Global Market Overview - The Hang Seng Index closed at 27,082, up 2.53% for the day and 5.66% year-to-date, driven by strong performances from major stocks like Tencent and Hong Kong Exchanges [3] - The Hang Seng Technology Index rose by 3.34%, indicating a renewed interest in technology stocks [3] - Southbound capital saw a net inflow of approximately HKD 20.2 billion, highlighting a shift towards "core assets + technology" allocation [3] - The offshore RMB strengthened, breaking through 6.89, nearing a three-year high, amidst calls from the Ministry of Commerce for the U.S. to lift unilateral tariffs [3] Sector Performance - The Hang Seng Financial Index increased by 2.29%, with a year-to-date rise of 8.12% [2] - The Hang Seng Industrial Index rose by 2.77%, reflecting a year-to-date increase of 3.03% [2] - The Hang Seng Real Estate Index saw a 2.25% increase, with a significant year-to-date rise of 23.95% [2] - The Hang Seng Utilities Index gained 0.90%, with a year-to-date increase of 9.27% [2] U.S. Market Reaction - Major U.S. indices, including the Dow Jones, S&P 500, and Nasdaq, all fell over 1%, influenced by renewed tariff uncertainties and concerns over AI impacts [3] - The 10-year U.S. Treasury yield dropped over 5 basis points to 4.02%, marking a near three-month low as investors sought safe-haven assets [3] - Gold prices surged over 2%, while silver rose approximately 4%, reflecting a flight to safety amid market volatility [3] Investment Sentiment - The report indicates a cautious sentiment among investors due to the resurgence of tariff risks and AI-related fears, leading to significant sell-offs in high-valuation sectors [3] - The uncertainty surrounding trade policies has weakened investor confidence in U.S. assets, contributing to a decline in the U.S. dollar index over two consecutive days [3]

Group 1: Stock Recommendations - 吉利汽车 (Geely Auto) has a market cap of $23.4 billion, with a target price of $25.00, indicating an upside potential of 48%[5] - 正力新能 (Zhengli New Energy) has a market cap of $2.8 billion, with a target price of $18.00, indicating an upside potential of 113%[5] - 极兔速递 (Jitu Express) has a market cap of $12.2 billion, with a target price of $13.40, indicating an upside potential of 25%[5] - 三一国际 (Sany International) has a market cap of $6.2 billion, with a target price of $20.60, indicating an upside potential of 37%[5] - 瑞幸咖啡 (Luckin Coffee) has a market cap of $11.0 billion, with a target price of $54.68, indicating an upside potential of 41%[5] Group 2: Performance Overview - The basket of 26 long positions had an average return of -2.3%, outperforming the MSCI China Index, which returned -2.4% by 0.1 percentage points[10] - Out of the 26 stocks, 11 had returns exceeding the benchmark[10] - The report includes a new addition of Datadog (DDOG US) to the buy list, while Salesforce (CRM US) has been removed[7]

Global Market Overview - The Hang Seng Index closed at 26,413, down 1.10% for the day but up 3.05% year-to-date [1] - The Hang Seng Technology Index fell by 2.91%, reflecting a year-to-date decline of 5.52% [1] - The US stock market showed positive movement with the Dow Jones up 0.47% and the S&P 500 up 0.69% [1] - European markets were buoyed by a rise in the STOXX 600 index, which increased by 0.84% to reach a historical closing high [3] Sector Performance - The Hang Seng Financial Index increased by 0.08% year-to-date, while the Hang Seng Real Estate Index saw a significant rise of 21.22% [2] - The Hang Seng Industrial Index decreased by 1.89% for the day, with a modest year-to-date increase of 0.25% [2] - The Hang Seng Utilities Index fell by 0.81% but has a year-to-date increase of 8.29% [2] Macroeconomic Insights - Strong domestic travel and consumption data were reported during the Chinese New Year holiday, indicating robust economic activity [3] - The offshore RMB strengthened against the USD, recovering above the 6.90 mark and recording three consecutive weekly gains [3] - The 10-year US Treasury yield rose to 4.08%, influenced by a significant increase in the core PCE price index, which rose 3% year-on-year [3] Commodity Market Trends - Gold prices rebounded, with spot gold rising over 2% to reach $5,080 per ounce, while silver surged approximately 6% to surpass $82 [3] - Concerns over stagflation and uncertainties surrounding tariff policies have influenced the precious metals market positively [3]

Investment Rating - The report maintains a "BUY" rating for NetEase Cloud Music, indicating a potential return of over 15% over the next 12 months [14]. Core Insights - NetEase Cloud Music's total revenue for FY25 declined by 2% YoY to RMB7.76 billion, slightly below the Bloomberg consensus estimate of RMB7.91 billion. However, adjusted net profit increased by 68% YoY to RMB2.86 billion, aligning with consensus estimates [1]. - The company has slightly lowered its FY26 total revenue forecast by 1% due to a soft non-subscription business, but maintains a solid earnings growth outlook for FY26 [1][6]. - The target price has been adjusted to HK$245.00, down from HK$330.00, based on a 23x FY26E non-GAAP PE, reflecting a decline in sector valuation [1][9]. Financial Performance Summary - FY25 total revenue: RMB7.76 billion, down 2% YoY; adjusted net profit: RMB2.86 billion, up 68% YoY [2]. - FY26 revenue forecast: RMB8.42 billion, expected to grow by 8.5% YoY; adjusted net profit forecast: RMB2.14 billion, expected to decline by 25.3% YoY [2][7]. - Gross margin for FY26 is projected at 37.0%, with an operating profit margin of 22.9% [2][11]. Revenue Breakdown - Online music services revenue grew by 8% YoY to RMB3.0 billion in 2H25, while membership subscription revenue increased by 12% YoY to RMB2.6 billion [6]. - Non-subscription music revenue declined by 7% YoY in 2H25, primarily due to a drop in digital album sales [6]. - Social entertainment revenue fell by 17% YoY to RMB905 million in 2H25, although it stabilized with a 5% HoH growth [6]. Margin Analysis - Overall gross profit margin (GPM) increased by 2.7 percentage points YoY but declined by 1.4 percentage points HoH to 35.0% in 2H25 [6]. - Adjusted operating margin improved by 4.6 percentage points YoY to 21.1% in 2H25, driven by operating leverage and effective expense control [6]. Valuation Metrics - The current price of NetEase Cloud Music is HK$165.40, with an upside potential of 48.1% to the target price of HK$245.00 [3]. - The company is currently trading at a P/E of 15x for FY26E, which is considered attractive compared to the target P/E of 23x [1][9].

Group 1: Company Overview - NetEase Cloud Music reported FY25 revenue of 7.76 billion RMB, a 2% year-on-year decline, slightly below the consensus estimate of 7.91 billion RMB [2] - Adjusted net profit for FY25 increased by 68% to 2.86 billion RMB, in line with consensus expectations [2] - The adjusted operating profit rose by 32% to 1.73 billion RMB, excluding the impact of deferred income tax credits [2] Group 2: Performance Analysis - In 2H25, online music revenue growth slowed to 8% year-on-year, down from 16% in 1H25 [2] - Overall gross margin in 2H25 decreased by 1.4 percentage points compared to 1H25, primarily due to a decline in high-margin non-member business revenue [2] - Despite the slowdown in non-member business performance, the music membership business remained robust in 2H25 [2] Group 3: Future Outlook - The FY26 total revenue forecast has been slightly adjusted downwards by 1% due to the weaker performance of non-member business [2] - The target price for NetEase Cloud Music has been revised down to 245.0 HKD, based on a 23x FY26E non-GAAP PE, reflecting a downward adjustment in sector valuations [2] - The current valuation corresponds to a 15x FY26E PE, combined with a stable profit growth outlook for FY26, making the risk-reward ratio more attractive [2]

Employment Data - In January, the U.S. added 130,000 non-farm jobs, significantly exceeding the market expectation of 65,000[4] - Private sector job additions rose from 64,000 in December to 172,000 in January[4] - The unemployment rate decreased from 4.4% in December to 4.3% in January, better than the expected 4.4%[4] Structural Weakness - Job growth was primarily concentrated in public sectors like healthcare and education, while layoffs reached the highest level for January since 2009[4] - Job vacancies fell to a nearly five-year low, indicating weak labor demand[4] - The government sector saw a reduction of 42,000 jobs, with federal employment down by 34,000 since 2025, totaling a cumulative loss of 323,000 jobs[4] Wage Growth and Inflation - Monthly wage growth increased from 0.1% in December to 0.4% in January, with a year-on-year growth rate of 3.7%[4] - The QCEW benchmark revision reduced the projected job additions for April 2024 to March 2025 by 860,000, aligning with market expectations[4] Economic Outlook - The labor market is expected to stabilize with potential structural weaknesses due to AI integration replacing basic jobs[4] - Expansionary fiscal policies may support demand recovery, but the job market's recovery will be uneven[4] - Market anticipates two rate cuts in 2026, with the first cut now expected in July instead of June[4]

1. Report Industry Investment Rating - No industry investment rating is provided in the report. 2. Core Viewpoints - The Chinese/HK properties performed strongly overall, especially VNKRLE bonds due to the reported SZ government rescue plan for Vanke. The deflationary pressure in China continued to ease in early 2026, and mild price reflation is expected in 2026, which should improve corporate profitability and support the capital - market performance of materials and cyclical sectors [2][3][12]. 3. Summary by Relevant Catalogs Trading Desk Comments - Yesterday, the new CHIFEN 7.4 02/13/29 lowered by up to 1.0pt from RO at par. Chinese AMC space was firm, while HK bank T2s BNKEA/NANYAN widened 5 - 6bps, and Chinese TMTs KUAISH/MEITUA widened 2 - 5bps. Higher - beta names FRESHK 26 - 29s/ZHOSHK 28 closed 7 - 13bps wider. EHICAR 27 dropped 2.1pts, and EHICAR 26 closed 0.3pt lower. VNKRLE 27' and 29' surged 8.0 - 8.8pts on the SZ government rescue plan report. LNGFOR 27 - 32s/FUTLAN 28/FTLNHD 26 - 27 edged 0.1 - 0.4pt higher. Seazen Group raised HKD472.3mn (cUSD60.4mn) through a private share placement. LASUDE 26 rose 1.5pts, NWDEVL/VDNWDL complex gained 0.2 - 0.9pt, and FAEACO 12.814 Perp closed 0.8pt higher. In SE Asian space, PTTGC 31 - 52s widened 1 - 5bps, PTTGC Perps leaked 0.1 - 0.2pt, VLLPM 27 - 29 were down 1.0 - 1.8pts, and SMCGL Perps were 0.1pt higher. In KR space, POHANG/SKBTAM/HYNMTR/LGENSO stabilized. In JP space, there were selling flows on 10yr bank papers, Japanese insurance subs edged 0.1pt firmer, and Yankee AT1s leaked 0.1 - 0.3pt. In the Middle East, BSFRs were 0.1pt lower to 0.1pt higher, and long - end KSAs traded up to 0.4pt higher [2]. - This morning, MEITUA/KUAISH recovered to 3 - 5bps tighter. There was better selling on FRESHKs, FAEACO 12.814 Perp gained 1.6pts higher, EHICAR 26 dropped 2.3pts, and ACPM 4.85 Perp/HYSAN 4.85 Perp were 0.6 - 0.8pt lower. VNKRLE 27' and 29' edged 0.1 - 0.2pt higher after yesterday's jump [3]. - In the LGFV space, there was deployment demand from institutions, lifting offers and driving yields tighter. Non - LGFV CNH papers remained afloat due to cross - border account demand [4]. Last Trading Day's Top Movers | Top Performers | Price | Change | Top Underperformers | Price | Change | | --- | --- | --- | --- | --- | --- | | VNKRLE 3.975 11/09/27 | 43.4 | 8.8 | EHICAR 12 09/26/27 | 53.3 | - 2.1 | | VNKRLE 3 1/2 11/12/29 | 41.5 | 8.0 | VLLPM 7 1/4 07/20/27 | 51.9 | - 1.8 | | TTMTIN 4.35 06/09/26 | 99.4 | 1.9 | NICAU 9 09/30/30 | 103.4 | - 1.2 | | LASUDE 5 07/28/26 | 78.4 | 1.5 | HAOHUA 5 1/2 03/14/48 | 99.9 | - 1.0 | | NWDEVL 10.131 PERP | 80.9 | 0.9 | VLLPM 9 3/8 07/29/29 | 41.5 | - 1.0 | [5] Marco News Recap - On Wednesday, S&P (-0.00%), Dow (-0.13%), and Nasdaq (-0.16%) were lower. The US Jan'26 Nonfarm Payrolls were +130k (higher than the market expectation of +66k), the Unemployment Rate was 4.3% (lower than the forecast of 4.4%), the Average Hourly Earnings in Jan'26 was +0.4% mom (a touch higher than the forecast of +0.3%), and the Crude Oil Inventories was +8.53mn (higher than the market expectation of -0.2mn). UST yield was higher, with 2/5/10/30 - year yield at 3.52%/3.75%/4.18%/4.82% [6]. Desk Analyst Comments - VNKRLE 27' and 29' jumped 8.0 - 8.8pts yesterday and edged 0.1 - 0.2pt higher this morning on the media reports of the SZ government's RMB80bn rescue plan for Vanke, including a RMB20bn share placement. Whether the equity injection is sufficient is under discussion, and the new share issue for a loss - making company needs special regulatory approval. The rescue plan is in line with the view that the central government doesn't want another high - profile default in the property sector. The SZ government, through SZ Metro, has been incentivized to support Vanke's refinancing and maturity extension [7]. - In late Jan'26, Vanke secured consents on onshore bonds. SZ Metro provided a 3 - year loan of up to RMB2.4bn to Vanke. Fitch upgraded China Vanke to CC from RD and affirmed Vanke HK's CC rating [8]. - Vanke can turn to alternative funding channels like long - term operating loans or CBICL - guaranteed bonds secured by IPs. As of Jun'25, the book value of Vanke's IPs was cRMB152bn, and c48% of IPs remained unencumbered, which could secure additional financing of cRMB36bn. The total o/s onshore and offshore bonds of Vanke is cRMB27bn [9][10]. - There are hold recommendations on VNKRLEs. The total outstanding amount of Vanke's USD bonds is USD1.3bn, and the next offshore maturity is VNKRLE 3.975 11/09/27 in Nov'27. Estimated NPVs for VNKRLEs are low - 60 to high - 70 and high - 50 to low - 70, respectively [11]. China Economy - China's deflationary pressure continued to ease in early 2026. CPI slowed to 0.2% YoY in Jan due to a high base effect and volatile food pricing. Core inflation remained robust driven by durable goods, tourism, and jewellery prices. PPI beat market expectation as price relation in upstream sectors passed through, while PPI of consumer goods remained subdued. Mild price reflation is expected in 2026, and CPI and PPI are expected to reflate from 0.1% and - 2.6% in 2025 to 0.9% and 0.5% in 2026. Further demand - side policies are expected to address the imbalance [12]. - Food price dynamics and base effects drove the shift in headline CPI. CPI YoY moderated to 0.2% in Jan from 0.8% in Dec, slightly below the market expectation. Sequentially, CPI remained flat at 0.2% MoM. Food prices showed weaker - than - normal seasonality, pork prices had 1.2% MoM growth, fresh vegetable prices dropped - 4.8% MoM, and vehicle fuel prices declined 1.2% MoM. Headline CPI is expected to rebound to 1.1% in Feb [13]. - Core CPI remained robust as durable goods price reflated. Core inflation edged down to 0.8% YoY in Jan from 1.2% in Dec due to the base effect, while its MoM expanded to 0.3%. Durable goods saw notable price reflation, other supplies and services including gold jewellery surged 2.7% MoM, service price growth edged up to 0.2% MoM, medical services continued reflation, and housing rent dropped 0.1% MoM [14]. - PPI sustained its recovery momentum. The YoY contraction of PPI narrowed to - 1.4% in Jan from - 1.9% in Dec, beating market expectations. The MoM growth reached 0.4%, the highest in 28 months. The extraction sector dropped 1.7% MoM, raw materials and processing sectors rose 0.7% and 0.5% MoM, AI - related and anti - involution sectors saw price increases, while downstream sectors remained subdued [15][16]. Offshore Asia New Issues - There were no offshore Asia new issues priced or in the pipeline today [19][20]. News and Market Color - Yesterday, 72 credit bonds were issued onshore with an amount of RMB50bn. Month - to - date, 858 credit bonds were issued with a total amount of RMB690bn, a 615.7% yoy increase. Sales of New Energy Vehicles (NEVs) in China slumped 18.9% yoy in Jan'26. First Pacific's Meralco will spend USD4.65bn on network upgrades and service expansion. Fosun - owned insurer weighs Lisbon listing at more than USD3.6bn valuation [21]. Company - Specific News - Seazen Group raised HKD472.3mn (cUSD60.4mn) through a private share placement to help repay FTLNHD 4.5 05/02/26 [26]. - Medco Energi Internasional's arm was awarded the operatorship of Cendramas offshore field in Malaysia by Petronas [26]. - Moody's affirmed Meituan's Baa1 ratings and revised outlook to negative from stable due to competition in the food delivery business [26]. - Petron Malaysian unit flagged a potential financial hit due to tropical storm Senyar [26]. - Petronas launched a bidding round for nine exploration blocks across Malaysia [26]. - Samsung Heavy won a USD321mn deal to build two containerships for an African buyer [26]. - AIIB will provide up to USD250mn on - lending facility to Shriram Finance [26]. - Santos flagged a USD137mn impairment loss in 2025 [26]. - West China Cement settled tender offer for WESCHI 4.95 07/08/26, with USD51.976mn remaining outstanding [26].

Macro Commentary - In 2026, China's deflationary pressure continues to ease, with January CPI growth slowing to 0.2% due to the impact of the Spring Festival and food price fluctuations. Core inflation remains strong, driven by price increases in durable goods, travel services, and gold jewelry [2] - PPI exceeded market expectations again, with upstream price increases beginning to transmit to midstream and downstream sectors, particularly in the non-ferrous metals industry, while consumer goods PPI remains relatively weak [2] - It is anticipated that price levels will continue to rise moderately in 2026, driven by antitrust movements, AI-related investments, and rising global commodity prices, which will enhance corporate profitability and boost capital market performance in raw materials and cyclical industries [2] - CPI and PPI are expected to rebound from 0.1% and -2.6% in 2025 to 0.9% and 0.5% in 2026, respectively [2] Market Performance - The Hang Seng Index closed at 27,266, up 0.31% for the day and 6.38% year-to-date. The Hang Seng Tech Index rose nearly 1% [2] - The Shanghai Composite Index slightly increased to 4,132, marking a "seven consecutive days" rise [4] - The performance of various sectors in the Hong Kong stock market showed mixed results, with the Hang Seng Property Index up 20.44% year-to-date [3] Company Commentary - NetEase (NTES US) reported 4Q25 earnings with total revenue growing 3% year-on-year to 27.5 billion RMB, which was 4% lower than Bloomberg consensus expectations, primarily due to slower-than-expected growth in gaming revenue and extended revenue recognition periods [5] - Operating profit increased by 6% year-on-year to 8.3 billion RMB, falling short of consensus expectations by 6% [5] - Despite the revenue miss, the outlook for FY26E revenue growth remains positive, supported by a 34% year-on-year increase in contract liabilities in 4Q25 and the anticipated launch of several major new products in FY26 [5] - The target price for NetEase has been adjusted to $161.5 from $164.0, maintaining a "Buy" rating [5]

Investment Rating - The report maintains a BUY rating for NetEase, indicating a potential return of over 15% over the next 12 months [19]. Core Insights - NetEase reported a total revenue increase of 3% year-over-year to RMB 27.5 billion in 4Q25, which was 4% below Bloomberg consensus estimates due to slower-than-expected games revenue growth and a prolonged revenue recognition period [1]. - Operating income grew by 6% year-over-year to RMB 8.3 billion, also falling short of consensus estimates by 6% [1]. - Contract liabilities increased by 34% year-over-year in 4Q25, suggesting a positive outlook for revenue growth in FY26, supported by several highly anticipated game launches [1][8]. - The target price for NetEase has been slightly adjusted to US$161.5 from the previous US$164.0, reflecting a 30.7% upside from the current price of US$123.52 [3][12]. Financial Performance - For FY26E, total revenue is projected to reach RMB 120.8 billion, with adjusted net profit expected at RMB 41.4 billion, reflecting a growth of 10.5% year-over-year [2][9]. - Gross margin is expected to improve to 64.8% in FY26E, while operating margin is projected to be 33.0% [9][10]. - The company has maintained a decent shareholder return of RMB 14.5 billion in 2025, which is approximately 3% of its market capitalization [8]. Business Segments - The online games segment is valued at US$142.1 billion, accounting for 88% of the total valuation, based on a 17x EV/EBIT multiple for FY26E [12]. - Youdao and NetEase Cloud Music are valued at US$0.7 billion and US$3.4 billion, respectively, based on industry-average multiples [12]. - The innovative businesses segment is valued at US$1.5 billion, with net cash contributing an additional US$13.8 billion to the overall valuation [12]. Market Position - NetEase's market capitalization stands at approximately US$78.7 billion, with an average trading volume of US$92.3 million over the past three months [4]. - The stock has experienced a decline of 11.3% over the past month and 13.2% over the past three months, indicating some volatility in its performance [5]. Future Outlook - Several highly anticipated game launches are scheduled for FY26, including "Sea of Remnants" and "YaoYaoQi," which are expected to drive revenue growth [1][8]. - The integration of AI into various phases of game development is expected to enhance quality and efficiency, positioning the company favorably in the competitive landscape [8].

Company Insights - Geekplus (2590 HK, Buy, Target Price: HKD 26.7) has officially launched Gino 1, the world's first general-purpose robot designed specifically for warehouse scenarios, which is expected to open up more application areas in warehouse automation [1] - Gino 1 is capable of performing multiple warehouse tasks including picking, moving boxes, packing, and inspection, and will be offered to customers as a solution alongside existing Autonomous Mobile Robot (AMR) products before mass production [1] - Datadog (DDOG US, Buy, Target Price: USD 196.90) reported Q4 2025 revenue of USD 953.2 million, a year-on-year increase of 29.2%, driven by accelerated revenue growth from non-AI customers and strong demand from AI-native clients [1] - Datadog's non-GAAP net profit for Q4 2025 was USD 217.4 million, up 22.5% year-on-year, exceeding both internal and market expectations due to better-than-expected revenue and operational leverage [1] - For the full year 2025, Datadog expects total revenue to grow by 27.7% to USD 3.4 billion, with a non-GAAP operating margin of 22.4% [1] - Management indicated that the trend of accelerating revenue growth from non-AI customers continued into January 2026, guiding for Q1 2026 revenue growth of 25%-26% [1] - The revenue growth forecast for 2026 is set at 18%-20%, with a non-GAAP operating margin of 20%-22%, reflecting a cautious approach towards AI-native customer revenue growth assumptions [1] - The target price for Datadog has been adjusted to USD 196.90 based on a 16.3x EV/Sales for 2026, which is at a level one standard deviation above the two-year average [1]