Investment Rating - The report maintains a Buy rating on both Gold Circuit Electronics (GCE) and Tripod Technology, with a target price (TP) of NT$310 for GCE and NT$260 for Tripod [5][11]. Core Insights - GCE is expected to gain more market share in the AI ASIC server business due to strong demand and capacity expansion in Thailand [1][3]. - Tripod has achieved a record gross margin (GM) of 25.0% in 1Q25, driven by a favorable product mix, although it may face challenges in its automotive segment [8][10]. - The overall earnings forecasts for both companies have been raised due to anticipated growth in AI and server demand [11]. Summary by Sections Gold Circuit Electronics (GCE) - GCE's 1Q25 sales increased by 22% quarter-over-quarter (QoQ), primarily due to the ramp-up in AI ASIC server production, with a gross margin of 31.3% [2][12]. - The company expects 2Q25 sales to grow by 8% QoQ, with gross margin expanding to 32% [3]. - GCE's new capacity in Thailand and existing plant improvements are anticipated to capture future demand effectively [4][11]. Tripod Technology - Tripod's 1Q25 sales remained stable with a 0% QoQ change, but its gross margin reached a record high of 25.0% [8][19]. - The company is projected to benefit from AI server orders, with an expected 8% QoQ sales growth in 2Q25 [9][20]. - Despite challenges in the automotive segment, Tripod's memory and server segments are expected to drive overall sales growth in 2025 [10][11].

Investment Rating - The report downgrades the EUR overweight to neutral [9][30]. Core Insights - The reduction of US tariffs on China from 145% to 30% effectively lowers the tariff rate from 25% to 12%, significantly altering the tactical risk landscape [2][3]. - The economic outlook in China appears more favorable, leading to adjustments in currency positions, particularly closing EURUSD longs and USDCNH call spreads [3][6]. - The de-escalation of trade tensions is expected to benefit small-cap equities, prompting the closure of short positions in RTY1 while maintaining a long position in VG1 [4][23]. - In commodities, the report suggests unwinding short positions in copper due to a positive growth outlook and downgrading precious metals from overweight to neutral due to potential risks in growth and USD strength [26][27][30]. Summary by Sections FX - The report indicates a shift in positioning, closing EURUSD longs and USDCNH call spreads, as the outlook for CNH depreciation diminishes [6][7]. - A structural EUR underweight and USD overweight may be trimmed over time, but the timeline for these adjustments is expected to be slow [7]. Rates - The report emphasizes the importance of hedging against US rates for various receivers in Canada, Norway, Mexico, and Brazil, reflecting a more optimistic outlook on the US economy [13][16]. Equities - The report highlights the positive impact of de-escalation news on small-cap stocks, leading to the closure of short positions in RTY1 while remaining long in VG1 [4][23]. Commodities - The report suggests unwinding short copper positions due to a rebound in prices and a more favorable growth outlook, while also downgrading precious metals from overweight to neutral due to potential risks [26][27][30].

Investment Rating - The report assigns a "Buy" rating for Tencent Holdings with a target price of HK$670, implying an expected share price return of 28.6% and a total return of 29.5% [3][10]. Core Insights - Tencent's 1Q25 results exceeded expectations, with total revenues growing by 13% year-over-year (yoy) to Rmb180.0 billion, driven by strong performance in domestic games and online advertising, which grew by 24% and 20% yoy, respectively [1][2]. - Non-IFRS net profit for 1Q25 was Rmb61.3 billion, reflecting a 22% yoy increase, surpassing consensus estimates [1][2]. - The report highlights the ongoing benefits of AI integration across Tencent's business segments, contributing to higher margins and revenue growth [6]. Revenue Breakdown - Total Value-Added Services (VAS) revenues increased by 17% yoy to Rmb92 billion, with online games revenues at Rmb59.5 billion, up 24% yoy [1][2]. - Online advertising revenues rose by 20% yoy to Rmb31.9 billion, exceeding expectations [1][2]. - Fintech and business services revenues grew by 5% yoy to Rmb54.9 billion, driven by consumer loan services and wealth management [1]. Deferred Revenues - Total deferred revenues increased by 15% yoy to Rmb127.4 billion, with current deferred revenues up 16% yoy [1][2]. Capital Expenditure - Tencent's capital expenditure for 1Q25 was Rmb27.5 billion, representing a significant increase of 91% yoy [1][6].

Investment Rating - The report maintains a cautious outlook on US equities, expecting the markets to digest recent gains due to ongoing tariff rollouts and macroeconomic concerns [1][6][14]. Core Insights - The Q1 earnings season showed a pattern of falling revisions leading to positive surprises, but this translated into a decline in full-year EPS estimates [1][2][11]. - Growth sectors, particularly the Magnificent 7, demonstrated stronger earnings resilience compared to Cyclicals and Defensives, reinforcing the view that Growth is fundamentally defensive in the current environment [3][9][23]. - Small and Mid Cap companies are experiencing significant margin pressure, with notable downward revisions in gross margin expectations for 2025 compared to Large Cap firms [4][32]. Summary by Sections Earnings Performance - S&P 500 earnings surprises were strong, with EPS beats significantly outpacing sales beats, indicating efficiency gains rather than top-line growth [2][15]. - Despite a 6% upside in Q1 EPS estimates, there was a -1.4% decline in full-year consensus estimates, suggesting further earnings rightsizing is likely [8][18]. Consumer Sector Insights - The Consumer Discretionary and Staples sectors are showing signs of deterioration, with sales growth rates declining alongside rising unemployment [5][12][41]. - Recent sales growth numbers were weak, indicating potential consumer weakness ahead of full tariff impacts [5][12][39]. Tariff Impact and Market Outlook - The report anticipates that the current consensus growth for the S&P 500 will likely fall from +8% to +3% due to tariff implications [11][29]. - The S&P 500 has rallied approximately +14% since "Moratorium Day," but valuation concerns are resurfacing as the index approaches the year-end target of 5800 [14][29]. Small/Mid Cap Analysis - Small and Mid Cap firms are facing more significant cuts in sales growth expectations and gross margins compared to their Large Cap counterparts [32][33]. - Analysts express skepticism about the resilience of Large Cap gross margins unless there is a shift in tariff policies [32]. Consumer Insights - Top-line growth for consumer sectors has decelerated sharply, with Q1 results coming in at about half of the expected growth rate [36][39]. - Inventory levels among consumer companies were low, suggesting limited preparation for tariff impacts [43].

Investment Rating - The report maintains a positive outlook on the Taiwan Electronics and Semiconductors sector, particularly favoring TSMC as the most preferred stock in the semiconductor space [1][2]. Core Insights - April sales in the technology sector were robust, with TSMC reporting NT$349.6 billion in revenue, reflecting a 48% year-over-year increase and a 22% month-over-month increase [2][10]. - The semiconductor supply chain is expected to face challenges in the second half of 2025 due to early order pull-ins and tariff uncertainties, although supply constraints are easing [1][2]. - Companies like Gold Circuit and Quanta are highlighted for their strong sales momentum and improving product mix and margins, particularly in the AI ASIC and server supply chain segments [1][3]. Summary by Sections Semiconductor - TSMC's April revenue was significantly above expectations, driven by solid AI demand and a healthy order flow, with a year-over-year growth of 48% [2][10]. - UMC and other fabless companies are also showing steady recovery, with April revenues tracking positively [2]. Server and ODMs - Server sales in April increased by 167% year-over-year, with companies like Wiwynn and Accton outperforming expectations due to strong ASIC server demand [3][14]. - ODMs reported a 1% month-over-month increase and a 33% year-over-year increase in sales, indicating a positive trend in the server supply chain [3]. Component and PCB - Largan is noted for its 28% year-over-year growth, attributed to market share gains and resilient ASP trends [5]. - Gold Circuit is expected to benefit from rising AI ASIC demand, while Unimicron is projected to capture a significant market share in AI GPU applications [6][10]. Overall Market Trends - The overall revenue trend for the Taiwan technology supply chain shows a 24% year-over-year increase, with significant contributions from the semiconductor and server sectors [14]. - The report anticipates a decline in sales for May due to NTD appreciation, but the long-term outlook remains positive as demand for AI-related products continues to grow [2][3].

Investment Rating - The report has downgraded the 0-3 month target price for gold to $3,150/oz from the previous target of $3,500/oz, expecting gold prices to consolidate in the range of $3,000-3,300/oz over the coming months [1][11]. Core Insights - Gold prices reached record highs in late April, driven by strong demand, particularly from ETFs in both China and other markets, with a significant increase in gold investment demand estimated at approximately $400 billion annually [5][7][30]. - The report identifies three key drivers of gold demand: deterioration in global growth prospects due to tariff shocks, diversification of foreign reserves towards gold, and rising concerns over currency debasement in the US and China [6][25]. - The report anticipates a physical market deficit for gold, with investment demand expected to exceed 100% of mine supply during 2Q'25, which historically correlates with price increases [35][77]. Summary by Sections Gold Prices and Market Dynamics - Gold prices are expected to consolidate after a significant rally, with the report noting that the recent price surge was largely influenced by tariff-related concerns [11][41]. - The report highlights that gold's share in global central bank reserves has increased significantly, which may limit future demand for gold as central banks approach their target allocations [59][63]. Demand Analysis - The report indicates that gold jewelry demand has weakened, with a 19% decline in volume terms in 1Q'25 compared to the previous year, which may further impact gold prices [42][47]. - Central bank demand has been robust, particularly from emerging markets, contributing to the overall bullish sentiment for gold [60][77]. Investment Demand and Price Correlation - The relationship between gold prices and investment demand has been strong, with the report stating that for every 10% increase in net investment demand as a share of mine supply, gold prices rise by approximately $170/oz [84][88]. - The report emphasizes that the current high levels of gold prices are creating a unique opportunity for gold producers, as forward prices are significantly higher than spot prices, allowing for potential high margins [65][73].

12 May 2025 05:04:38 ET │ 9 pages Flash | China Economics US-China Phase 1.5 Deal Much Better than Expected CITI'S TAKE The US-China tariff reductions have come in even bigger than our bullish expectations. The US's effective tariff on China has been lowered to 38.6%, per our estimates, back to the non-prohibitive days. Looking ahead, the 20% Fentanyl tariff could be a low-hanging fruit for further reduction, in our view, and its rollback could further remove the external hurdle for the Chinese economy. The ...

Flash | 11 May 2025 22:23:52 ET │ 9 pages China Economics The Likely Shape of US-China Phase 1.5 Deal – Quick Take on the Geneva Talks CITI'S TAKE The US and China held a 2-day long conversation in Switzerland. We see the progress as a potential Phase 1.5 deal, resolving the easy part of the trade talks between the two countries. The Fentanyl tariffs and escalatory tariffs could be rolled back, and China is likely to make concession in reversible areas. It is now more likely in our view that the effective t ...

Investment Rating - The report maintains a bullish outlook on iTraxx Main over CDX IG, indicating a preference for financial risk and suggesting further upside potential [1][12][31] Core Insights - Financials are expected to outperform, with a target of -5 basis points (bp) compression between iTraxx Main and CDX IG, driven by compositional differences and strong performance in European bank equities [2][12] - Favorable macroeconomic conditions, supportive monetary and fiscal policies, and improved fundamentals are anticipated to benefit financials, particularly in Europe [3][12] - The report highlights the divergence in risk sentiment between Europe and the US, with European financials outperforming their US counterparts by 20% year-to-date [8][12] Summary by Sections Trading Strategy - An options relative value trade is recommended between iTraxx Senior Financials and CDX IG to capitalize on asymmetric upside and downside potential [5][31] - A specific strategy includes a 25-delta bullish risk reversal on iTraxx Senior Fins and a 25-delta bearish risk reversal on CDX IG [5][33] Market Dynamics - The report notes that iTraxx Main has reached parity with CDX IG, with expectations for continued tightening due to favorable conditions for European credit [7][12] - The energy sector's compositional differences between iTraxx Main and CDX IG are highlighted, with iTraxx Main containing higher quality, integrated oil and gas majors compared to CDX IG's more speculative energy names [19][20] Risk Assessment - The report suggests that previous conditions leading to European underperformance are unlikely to recur, with stable sovereign spreads indicating manageable debt loads and reduced political risk [4][23] - The overall sentiment is that European credit is positioned to outperform, supported by improved fiscal conditions across Eurozone countries [3][23]

Investment Rating - The report does not explicitly provide an investment rating for the industry or companies discussed Core Insights - Risk assets have reacted positively to the initiation of trade talks between the US and China, as well as a preliminary trade deal with the UK, despite the continuation of 10% tariffs with the UK and indications of higher tariffs for other countries [1][4] - Current tariff levels are expected to remain in place, with potential increases after the 90-day pause concludes on July 4th, particularly for China, where tariffs may decrease but remain prohibitively high [5][4] Economic Indicators - The ISM Services Index for April increased to 51.6, surpassing expectations, while the Trade Balance widened to -$140.5 billion in March due to a surge in imports, particularly in pharmaceuticals from the EU [11] - Initial jobless claims fell to 228,000, indicating a steady labor market, which is keeping the Federal Reserve in a wait-and-see mode regarding interest rate adjustments [11] Market Reactions - Equity prices have returned to pre-tariff levels, with expectations that tariffs on imports from China could be cut from 145% to 60%, although imports would still be significantly more expensive [4][5] - The market is pricing in expectations of three interest rate cuts this year, reflecting concerns over economic activity and employment due to elevated tariff rates [13][19]