Investment Rating - The report suggests a cautious outlook on Japanese stocks, indicating that they are likely to struggle to maintain current levels due to expected global economic slowdown and deteriorating earnings forecasts [1][3]. Core Insights - Japanese stocks have rebounded more than anticipated after a sharp correction, returning to pre-correction levels, attributed to smooth tariff negotiations, inflation concerns, and strong global macroeconomic data [2][6]. - Despite the recent rebound, the report anticipates that Japanese stocks will likely be soft in the coming months as earnings forecast revisions are expected to turn negative [3][24]. - A strategy focusing on high-quality stocks with strong earnings revisions is recommended, as these have shown positive returns during both the correction and rebound phases [4][36]. Summary by Sections Rebound Analysis - Japanese stocks have corrected sharply but have rebounded significantly, with 28 TSE sectors recovering over 90% of their losses [6]. - The stronger-than-expected rebound is attributed to smooth tariff negotiations, inflation concerns preventing large fund shifts to bonds, and firm global macroeconomic data [2][6]. Earnings Forecasts - The report predicts a deterioration in earnings forecasts for Japanese companies due to rising US tariff rates and negative global economic impacts [3][15]. - Historical patterns indicate that when earnings forecasts decline, stocks typically either correct ahead of revisions or follow a declining range until signs of recovery emerge [24]. Investment Strategy - The report highlights that high-quality stocks (measured by RoE, RoIC, RoA) and those with high earnings revisions have performed well during both market phases [4][36]. - If economic uncertainty recedes, a rotation into value stocks is expected; however, if uncertainty persists, the trend favoring high-quality stocks is likely to continue [4][36].

Investment Rating - The report maintains a constructive outlook on the mortgage basis and projects a reduction in private market supply, which is expected to be a tailwind for the sector [1][20]. Core Insights - The private market supply for 2025 is projected to be $394 billion, approximately $20 billion lower than previous estimates, which should benefit the sector [1][13]. - The net supply projection for 2025 has been reduced to $200 billion, with gross supply expected to be around $1.15 trillion [3][31]. - Short-term prepayment speeds are expected to decrease in May and June, with a potential increase in July [4][31]. - The production coupon OAS widened to 44 basis points, indicating a shift in market conditions [20]. Summary by Sections Supply Projections - The report revises the net supply projection for 2025 to $200 billion, down from $225 billion, with gross supply expected to be approximately $1.15 trillion [3][31]. - The private market supply is projected to be $394 billion for 2025, reflecting a decrease from previous estimates [1][13]. Prepayment and Speed Projections - Prepayment speeds for May are expected to decrease by 3% for conventional loans and by 5% for G2SF, with a projected decline of 4-5% for June [4][31]. - Preliminary projections indicate a potential increase in speeds by 3% in July [4][31]. Market Conditions - The production coupon OAS has widened to 44 basis points, which is above the fair value range of 25-35 basis points, suggesting a shift in investor sentiment [20]. - A significant portion of investors (approximately 70%) expect the production coupon basis to tighten by 5-10 basis points in the coming months [20]. Valuation Preferences - The report maintains a preference for 5.5 coupons, indicating a strategic focus on specific segments of the market [24][31].

Investment Rating - The report maintains a GDP growth forecast of 4.7% YoY for 2025E [5] Core Insights - China's economy showed resilience in April despite trade tensions, with a real growth rate potentially exceeding 5.0% YoY, driven by strong industrial production growth of 6.1% YoY and services production index rising 6.0% YoY [3][10] - The exports-driven growth model appears to be re-emerging, with external demand outpacing domestic demand, although domestic retail sales and fixed-asset investment have weakened more than expected [4][10] - The report anticipates limited fiscal policy changes, with only a 10 basis points policy rate cut and a 50 basis points RRR cut expected in the second half of 2025 [5] Economic Performance - Industrial production exceeded expectations at 6.1% YoY in April, while fixed-asset investment softened to 4.0% YoY for January-April [10][11] - Exports-oriented sectors supported industrial production, with significant growth in machinery and equipment exports, while the property sector showed signs of weakness [12] - Retail sales growth decelerated to 5.1% YoY in April, falling short of market expectations, primarily due to declines in petrol and car sales [18][23] Sector Analysis - The new economy sectors, particularly high-tech, continued to perform well, with value added expanding 10.0% YoY and industrial robots' output surging 51.5% YoY [12] - The property sector showed marginal softening, with property sales down 2.8% YoY in volume terms and property investment contracting 10.3% YoY in the first four months [12] - Retail sales of home appliances and furniture remained strong, with growth rates of 38.8% YoY and 26.9% YoY respectively, while auto sales faced challenges [20][21]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report indicates a positive outlook for risk assets due to recent developments in trade negotiations, suggesting a potential disinflationary impact [2] - The US effective tariff rate is currently at approximately 13%, the highest in 100 years, which may dampen US growth but could also avoid a recession [9] - The report highlights the importance of upcoming fiscal policies and their potential impact on market dynamics, particularly regarding the new tax and spending bill [30][31] Summary by Sections Trade War Developments - The trade war is ongoing, but there are indications that the US may lower tariffs if they become economically burdensome [8] - Current tariffs are seen as a medium-term drag on US growth, with potential deflationary effects on services [9] - The report emphasizes the significance of non-China trade deals in shaping future tariff rates and market conditions [12] Fiscal Policy Outlook - The new fiscal bill is expected to increase deficits, with projections suggesting a potential rise to 7% of GDP [30] - Key components of the bill include increased business tax benefits and changes to child tax credits, which may influence market reactions [31] - The correlation between equities and rates is expected to drive USD performance based on fiscal outcomes [31] Currency and FX Strategy - The report advocates for a focus on high-yield currencies, particularly in Latin America, while maintaining a cautious stance on low-yielders [40] - There is a noted trend of outflows from low-yield currencies, with a preference for high-yield investments [38] - The report suggests that the current environment may favor FX carry strategies, particularly from the long side [36]

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific securities Core Insights - Breakeven rates have increased, with 5-year breakevens rising by 5.4 basis points, 10-year breakevens by 5.5 basis points, and 30-year breakevens by 5 basis points for the week [1] - Real yields have also increased, with 5-year real yields up by 14.9 basis points, 10-year real yields by 9.8 basis points, and 30-year real yields by 5.3 basis points [1] Summary by Sections Breakeven and Real Yield Changes - Breakeven rates for various maturities have shown upward movement, indicating market expectations of inflation are rising [1] - Real yields have also increased, suggesting a shift in investor sentiment regarding future interest rates and inflation [1] Open and Closed Trades - The report details several open trades, including a long position in 10-year TIPS and a short position in 3-month to 10-year receivers, which started on January 5, 2024, with a current level of 2.05% and a loss of $549,000 [4] - Closed trades include a profitable position in the 3-year to 10-year inflation spread, which yielded a profit of $1,040,000 [4] Inflation Calendar - Important upcoming inflation data releases include the US CPI on June 11, 2025, and PPI on May 15, 2025, which are critical for assessing inflation trends [6] TIPS Relative Value - The report provides a detailed analysis of TIPS relative value, showing various maturities and their respective real yields, with some bonds identified as rich or cheap based on market adjustments [8][9] Current Market Levels - The report includes current market levels for TIPS, indicating real yields across different maturities, with the 10-year real yield at 2.00% [11]

Investment Rating - The report does not explicitly state an overall investment rating for the aluminium premiums industry, but it suggests hedging strategies for European consumers due to limited downside risks [3][13]. Core Insights - The report introduces a framework for determining the fair value of aluminium premiums, which helps identify inefficient pricing across physical markets and gauge market tightness [5][6]. - Current premiums in the US are close to fair value, but there are downside risks due to a forecasted decline in LME prices and potential tariff exclusions [3][11]. - European premiums are trading near multi-year lows, presenting an attractive opportunity for consumers to hedge their exposure [3][13]. Summary by Sections Fair Value Methodology - The report develops an anchor and spread methodology to determine fair value for aluminium premiums, focusing on the price paid over the LME price for physical delivery [2][5]. - The anchor is based on the premium that an LME warehouse in Asia would pay, with a calculated warehouse incentive set at $83/t [7]. US Market Analysis - The US Midwest premium is currently trading around $839/t, with duties accounting for 70% of this premium [9][11]. - The report estimates that the US Midwest premium is undervalued by $30/t based on the current spot LME price, but advises against buying due to a bearish price forecast [11]. European Market Analysis - The Rotterdam Duty Paid premium is currently $200/t, trading at a $55-60/t discount to fair value, indicating limited downside risk [13]. - The report anticipates an increase in European imports from Canada due to US tariffs, which may further stabilize European premiums [13]. Freight Rates and Their Impact - The report suggests that freight rates have limited downside potential, with most declines already realized, impacting the European duty unpaid premium significantly [14][20]. - A forecasted decline in container freight rates could lower the European premium modestly by $6-10/t [14].

Investment Rating - The report reverts the GDP forecast for 2025E to 4.7% from 4.2%, indicating a positive outlook for the industry [1][4]. Core Insights - The Phase 1.5 Deal between the US and China is expected to lead to further tariff reductions, which may enhance trade relations and economic growth [3][4]. - The urgency for significant stimulus measures has decreased, with expectations of only minor adjustments in policy rates and reserve requirement ratios [1][5]. - The report anticipates a material increase in China's purchases of US goods, aligning with the Phase 1 Deal, and suggests that the effective US tariff rate on China could drop from approximately 39% to around 20% within three months [3][4]. Summary by Sections Economic Forecasts - The GDP growth forecast for China has been revised up to 4.7% YoY for 2025E, reflecting improved trade conditions [4][6]. - Export growth for Q2 2025 is projected at 3.6% YoY, a significant increase from the previous forecast of -6.5% [4][6]. Policy Outlook - With trade tensions easing, the report suggests that major fiscal budget revisions are unlikely, and any future support will likely come from policy banks or targeted measures [5][6]. - The anticipated monetary policy adjustments include a 10 basis points cut in the policy rate and a 50 basis points cut in the reserve requirement ratio in the second half of 2025 [1][5]. Trade Relations - The report highlights the potential for the US and China to engage in discussions regarding tariff reductions, particularly concerning the 20% fentanyl tariff, which may be paused or removed in the near term [3][4]. - The easing of tariffs is expected to facilitate a more favorable environment for US businesses in China, especially in the services sector [3][4].

Investment Rating - The report indicates a positive outlook for overall exports in May, driven by the Phase 1.5 Deal between the US and China, suggesting a stabilization in shipping to the US [1]. Core Insights - Overall exports from China softened marginally into May, with container export volume dropping by 5.0% year-on-year during the week of May 3-9, down from high single-digit growth at the end of April [1][7]. - Cargo throughput at Chinese ports grew by 4.2% year-on-year in the week ending May 11, also a decrease from previously high single-digit growth [1][11]. - Shipping to the US stabilized and showed signs of recovery at the end of April, continuing into May, although the data post-May 12 did not reflect significant improvements [1]. - There is potential for further growth if the reported surge in shipping orders materializes in the data [1]. - Exports to non-US markets softened, and trade rerouting may temporarily halt following the Phase 1.5 Deal [1]. Summary by Sections Export Performance - Container export volume decreased by 5.0% year-on-year during the week ending May 9, compared to a previous growth of 9.8% year-on-year [7]. - Cargo throughput at ports increased by 4.2% year-on-year in the week ending May 11, down from 9.1% year-on-year previously [11]. Shipping Trends - Shipping to the US showed stabilization and a slight increase at the end of April, continuing into May, with a year-on-year increase of 14.6% in container departures for the US during the 15 days ending May 13 [10]. - The data indicates that shipping orders may increase, which could positively impact future export volumes [1].

Investment Rating - The report indicates a positive outlook for US equity funds with a significant inflow of US$25.2 billion, suggesting a favorable investment environment [1][2]. Core Insights - US equity funds experienced a notable inflow of US$19.8 billion after four weeks of net outflows, primarily through ETFs, while bond funds also saw inflows of US$13.1 billion [1]. - Global and European funds maintained strong inflows of US$5.2 billion and US$2.7 billion respectively, indicating robust investor interest in these markets [1]. - Emerging markets (EM) funds faced outflows, particularly from China ETFs, which saw US$3.2 billion in redemptions, despite GEM funds gaining almost 3.7% for the week [2]. Summary by Sections Fund Flow Overview - Inflows into US equity funds totaled US$25.2 billion, with bond funds attracting US$13.1 billion during the week of May 14, 2025 [1]. - Global funds attracted US$5.2 billion, while European funds saw inflows of US$2.7 billion, reflecting strong market performance [1]. Emerging Markets - Emerging market funds experienced a US$3.3 billion outflow, with China ETFs leading the redemptions at US$3.2 billion [2]. - GEM funds had mixed flows, with ETFs seeing US$1.4 billion outflow but non-ETFs gaining US$1.6 billion [2]. Local Intelligence - Taiwan saw a return of US$3.3 billion in foreign inflows, while Korea and India attracted US$0.6 billion and US$0.4 billion respectively [3]. - However, Chinese investors sold US$1.0 billion worth of Hong Kong stocks through the Southbound Connect [3].

Investment Rating - The report maintains a positive outlook on selected Chinese semiconductor companies, particularly those focused on consumer electronics and mature semiconductor localization [1][4]. Core Insights - The US and China have announced a 90-day pause on tariffs, reducing US tariffs on Chinese imports from 145% to 30% and Chinese tariffs on US imports from 125% to 10%, which is viewed as a slight positive for the Chinese semiconductor sector [1][2]. - The tariff reprieve is expected to reduce demand uncertainties for consumer electronics in the second half of 2025, benefiting companies like Silan and CR Micro [1][3]. - China's commitment to suspend rare-earth export controls may negatively impact investor sentiment towards RF front-end vendors such as Maxscend, which were previously seen as beneficiaries due to their access to rare earth materials [3][4]. - The report emphasizes that China's mature semiconductor localization efforts will continue, with companies like SG Micro and Will Semi positioned to benefit from this trend amid supply uncertainties [4][5]. Summary by Sections - **Tariff Impact**: The 90-day tariff pause is expected to lower tariffs significantly, which could positively influence demand for consumer electronics and related semiconductor manufacturers [1][2]. - **Company Performance**: Companies with higher exposure to consumer electronics, such as Silan and CR Micro, are likely to benefit from the tariff changes, while RF front-end vendors may face challenges due to changes in rare-earth material export controls [3][4]. - **Localization Trends**: The report highlights the ongoing trend of semiconductor localization in China, with a focus on mature semiconductor technologies, indicating a robust market for companies like SG Micro and Will Semi [4][5]. - **Future Monitoring**: Upcoming events to watch include the US Section 232 investigation and potential new AI export restrictions, which could impact the semiconductor industry [5].