the ele ...

Investment Rating - The report suggests a bearish outlook on the US dollar (USD) for 2025, indicating a decline similar to that observed in 2017 [5][74]. Core Insights - The report identifies three main factors contributing to the expected decline of the USD in 2025: slower-than-expected tariff increases, stronger-than-anticipated global economic growth, and underperformance of EU-skeptical political parties [74]. - It emphasizes that fiscal and monetary policies in the US will not fully incorporate growth expectations until after the passage of a budget reconciliation bill [9][74]. - The report draws parallels between 2017 and 2025, suggesting that the USD's performance will be influenced by similar trade policies and global economic conditions [10][74]. Summary by Sections US Trade Policy - The report anticipates that US trade policy will weigh on the USD in 2025, similar to its impact in 2017, with expectations of gradual tariff increases on China and key European products [84][85]. - The administration's tariff strategy aims to leverage tariffs for short-term policy concessions and achieve long-term security goals [86][87]. US Fiscal Policy - The report notes that median economist deficit forecasts are unlikely to shift until a budget bill passes, which may occur relatively late in the year [79][80]. - It highlights that fiscal expectations were relatively unchanged from April to December 2017, impacting the USD's performance [79][80]. Global Growth - The report indicates that global growth expectations in 2025 are likely to be in line with those of 2017, which saw a rebound in global growth that affected the attractiveness of financial assets outside the US [39][42]. European Politics - The report suggests that political stability in Europe, particularly the underperformance of EU-skeptical parties, contributed to a reduction in EUR-negative risk premium in 2017, a trend expected to continue in 2025 [51][52]. Central Banks - The report discusses the Fed's interest rate hikes and the ECB's unchanged policy, noting that the shadow short rate differential between the US and Eurozone remained stable [15][61].

Laura Wang Equity Strategist Laura.Wang@morganstanley.com +852 2848-6853 February 19, 2025 09:00 PM GMT China Equity Strategy M Asia Pacific Insight Getting Out of the Woods We see sustainable structural improvement on ROE and valuation regime shift for offshore Chinese equities, enabled by corporate self-help, shareholder return enhancement actions, improved geopolitical conditions, and affirmation of government support for private sectors. Upgrade to EW with higher price targets for MSCI China and Hang Se ...

Investment Rating - The report suggests a "Buy" rating in lagging sectors, particularly in Property and Healthcare, while advising to trim extremely overbought AI proxies [2][3][26]. Core Insights - The MXCN index has performed well with a year-to-date increase of 15%, driven by factors such as AI advancements and better-than-expected consumption during the Lunar New Year [3][19]. - The consensus FTM EPS estimate for MXCN has been revised up by 2.5% since September 2024, indicating positive sentiment in the market [3][17]. - Property shares are expected to see tactical upside as stabilization continues, with potential new policy support if sales weaken further [3][26]. - Healthcare is anticipated to show structural upside, particularly in medtech and biotech, with better revenue guidance expected for 2025 [7][28]. Summary by Sector Property - The property sector has been underperforming but shows signs of recovery, with new home prices in Tier 1 and Tier 2 cities rising by 0.1% month-on-month in January 2025 [6][26]. - Positive developments include increased mortgage demand and a recovery in transactions post-policy relaxations [6][26]. - Preferred picks in this sector include COLI, CR Land, and BEKE [6][26]. Healthcare - The healthcare sector has been the second worst performing MSCI sector but is expected to see positive revenue guidance for 2025, particularly in medtech with a projected 10-15% year-on-year growth [7][28]. - Leading biotech firms are expected to turn EBITDA positive in 2025, with strong sales growth anticipated [7][28]. - Preferred picks include Mindray and Akeso [7][28]. Consumer Staples - The consumer staples sector, which has been the worst performing value sector since the first half of 2021, may benefit from property stabilization [8][26]. - Selected firms in the food and beverage segment have reported net profit growth due to effective distribution channel optimization [8][26]. - Preferred picks include Anta and Tsingtao Brewery [8][26]. AI and Technology - AI-related stocks have become short-term overbought, with several companies reaching a 14-day RSI reading near or over 80 [9][26]. - The report highlights the importance of underlying inventory and new product cycles for tech hardware and semiconductors [9][26]. - The software segment is facing challenges due to delayed IT spending from corporate clients, leading to decreased contract sales [9][26]. Financials - The financial sector is seeing strong returns and volume in bonds and equities, with banks projecting around 10% net profit growth for 2024 [29][28]. - Investment gains among insurance and brokers have been solid, supported by tech-enabled risk management [29][28]. Industrials - The industrials sector is experiencing tight supply-demand conditions, particularly in marine and transport infrastructure, driven by a replacement cycle and strong demand from the US [30][28]. - Consensus earnings for major players in this sector have risen significantly for 2024/25 [30][28].

Investment Rating - The report does not explicitly provide an investment rating for the China property sector, but it indicates that the sector is nearing the end of a default cycle that began in early 2021 [2][3]. Core Insights - The China property sector has experienced a significant default cycle, with 44 high-yield property issuers defaulting on their offshore USD bonds, amounting to a total of US$127 billion in defaults, the largest for any sector in the Asia high-yield credit market [10][14]. - Despite the end of defaults, a quick recovery is not anticipated, and the recovery path is expected to be long and complex [3][4]. - The China property sector now represents only 2% of Asia credit, down from nearly 50% at its peak in 2021, indicating a diminished role in the overall Asia credit market [22][24]. Part 1: A Painful Default Cycle - The current default cycle has seen a cumulative total of 44 defaults since 2021, compared to only 2 defaults during the previous cycle in 2014-15 [10]. - The default rate for China high-yield property issuers peaked at nearly 60%, while the Asia high-yield default rate was around 40% [18]. - The majority of defaults (70%) occurred in 2021 and 2022, with a notable slowdown in defaults observed in 2023 [15][18]. Part 2: Restructuring Is a Work in Progress - Only six defaulted China property issuers are actively engaged in debt workouts, with half of the debt from distressed issuers currently in winding-up orders or petitions [29][31]. - Recovery rates for defaulted issuers are low, with 39 issuers having recovery rates below 15%, and the credit market pricing an expected recovery rate of only 7.2% for distressed bonds [33][36]. Part 3: The Long Road to Recovery - The credit market expects that most redemptions in the China high-yield property sector will be paid, with bonds trading close to par, except for specific cases like SUNAC [43][45]. - The China property physical market is projected to bottom out in the fourth quarter of 2025, with an expected drop of over 10% in primary sales volume [51][52]. - Contracted sales recovery is crucial for the sector, with liquidity risks diminishing but ongoing challenges related to landbank depletion and project completion affecting sales [55][56]. Performing China HY Property Credits - A screen for performing China high-yield property credits identified seven issuers whose bonds are not trading at distress levels, with average long-end bond prices above 70 cents [59][61].

Investment Rating - The humanoid robot industry is rated as having significant growth potential, with a total addressable market (TAM) estimated at 5 billion units, driven by demographic trends and labor force dynamics [11][34]. Core Insights - The humanoid robot sector is expected to replicate the success of the New Energy Vehicle (NEV) industry, supported by government initiatives and China's advanced manufacturing capabilities [11][25]. - Humanoid robots are positioned to address labor shortages by performing tasks that are dangerous, repetitive, or undesirable for human workers, enhancing workplace safety and operational efficiency [6][18]. - The adoption curve for humanoid robots is anticipated to accelerate rapidly over the next five years, mirroring the NEV take-off trend of the 2010s [34][37]. Market Dynamics - The working-age population in China is projected to shrink significantly, leading to increased labor costs and reduced productivity, which presents opportunities for the robotics industry to fill labor gaps [13][18]. - The global average of robot density has surged, with countries like South Korea leading in industrial robot use, indicating a growing trend towards automation across various sectors [18][19]. - Policy initiatives in various countries, including Japan and the EU, are driving innovation and competitiveness in the robotics sector, creating a favorable environment for humanoid robot development [19][20]. Technological Advancements - Advancements in AI, robotics, and battery technology are expected to make humanoid robots cheaper and more efficient, driving rapid consumer adoption [30][34]. - Major tech companies are investing in humanoid robot technology, enhancing capabilities and expanding use-case scenarios [30][31]. - The emergence of new models and technologies, such as the DeepSeek R1, could alleviate hardware challenges and drive innovations in the humanoid robot space [30][34]. Competitive Landscape - Key players in the humanoid robot industry include Sanhua Intelligent, Leader Drive, and Hengli Hydraulic, which are well-positioned to capitalize on the expanding market [11][25]. - The supply chain for humanoid robots is supported by China's advanced manufacturing capabilities, focusing on critical components such as motors, reducers, and sensors [6][25]. - Collaborative robots (cobots) and autonomous mobile robots (AGVs) are crucial to the development of humanoid robots, sharing key technologies and principles [50].

Global Markets Strategy 21 February 2025 China Equity Strategy AI adoption takeaways from JPM's China Forum Positive on AI capable vertical leaders as the China rally broadens. We attended JPM's China Opportunities Forum in Shenzhen (Feb 13-14) and found almost all non-tech corporates are rapidly adopting DeepSeek to optimize cost, improve efficiency, lift productivity, and identify new business opportunities. The equal and low-cost access to DeepSeek, an advanced productivity enhancement tool, should incre ...

Asia Pacific Equity Research 21 February 2025 Alibaba Group Holding Limited (BABA US & 9988 HK) Source: Company data, Bloomberg Finance L.P., J.P. Morgan estimates. n/c = no change. All prices as of 19 Feb 25 except for 9988 HK [20 Feb 25]. See page 10 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of in ...

Investment Rating - The report assigns an "Equal-weight" rating to Alibaba Group Holding, indicating that the stock's total return is expected to be in line with the average total return of the industry coverage universe over the next 12-18 months [4]. Core Insights - The report highlights a modest upside potential for Alibaba, with a price target set at US$100.00, representing a downside of approximately 21% from the current price of US$125.79 [4]. - Financial results for the third quarter of fiscal 2025 showed total revenues increasing by 8% year-over-year, with a significant beat in customer management revenue growth of 9% [7]. - The adjusted EBITA margin for the company was reported at 20.3%, reflecting a year-over-year increase of 3.8% [3][7]. Financial Performance Summary - Total revenue for the third quarter was RMB 260.35 billion, with an income from operations of RMB 22.51 billion, showing a 0.5% increase compared to the previous quarter [3]. - Adjusted diluted EPADS for the quarter was reported at 18.97, marking a 12.8% increase year-over-year [3]. - The Cloud Intelligence Group revenue grew by 13% year-over-year, aligning with market expectations [7]. Segment Performance - The Taobao & Tmall Group generated revenue of RMB 136.09 billion, reflecting a 43.2% year-over-year increase [3]. - The Alibaba International Digital Commerce Group reported revenue of RMB 37.76 billion, a 32.4% increase year-over-year [3]. - The Local Services Group, including Cainiao Smart Logistics, saw a revenue decline of 9.8% year-over-year, indicating challenges in this segment [3]. Capital Expenditure and Share Repurchase - Capital expenditures for the quarter were RMB 31.8 billion, representing 11% of revenue, a significant increase from RMB 8.9 billion in the same quarter last year [7]. - The company repurchased 15 million ADSs for US$1.3 billion, with a remaining authorization of US$20.7 billion effective through March 2027 [7].