Domestic Macro - On October 11, the State Council Information Office held a press conference on "High-Quality Completion of the 14th Five-Year Plan" [4] - On October 12, the Ministry of Commerce stated that China's rare earth export controls are not prohibitive and that applications meeting regulations will be permitted [4][5] - On October 14, Premier Li Qiang emphasized the need for enhanced counter-cyclical adjustments during a meeting with economic experts and entrepreneurs [4][5] - The People's Bank of China announced a 600 billion yuan reverse repurchase operation on October 15, with a cumulative net injection of 400 billion yuan for the month [4][5] - On October 16, China expressed an open attitude towards a new round of Sino-U.S. economic and trade talks [4][5] Industry Policy - On October 10, the Ministry of Natural Resources released guidelines for optimizing urban stock space, marking it as a key task for future land use planning [5][18] - The Financial Regulatory Bureau issued a notice to strengthen regulation of non-auto insurance businesses, focusing on issues of non-standard operations and irrational competition [18] - The central bank solicited opinions on the "Management Measures for Identifying Beneficial Owners of Financial Institutions" [18] - On October 12, the Ministry of Industry and Information Technology and six other departments issued a plan to promote service-oriented manufacturing innovation [18] - The National Development and Reform Commission (NDRC) released a management method for energy-saving and carbon reduction investments, supporting key industries [19] Local Policy - On October 10, Shanghai adjusted the rules for the 2025 automobile trade-in subsidy program [6][20] - The Hainan Free Trade Port Tourism Regulations will take effect on December 1, 2025, gradually relaxing restrictions on foreign investment in tourism [6][20] - On October 11, Shanghai issued measures to accelerate the cultivation of future industries, focusing on six key areas [20] - The second batch of Shanghai Free Trade Zone innovation zone construction plans was released on October 15 [20] Overseas Dynamics - On October 10, China announced countermeasures against U.S. restrictions on the shipbuilding industry, implementing special port fees for U.S. vessels starting October 14 [9][19] - On October 11, the global cryptocurrency market experienced a significant crash, with over 19 billion USD in contracts liquidated in one day [9] - On October 12, the Dutch government froze 14.7 billion USD of Chinese semiconductor assets [9] - On October 15, China filed a complaint with the WTO against India's electric vehicle and battery subsidy measures [9]

Market Performance - Developed markets experienced a general rebound, with MSCI Global up by 1.0%, MSCI Developed up by 1.2%, and MSCI Emerging down by 0.4% [6][10] - In the developed markets, the South Korean Composite Index showed the strongest performance with a gain of 3.8%, while the German DAX had the weakest performance with a decline of 1.7% [6][10] - In the emerging markets, the Mexican MXX index performed best with a rise of 1.9%, while the ChiNext Index was the worst performer, down by 5.7% [6][10] Trading Sentiment - The VIX index remained at a high level, indicating elevated market volatility [23] - Trading volumes varied across global markets, with the Shanghai Composite Index and Hang Seng Index seeing increases, while the S&P 500 and Nikkei 225 experienced declines [23][25] - Investor sentiment in Hong Kong was at a historical low, while North American sentiment was at a historical high [23] Earnings Expectations - Earnings expectations for the technology and financial sectors in Europe and the U.S. were revised upward [68] - The 2025 EPS forecast for the Hang Seng Index was downgraded from 2060 to 2055, while the S&P 500's EPS forecast was upgraded from 268 to 269 [68][71] - The Eurozone STOXX50 index maintained its 2025 EPS forecast at 332, with the technology sector seeing the largest upward revision [68][71] Economic Expectations - Economic expectations in Central Europe improved, with the European economic surprise index rising [6] - The U.S. economic surprise index declined due to ongoing government shutdowns and regional banking issues, while the Chinese economic surprise index also fell [6] Fund Flows - The market is pricing in two potential rate cuts by the Federal Reserve by the end of the year, with expectations rising from the previous week [54][59] - Recent fund flows indicated significant inflows into the Hong Kong stock market, totaling 78 billion HKD, with notable contributions from the Stock Connect program [65][67] Valuation Metrics - Developed markets' PE and PB ratios were reported at 24x and 3.9x, respectively, indicating high valuation levels compared to historical norms [32] - Emerging markets showed a decline in valuation metrics, with PE and PB ratios at 16.6x and 2.1x, respectively [36] - Sector valuations in the Hong Kong market showed healthcare and technology sectors with the highest PE ratios, while energy and financial sectors had the lowest [45]

Group 1 - The report indicates a significant net outflow of northbound funds, estimated at 112 billion yuan for the week of October 13-17, 2025, compared to a net outflow of 46 billion yuan the previous week [6][11] - The report highlights that flexible foreign capital experienced a net outflow of 50 billion yuan during the same week, up from 17 billion yuan the week before [6][11] - The top active stocks in the northbound trading during the week included Ningde Times with a total transaction amount of 222 billion yuan, accounting for 16% of the total trading amount for that stock [6][11] Group 2 - In the Hong Kong market, foreign capital increased its positions in the pharmaceutical and semiconductor sectors while reducing exposure to large financial institutions, with a total inflow of 78 billion HKD for the week of October 8-14, 2025 [11][13] - Stable foreign capital saw an inflow of 19 billion HKD, while flexible foreign capital experienced a significant outflow of 489 billion HKD during the same period [11][12] - The report notes that the main inflows for stable foreign capital were in pharmaceuticals (30 billion HKD) and semiconductors (20 billion HKD), while the main outflows were from ETFs (-30 billion HKD) and non-ferrous metals (-21 billion HKD) [13][14] Group 3 - In the Asia-Pacific market, foreign capital flowed into Japan, with a net inflow of 10,716 billion yen for the week ending October 6, 2025, while India saw an outflow of 2.7 billion USD in September [21][22] - Cumulatively, Japan has seen a net inflow of 8.9 trillion yen since the beginning of 2023, while India has experienced a total net inflow of 13.5 billion USD since 2020 [21][22] Group 4 - In the US and European markets, global mutual fund inflows into the US equity market amounted to 3.6 billion USD in August, reversing a previous outflow of 35 billion USD [24][25] - In Europe, the net inflows for the UK, Germany, and France were -0.59 billion USD, 1.13 billion USD, and 1.6 billion USD respectively for August [24][25]

Group 1: Market Trends and Technologies - ESUN (Ethernet for scale-up networking) has gained traction with major players like Meta, Broadcom, and AMD, indicating a positive outlook for Ethernet-related companies such as Broadcom, ANET, and CSCO[4] - The market reaction to ALAB and CRDO suggests they may be oversold, as ESUN and UAlink are not necessarily in conflict, allowing for continued use of PCIe/CXL interconnects[4] - Ciena predicts a sixfold increase in DCI bandwidth over the next five years, highlighting significant growth potential in the data center interconnect market[4] Group 2: Product Developments and Performance - AMD's Helios Rack features 72 MI450 GPUs, offering up to 1.4 EF of FP8 performance and 2.9 EF of FP4 performance, with a total HBM4 memory of 31 TB and bandwidth of 1.4 PB/s[4] - Oracle is the first major customer for the MI450, with an initial deployment of 50,000 GPUs starting in Q3 2026, and Meta is expected to follow as a significant customer[4] - The value of the 1.6T optical module in the GB300 NVL72 rack has doubled from a ratio of 1:2.5 to 1:5, with expected shipments increasing from 8 million to over 20 million units by 2026[4]

Investment Rating - The report assigns an "Outperform" rating to multiple companies including Nike, Midea Group, JD Group, Haier Smart Home, Gree Electric Appliances, Anta Sports, and others, while Lulu Lemon is rated as "Neutral" [1]. Core Insights - The report highlights that various sectors within the discretionary industry are experiencing continuous rotation, with price pullbacks presenting buying opportunities [4][11]. - The performance of different sectors is analyzed, with jewelry, overseas cosmetics, luxury goods, and snacks showing positive growth, while domestic cosmetics and gaming sectors are underperforming [6][13]. Sector Performance Overview - Weekly performance shows jewelry leading with a 9.9% increase, followed by overseas cosmetics at 6.8%, and luxury goods at 5.5%. Domestic cosmetics experienced a slight decline of 0.3% [11][12]. - Year-to-date performance indicates jewelry has risen by 179.1%, domestic cosmetics by 50.4%, and overseas cosmetics by 42.3%, while overseas sportswear has declined by 17.7% [11][12]. Valuation Analysis - Most sectors are currently valued below their average over the past five years, with the expected PE for overseas sportswear at 31.9 times, domestic sportswear at 13.4 times, and jewelry at 27.2 times, indicating potential for growth [9][14]. - The report notes that the expected PE for various sectors in 2025 is lower than their historical averages, suggesting that there may be undervalued opportunities in the market [14].

Investment Rating - The report does not explicitly state an investment rating for Stella International, but it indicates a positive outlook based on strong order visibility and capacity expansion plans. Core Insights - Stella International reported total revenue of USD 1.179 billion for the first three quarters of 2025, reflecting a year-over-year increase of 1.7%. In the third quarter alone, revenue reached USD 402 million, up 3.7% year-over-year, driven by a 7.8% increase in shipment volume, although partially offset by a 3.8% decline in average selling price (ASP) [1][6][7]. Summary by Sections Revenue and Shipment Performance - In 3Q25, the footwear manufacturing revenue was USD 392 million, marking a 3.6% year-over-year increase, with shipment volume approximately 13.9 million pairs, up 7.8% year-over-year. The growth in shipment volume was influenced by a low base effect from the previous year due to early shipments related to the Paris Olympics [2][7]. ASP and Product Mix - The ASP for the quarter was around USD 28.2 per pair, down 3.8% year-over-year, primarily due to a shift in product mix towards lower-priced sports footwear. Management noted that ASP changes are mainly driven by customer mix rather than raw material costs, with potential for recovery if new capacity is allocated to high-end clients [3][4][8]. Capacity Expansion and Customer Demand - Management highlighted that new sports brands have joined as customers, and fourth-quarter orders are largely secured, indicating high order visibility for the next two to three years. The company plans to accelerate capacity expansion to meet this demand while optimizing resource allocation [3][8][9]. Operational Efficiency - The efficiency of factories in Indonesia and the Philippines is improving, with the Indonesian factory showing continuous improvement since June. The Philippine factory has reduced production lines to prioritize stable yield, adhering to a principle of minimizing waste [9][10]. Cost Management and Capital Expenditure - Cost pressures remain manageable, with an estimated tariff sharing impact of around USD 8 million for 2025. Management plans to adopt a more cautious approach to capital expenditure, with expectations for an increase to support mid- to long-term growth needs [10][11]. Shareholder Returns - The company commits to maintaining a payout ratio of around 70% in 2025 and 2026, with additional returns to shareholders through share repurchases and special dividends, aiming to restore profit margins to normalized levels close to 12% [11].

Consumption - Post-holiday consumption has shown a slight decline, with retail and wholesale automobile sales significantly dropping compared to the previous week, indicating a temporary "vacuum" in market demand after pre-holiday promotions[6] - The wholesale price index for agricultural products increased by 0.4% month-on-month, while the price of Moutai liquor has significantly decreased, reflecting a broader trend of price adjustments in consumer goods[6] - Service consumption has returned to normal levels, with a notable decline in movie attendance and tourism prices, indicating the end of the holiday "pulse" effect[7] Investment - Infrastructure investment has seen a cumulative issuance of special bonds amounting to CNY 3.81 trillion as of October 18, with an additional CNY 133.88 billion issued in October, suggesting a supportive funding environment for infrastructure projects[17] - Real estate transactions in 30 cities have shown a seasonal rebound, with first-tier and third-tier cities experiencing a narrowing of year-on-year declines, while second-tier cities have turned positive[17] Trade and Export - Domestic export prices have decreased by 4.1% month-on-month, while import prices fell by 2.2%, indicating weak demand in non-mainline shipping routes[23] - The Shanghai and Ningbo export container price indices increased by 12.9% and 16.8% respectively, reflecting a recovery in demand for mainline shipping routes post-holiday[23] Production - Most production sectors have shown improvement post-holiday, with coal consumption in coastal provinces increasing, although steel production has seen a mixed performance with some declines in output[26] - The operating rate for asphalt has slightly increased, indicating a gradual recovery in construction activities following the holiday[17] Inventory and Prices - Coal inventories at ports have significantly decreased, while cement inventory ratios have slightly increased, reflecting varying demand across sectors[36] - Consumer prices have shown a slight overall increase, while industrial prices have generally declined, with the PPI for industrial products decreasing by 1.1% month-on-month[38] Liquidity - The central bank has conducted a net withdrawal of CNY 231.9 billion to maintain liquidity stability, with the dollar index declining by 27 basis points, indicating a stable overall liquidity environment[42]

Investment Rating - The report assigns an "Outperform" rating for Chow Tai Fook, expecting a relative return exceeding 10% over the next 12-18 months [21]. Core Insights - Chow Tai Fook's retail sales increased by 4.1% year-on-year in 2QFY26, with Mainland China growing by 3.0% and Hong Kong/Macau by 11.4% [2][8]. - Same-store sales returned to positive growth across all channels, driven primarily by higher average selling prices (ASP), despite a decline in sales volume [9][10]. - Priced gold products emerged as a key growth driver, with retail sales surging by 43.7% year-on-year, significantly enhancing the company's gross margin and profitability [10][11]. - The company is focusing on optimizing its retail network, closing approximately 300 stores in Mainland China while opening new high-efficiency stores in prime locations [12]. - Management anticipates FY26 to be a year of profitability recovery, with gross margin and operating profit expected to exceed previous guidance due to structural improvements and a higher contribution from priced gold [13]. Summary by Sections Retail Performance - Group retail sales for 2QFY26 increased by 4.1% year-on-year, with same-store sales in Mainland China and Hong Kong/Macau showing positive growth [2][9]. - The average selling price in Mainland China rose from HK$6,400 to HK$7,900, while in Hong Kong and Macau, it increased from HK$9,400 to HK$11,700 [9]. Product Mix and Growth Drivers - Priced gold became the core growth engine, with same-store sales of gold jewelry in Mainland China and Hong Kong/Macau increasing by 10.6% and 10.4%, respectively [10]. - The proportion of priced gold products in Mainland China rose to 29.9%, with management indicating potential for further increases based on market acceptance [10][11]. Brand and Marketing Strategy - The company is enhancing brand recognition through iconic collections and collaborations with popular IPs, targeting younger consumers [11]. - New product lines, such as the "Tian Yuan Di Fang" collection, integrate traditional Chinese elements to attract a broader audience [11]. Channel Optimization - Chow Tai Fook is optimizing its retail network by closing underperforming stores and opening new concept stores with higher sales potential [12]. - E-commerce sales grew by 28.1% year-on-year, contributing significantly to overall retail performance [12]. Financial Outlook - Management expects improved gross margin and operating profit for 1HFY26, driven by a favorable product mix and effective cost management [13]. - The company is preparing for a strong second half of FY26, coinciding with wedding and festive seasons, which may further boost demand [13].

Investment Ratings - The report assigns an "Outperform" rating to multiple companies including Pop Mart, Anta Sports, Huazhu Group, and Haidilao, while Budweiser APAC is rated "Neutral" [1]. Core Insights - The report highlights the strong performance of the F&B sector, particularly noting the 10.7% increase in the stock price of Guoquan [4][7]. - It also mentions the strategic partnership between Haier Group and Alibaba, focusing on AI and digital innovation [3][6]. - Jiumaojiu's operational data for Q3 shows a decrease in same-store sales, but improvements in operational metrics are noted [3][6]. Weekly Performance Summary - Key performers in the F&B sector include Guoquan (+10.7%) and Xiaocaiyuan (+3.0%), while underperformers include ECOVACS (-11.8%) and ROBOROCK (-12.5%) in the home appliances sector [4][7]. - The report provides detailed stock price changes and PE ratios for various companies, indicating market trends and investor sentiment [5].

[Table_Title] 研究报告 Research Report 19 Oct 2025 香港策略 Hong Kong Strategy 短期回调空间初步释放，布局窗口逐步打开 Short-Term Pullback Largely Priced In, Entry Window Gradually Opening 周林泓 Amber Zhou 李加惠 Jiahui Li, CFA amber.lh.zhou@htisec.com jh.li@htisec.com [Table_yemei1] 观点聚焦 Investment Focus [Table_summary] (Please see APPENDIX 1 for English summary) 上周我们提到，周初下跌将触发短期超跌反弹，然而，受中美元首会晤不确定性影响，10月市场仍大概率维持震 荡格局。行业方面，市场风格或逐步转向红利与低位蓝筹相对占优。本周中美贸易摩擦持续升温，市场情绪未能 一步到位释放，导致指数在反弹后反复受压，整体呈现高位震荡回落格局。全周来看，上证综指下跌2.5%，创业 板指下跌5.7%，周线回落至10日线附近；港股回调 ...