Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The report highlights significant inflows into various asset classes, with equities receiving $19.6 billion and bonds $19.2 billion, indicating strong investor interest [12][50] - The "Magnificent 7" stocks are noted to constitute 35% of the US market cap, drawing parallels to historical market concentration in sectors like railroads [1][26] - The report discusses the macroeconomic environment, emphasizing the potential for a flattening US yield curve and the implications for interest rates [3][20] Summary by Sections Market Performance - Year-to-date performance shows gold at 24.4%, bitcoin at 23.7%, and stocks at 11.9%, while oil and the US dollar have declined by 3.2% and 7.9% respectively [1] - The report notes that the US dollar's recent rally is attributed to extreme short positioning and a hawkish Federal Reserve [2][17] Asset Flows - Inflows into investment-grade bonds reached $10.2 billion, marking the second-highest annual inflow ever [13][51] - BofA private clients have a record-high AUM of $4.1 trillion, with 64.2% allocated to stocks, the highest since March 2022 [15][19] Economic Indicators - The report indicates that US real domestic sales increased by 1.1%, the slowest growth since Q3 2022, suggesting a cooling economy [20][42] - The BofA Bull & Bear Indicator decreased to 6.3, reflecting lighter inflows to emerging market debt and a pullback in global stock index breadth [15][19] Sector Analysis - The report identifies a shift in momentum trades from gold and crypto back to US big tech, driven by increased AI capital expenditure [18] - Inflows into US large-cap stocks were significant, with an annualized inflow of $419 billion, the second highest ever [19][43] Historical Context - The report draws historical comparisons, noting that railroads once made up 63% of the US stock market cap in 1881, highlighting the potential for current tech stocks to reach similar levels of market concentration [1][4][21]

Investment Rating - The report maintains an "In-Line" investment rating for the industry, with a cautious view on midcap banks and a positive outlook for large cap banks [5][3]. Core Insights - The regulatory landscape for US banks is expected to undergo significant changes, with proposals for lower capital requirements likely to double excess capital and risk-weighted asset (RWA) capacity at large cap banks [1][4]. - The Federal Reserve is moving quickly on regulatory reforms, with a broad consensus anticipated on many proposals, including stress test transparency and GSIB surcharge adjustments [3][4]. - The expected increase in excess capital for large cap banks is projected to rise from $118 billion in Q2 2025 to $228 billion following the implementation of new regulations [7][9]. Summary by Sections Regulatory Changes - Key changes anticipated over the next year include lower stress capital buffers (SCBs) from the 2025 stress test, enhanced stress test transparency, and reforms to the GSIB surcharge and supplementary leverage ratio (SLR) [7][10]. - The Basel III Endgame finalization is expected to provide clarity for banks to optimize capital, supporting loan demand and capital markets activity [10][11]. Capital and RWA Capacity - Large cap banks currently have $118 billion of excess capital, which is expected to increase to $157 billion after a lower 2025 SCB, $172 billion post-SLR reform, and $228 billion post-GSIB surcharge reform [9][17]. - Incremental RWA capacity for large cap banks is projected to double from $0.9 trillion in Q2 2025 to $1.9 trillion following regulatory changes [9][19]. Earnings Impact - A sensitivity analysis indicates that optimizing excess capital could lead to a median increase of 24% in consensus 2026 earnings per share (EPS) across large cap banks, midcap banks, and consumer finance coverage [10][34]. - Regional banks are expected to benefit significantly from faster M&A approvals, which should enhance capital positions and growth opportunities [10][11]. Company-Specific Opportunities - Citigroup is projected to increase its excess capital from $16 billion to $31 billion post-GSIB surcharge reform, with significant buyback plans [32]. - Bank of America is expected to see its excess capital rise from $10 billion to $33 billion, with strong buyback potential and loan growth [32]. - JPMorgan Chase anticipates an increase in excess capital from $38 billion to $60 billion, benefiting from lower GSIB surcharges [32]. - Goldman Sachs is positioned to benefit from a rebound in capital markets, with expected buybacks of $17 billion in 2025 [32][33]. - Wells Fargo is projected to increase its excess capital from $13 billion to $34 billion, allowing for organic growth and share repurchases [32].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The "anti-involution" initiative is a structural reform aimed at addressing overcapacity in various sectors, with a focus on self-discipline and curbing low-price competition, expected to take 3-5 years to implement [1][19][30] - The current overcapacity issues differ from the 2015-16 reforms, as they now affect both "old economy" and "new economy" sectors, with more private companies involved and a tougher macroeconomic environment [2][21][30] - The report anticipates mixed impacts across sectors, with potential short-term pains due to supply rationalization leading to reduced investment and job losses [3][31] Summary by Sections Anti-involution as a Strategic Focus - Anti-involution is expected to be a key focus in China's next five-year plan, addressing historical overcapacity cycles and deflationary pressures [8][9] Comparison with 2015-16 Reforms - The 2015-16 reforms successfully reduced outdated capacity in traditional sectors, while current reforms face challenges due to the involvement of new economy sectors and a weaker macroeconomic backdrop [19][21] Sector Focus - Current overcapacity is more pronounced in new economy sectors such as solar and EV supply chains, which have received significant local government support [21][30] Demand Side Challenges - The macroeconomic environment is less favorable than in 2015-16, with weaker demand in exports and property sectors, which may hinder the effectiveness of supply-side measures [35][36] Policy Measures - Anti-involution includes measures to contain price wars, protect SMEs, and reduce local government subsidies, which may negatively impact leading firms in affected sectors [41][45] Sector-Specific Insights - **Cement**: Expected to cut capacity from 2.1 billion tons to 1.6 billion tons, with a gradual implementation timeline [68] - **Steel**: Anticipated 5% production cut, with private mills showing reluctance to reduce output due to improving margins [75][76] - **Coal**: The sector is unlikely to undergo significant cuts due to its critical role in energy security [86][89] - **Battery**: The market is experiencing rising capacity utilization, with a more consolidated landscape compared to other sectors [55][56] Conclusion - The report emphasizes that the anti-involution initiative is a long-term mission with complex challenges, requiring careful management of expectations and sector-specific strategies to navigate the evolving landscape [1][19][30]

Investment Rating - The report indicates a mixed investment sentiment with a focus on equities and bonds, highlighting a potential risk-on environment as bond yields remain stable [2][12]. Core Insights - The report emphasizes that the US economy is showing signs of slowing down, with stock market breadth at lows and a divergence between value and growth stocks [3][25]. - There is a notable shift in investment flows, with significant inflows into bonds and materials, while healthcare and tech sectors are experiencing outflows [12][57]. - The BofA Bull & Bear Indicator has risen to 6.3, suggesting a bullish sentiment but cautioning that it may approach sell signals if certain inflow thresholds are met [15][18]. Summary by Sections Market Performance - Bitcoin leads year-to-date performance at 28.0%, followed by gold at 27.2%, while oil and the US dollar show declines of -7.4% and -9.3% respectively [2]. - The report notes that the equal-weight S&P 500 is at a 22-year low compared to the market-cap weighted index, indicating a narrowing market breadth [3]. Historical Context - The report references historical events, such as Nixon's economic policies in 1971, to draw parallels with current market conditions and potential Fed actions [4][19]. - It discusses the implications of past central bank decisions and their impact on market dynamics, particularly in relation to inflation and interest rates [19][25]. Investment Flows - Recent weekly flows show $15.7 billion into bonds, $5.8 billion into crypto, and $4.8 billion into stocks, indicating a shift in investor preferences [12][55]. - BofA private clients have allocated 63.9% of their assets to stocks, with a notable trend of inflows into utilities and materials [14][62]. Valuation and Risk Indicators - The report highlights that the current trailing P/E ratio of the "Magnificent 7" is 44x, suggesting elevated valuations compared to historical averages [25]. - The BofA Global Breadth Rule indicates that only 64% of MSCI ACWI equity indices are trading above their 50/200-day moving averages, a level below the sell signal threshold [18].

Investment Rating - The report indicates a cautious outlook on near-term growth momentum despite a strong GDP print, suggesting the need for more policy stimulus to boost investment demand and support the labor market [6]. Core Insights - China's 2Q25 GDP grew by 5.2% year-on-year, slightly below the 5.4% growth in 1Q25, but above market consensus of 5.1% [1][8]. - Industrial production (IP) showed a surprising increase to 6.8% in June, driven by resilient export activities, with manufacturing IP accelerating to 7.4% [3][8]. - Retail sales growth moderated to 4.8% in June, lower than the previous month and consensus expectations, indicating potential weakness in domestic demand [4][8]. - Fixed asset investment (FAI) growth slowed to 2.8% year-to-date, with a significant contraction in property investment at -11.2% year-on-year [5][8]. - The urban unemployment rate remained stable at 5.0% in June, with disposable income per capita increasing by 5.1% year-on-year [10][11]. Summary by Sections Economic Growth - 2Q25 GDP growth was reported at 5.2% year-on-year, with a sequential increase of 1.1% quarter-on-quarter [1][8]. - In the first half of 2025, real GDP growth reached 5.3%, surpassing the annual policy target of "around 5%" [1]. Industrial Production - IP growth rose to 6.8% in June from 5.8% in May, with manufacturing IP accelerating to 7.4% [3][8]. - Growth was observed in 36 out of 41 industries, with notable increases in industrial robots and integrated circuits [3]. Retail Sales - Retail sales increased by 4.8% year-on-year in June, down from 6.3% in May, influenced by earlier promotions and subsidy halts [4][8]. - Catering services saw a significant slowdown, with growth dropping to 0.9% year-on-year [4]. Fixed Asset Investment - FAI growth moderated to 2.8% year-to-date, with a single-month growth of only 0.5% year-on-year [5][8]. - Property investment continued to decline sharply, with a contraction of -11.2% year-on-year [5]. Labor Market and Income - The urban unemployment rate remained unchanged at 5.0% in June, with average weekly hours worked at 48.5 [10][11]. - Disposable income per capita reached RMB 9,661 in 2Q, reflecting a 5.1% year-on-year increase [11].

Investment Rating - The investment rating for GDS Holdings, VNET, and Montage is "Buy" [8][16][17]. Core Insights - The potential resumption of H20 GPU shipments to China is expected to positively impact the data center and public cloud sectors in China, as well as semiconductor companies in the AI supply chain [1][2]. - Nvidia's new compliant RTX PRO GPU is anticipated to accelerate customer move-in pace and increase new orders in the China data center sector [1][2]. - The availability of Nvidia's GPUs is likely to enhance AI-related public cloud services, leading to revenue growth for public cloud service providers [3]. - Montage is expected to see increased demand for its PCIe Retimer products due to the anticipated rise in AI server shipments in China [4]. Summary by Sections Data Center - If the export license for H20 shipments is granted, backlog orders from Chinese Internet and cloud service providers (CSPs) could be fulfilled quickly, potentially boosting the utilized capacity for GDS and VNET in Q3/Q4 2025 [2]. - The easing of GPU supply uncertainty may support CSPs in restoring data center order placements from Q3 2025 [2]. Public Cloud - The availability of Nvidia's GPUs is expected to help public cloud service providers secure more AI computing power, fulfilling downstream demand for model training and inferencing, which could lead to revenue upside [3]. Montage - Montage has reported a solid ramp-up of emerging products, including PCIe Retimer, which are crucial for AI servers [4]. - The resumption of H20 shipments and the availability of new compliant GPUs are likely to drive higher demand for PCIe Retimers domestically [4].

Investment Rating - The report indicates a bearish sentiment with institutional clients being the largest net sellers of US equities, while private clients are net buyers [10][11][25]. Core Insights - There has been significant divergence in trading flows, with institutional selling and retail buying reaching the largest cumulative gap since 2008, indicating a potential shift in market dynamics [10][11]. - The report highlights that institutional clients sold stocks across 8 of 11 sectors, with the largest outflows observed in Technology, Staples, and Health Care, while inflows were seen in Industrials and Financials [10][11]. - Corporate buybacks have accelerated but remain below typical seasonal levels, suggesting cautious sentiment among corporate clients [10][11]. Summary by Relevant Sections Client Flows - Institutional clients have been net sellers for three consecutive weeks, with outflows totaling $3.8 billion last week, marking the largest rolling four-week average outflows since just before the 2024 election [10][11]. - Private clients have been net buyers in 29 of the last 31 weeks, indicating strong retail interest in the market [10][11]. - Hedge funds returned to buying for the first time in four weeks, suggesting a potential change in strategy among these investors [10][11]. Sector Performance - The Technology sector experienced the largest outflows, while Industrials saw the most significant inflows, reflecting a rotation towards cyclical sectors [10][11][16]. - The report notes that clients bought equity ETFs for the sixth consecutive week, with inflows across major styles including Blend, Value, and Growth [10][11][30]. Market Capitalization Trends - Large-cap and mid-cap segments saw outflows, while small-cap stocks experienced modest inflows, indicating a preference for smaller companies amidst broader market volatility [10][11][24][72]. - The cumulative net buying trends show that institutional clients sold across all market cap sizes, while private clients bought across large, mid, and small caps [10][11][72].

Investment Rating - The report indicates a positive sentiment towards the Asia Pacific ex-Japan equities, with no participants expecting a lower level for these equities a year out [3][20]. Core Insights - Investor concerns regarding trade tensions, particularly related to President Trump's policies, are diminishing, with 70% of participants viewing the potential impact on Asian economies as only slightly negative, marking the highest optimism since December [1]. - There is a notable recovery in growth outlook, with a net 31% of participants anticipating a weaker global economy, a significant improvement from 82% in April, and a net 26% expecting a weaker Asian economy, up from 89% [2]. - Earnings expectations have shifted positively, with a net 13% of participants expecting an earnings pick-up, a complete turnaround from the 78% who anticipated a slowdown in April [3][23]. Country Allocation - Japan is the most favored market, followed by Taiwan and Korea, while India has slipped to fourth place. Taiwan and Korea are benefiting from a resurgence in the semiconductor cycle, while China’s allocation has decreased [5][53]. Sector Preferences - In the Asia ex-Japan portfolio, there is a growth bias with overweight positions in semiconductors, software, tech hardware, and banks, while sectors such as materials, energy, industrials, and real estate are being avoided [6][56]. - In Japan, banks are the most preferred sector due to higher interest rates, followed by semiconductors, with a preference for value over growth [6][51]. Investment Themes - In China, AI and semiconductors are the most favored themes, while in India, consumption and infrastructure are of high interest. IT services are currently out of favor [7][62]. - The semiconductor cycle sentiment has improved significantly, with 45% of participants expecting stronger growth in this sector over the next 12 months [66].

Investment Rating - The report indicates a "sell signal" triggered by cash levels falling to 3.9% [14][15][86] Core Insights - Investor sentiment is the most bullish since February 2025, with a significant surge in profit optimism and risk appetite over the past three months [2][17] - 59% of investors believe a recession is unlikely, a notable shift from 42% in April, with 65% expecting a soft landing [3][26][27] - The most crowded trade is "short US dollar," with a net 20% overweight on Euro, the highest since January 2005 [5][55][62] Summary by Sections Macro Insights - 42% of investors expect Q2 2025 EPS to beat consensus, while 19% anticipate disappointment [30][36] - AI is perceived to be increasing productivity by 42% of investors [32][37] - Expectations for a global recession have decreased, with only 9% expecting a hard landing [26][28] Policy Insights - The trade war is viewed as the biggest tail risk, with expected final tariff rates on the Rest of the World rising to 14% [4][49][48] - 81% of investors forecast one or two rate cuts by year-end, with only 11% expecting a rate cut at the upcoming FOMC meeting [38][44] Asset Allocation - FMS equity allocation improved to a net 2% overweight, while bond allocation remains net 4% underweight [120][121] - Investors are most overweight Eurozone equities, with a net 41% overweight, the highest in four years [63][65] - There has been a significant increase in allocation to tech stocks, with a net 14% overweight, the highest since January 2025 [68][70] Investor Sentiment - The FMS cash level has dropped to 3.9%, indicating a sell signal, with historical median losses following such signals averaging -2% [14][20][86] - Risk appetite has surged, with a net 31% of investors expecting weaker global economic growth, a significant recovery from previous months [23][92] - 68% of investors believe high-quality earnings will outperform low-quality earnings [101][103]

Investment Rating - The report maintains a neutral/cautious outlook on the near-term performance of the China market due to earnings risks and unattractive valuations, while remaining structurally bullish on China's long-term turnaround [1]. Core Insights - The China market outperformed in 1Q25 but traded sideways in 2Q25, with MSCI China showing a flat performance of +0.7% compared to significant gains in global indices [2][16]. - The report emphasizes a focus on bottom-up earnings stories, particularly in mid-small-cap stocks, while avoiding sectors heavily reliant on policy stimulus or exports [1][4]. - Key macroeconomic indicators show signs of weakness, with credit growth modestly increasing but insufficient to drive meaningful GDP recovery [3][12]. Market Performance - In 2Q25, MSCI China lagged behind global peers, with a P/E valuation of 11.4x, near long-term averages [2][9]. - Best-performing sectors included Healthcare (+11.5%), Financials (+11.1%), and IT (+9.5%), while Consumer Discretionary (-11.2%), Real Estate (-3.1%), and Consumer Staples (-1.6%) underperformed [2][16]. Macro Environment - Credit growth rose from 8.0% YoY in 2024 to 8.7% in May 2025, but loan growth declined from 7.0% to 6.7% [3][54]. - The property market showed recovery in late 2024 but declined again in 2Q25, indicating ongoing challenges in the real estate sector [3][15]. - The report anticipates nominal GDP growth to decelerate to 3-4% in 2H25 amid trade tensions and insufficient credit growth [47][48]. Sector Model Portfolio - For 3Q25, the report favors sectors focused on domestic demand, such as financials and internet, while downgrading liquors and real estate due to earnings risks [4][14]. - The model portfolio includes banks and brokers for better downside protection, while tech hardware and gold sectors are upgraded [4][14]. Valuation and Earnings Revision - The average 12-month forward P/E valuation for the CSI 300 rebounded to 13x, while the MSCI China Index remained above 11x, indicating a discount to long-term averages [38][39]. - In 2Q25, consensus earnings for MSCI China were revised down by 0.9% QoQ, with significant downgrades in Real Estate, Utilities, and Energy sectors [42][42].