Inflation Trends - The U.S. July CPI growth rate slightly decreased to 0.20% month-on-month from 0.29% in June, primarily due to falling energy prices, while the year-on-year CPI growth remained at 2.7%[6] - Core CPI month-on-month growth increased from 0.23% in June to 0.32% in July, exceeding market expectations of 0.29%, with year-on-year growth rising from 2.9% to 3.1%[6] Market Expectations - Following the CPI data release, market expectations for a rate cut in September rose from 86% to 94%, with an anticipated total cut of 60 basis points for the year[1] - The Federal Reserve is expected to maintain interest rates in September, with potential cuts in October and December[1] Core Inflation Components - Core goods prices remained stable month-on-month, while core service prices saw a significant rebound, with core services month-on-month growth rising from 0.21% to 0.48%[6] - Rent, which accounts for nearly 35% of the CPI, saw a month-on-month increase of 0.27%, returning to pre-pandemic levels[6] Employment and Economic Outlook - Non-farm employment growth has recently declined, influenced by both demand slowdown and reduced immigrant labor supply, while the unemployment rate remains low historically[1] - The inflation rate is expected to rebound in August and September, with projections indicating a year-on-year CPI growth of 2.9% to 3%[6]

Market Overview - Global markets showed mixed performance, with the Hang Seng Index closing at 24,970, up 0.25% for the day and 24.48% year-to-date [1] - The US markets saw gains, with the Dow Jones up 1.10% and the S&P 500 up 1.13%, reflecting positive sentiment driven by moderate inflation data [3] Hong Kong Stock Performance - The Hang Seng Financial Index rose 0.52% and is up 28.47% year-to-date, while the Hang Seng Utilities Index fell 0.30% but is still up 5.00% for the year [2] - Southbound capital saw a net inflow of HKD 9.45 billion, indicating strong interest in Hong Kong stocks [3] Economic Policies and Impacts - The Chinese government announced targeted interest subsidies for personal consumption loans, potentially leading to an increase in loan growth by CNY 1 trillion [3] - The Hong Kong Monetary Authority intervened by buying HKD 7.065 billion to defend the currency peg, with total purchases since June reaching HKD 116.6 billion [3] Company Analysis: Kingdee International - Kingdee reported a 1H25 revenue of CNY 3.19 billion, a year-on-year increase of 11.2%, aligning with expectations [4] - The company aims for AI-related revenue to constitute over 30% of total revenue by 2030, with AI contracts exceeding CNY 150 million in 1H25 [4] Company Analysis: Tencent Music - Tencent Music's 2Q25 revenue grew 18% to CNY 8.44 billion, with Non-IFRS net profit increasing 37% to CNY 2.57 billion, surpassing market expectations [5] - The company is expected to continue its growth trajectory, with projected revenue and profit increases of 17% and 28% respectively for 3Q25 [5] Focus Stocks - Geely Automobile (175 HK) has a target price of HKD 24.00, representing a 24% upside potential [6] - Luckin Coffee (LKNCY US) has a target price of USD 44.95, indicating a 19% upside potential [6] - Tencent (700 HK) is rated "Buy" with a target price of HKD 660.00, reflecting an 18% upside potential [6]

Core Insights - The report highlights a mixed performance in global markets, with the Hang Seng Index showing a year-to-date increase of 24.16% while the S&P 500 and NASDAQ have increased by 8.36% and 10.74% respectively [1][3] - The report notes a significant inflow of capital into China, contrasting with a net outflow from emerging market ETFs, indicating a potential shift in investor sentiment [3] - The semiconductor sector is highlighted with companies like Huahong Semiconductor and Qiutai Technology showing strong earnings growth, driven by increased demand and improved margins [4][5] Market Performance - The Hang Seng Index closed at 24,907, up 0.19% for the day and up 24.16% year-to-date [1] - The Shanghai Composite Index rose by 0.34% to close at 3,648, with a year-to-date increase of 8.82% [1] - The US markets saw declines, with the Dow Jones down 0.45% and the S&P 500 down 0.25% [1] Sector Analysis - The telecommunications, real estate, and healthcare sectors led gains in the Hong Kong market, while materials, energy, and information technology sectors faced declines [3] - In the A-share market, power equipment, communication, and computer sectors showed strong performance, while banking and oil sectors declined [3] Company Insights - Huahong Semiconductor reported Q2 2025 revenue of $566 million, an 18.3% year-on-year increase, with a gross margin of 10.9%, exceeding expectations [4] - Sany International expects a net profit growth of 25-35% for the first half of 2025, driven by strong demand for large port equipment and steady domestic demand [4] - Qutai Technology's revenue for the first half of 2025 grew by 15%, with a net profit increase of 168%, driven by strong performance in non-mobile camera modules [5][6] Investment Ratings - Huahong Semiconductor has been downgraded to a "Hold" rating with a target price of 48 HKD due to its current stock price being deemed reasonable [4] - Sany International maintains a "Buy" rating with a target price of 8.7 HKD, reflecting a positive growth outlook [4] - Qutai Technology is rated "Buy" with a target price of 14.5 HKD, supported by strong growth in non-mobile business segments [5][6]

Macro Economic Overview - China's CPI in July remained flat year-on-year, while PPI showed a narrowing decline month-on-month, indicating ongoing deflationary pressures [4] - The report anticipates that PPI will continue to be subdued in Q3 due to trade tensions and weak final demand, but a potential recovery in Q4 is expected due to ongoing policy support [4] Industry Insights - The Chinese construction machinery industry showed strong performance in July, with excavator sales increasing by 32% year-on-year for exports and 17% for domestic sales, indicating a positive outlook driven by replacement cycles and emerging markets [4] - The report maintains a positive view on companies such as Sany Heavy Industry, Hengli Hydraulic, and Zoomlion [4] Company Analysis: Hutchison China MediTech - Hutchison China MediTech's H1 performance fell short of expectations, with a 15% year-on-year decline in oncology revenue to $144 million, attributed to competitive pressures in the Chinese market [5] - The company has revised its full-year oncology revenue guidance down from $350-450 million to $270-350 million due to ongoing challenges [5][6] - Despite challenges, management remains optimistic about H2 2025, citing new product approvals and a sales team restructuring as potential growth drivers [5][6] Financial Position - Hutchison China MediTech reported a strong cash position of $1.37 billion as of H1 2025, providing flexibility for future strategic opportunities [6] - The company achieved a net profit of $455 million, primarily due to a $416 million gain from the sale of a stake in Shanghai Hutchison [6] Product Development and Pipeline - The report highlights the potential of Savolitinib as a second global commercialized product, with positive trial results for MET+ NSCLC patients [7] - The company plans to submit a New Drug Application (NDA) for Savolitinib in gastric cancer by the end of the year and has ongoing trials for other indications [7][8] Innovation and Future Prospects - Hutchison China MediTech is focusing on its Antibody-Drug Conjugate (ATTC) platform as a core innovation direction, with plans to initiate clinical trials for its first candidate in late 2025 [8] - The company sees potential for external licensing opportunities with its ATTC platform [8]

Report Industry Investment Rating - Maintain a buy rating on FUTLAN/FTLNHDs [2] Core Viewpoints - China's export growth is expected to decelerate from 5.9% in 2024 to 2% in 2025, while import growth may mildly slow down from 1.1% to 0.5%. The USD/RMB rate may appreciate from the current 7.15 to 7.1 by year-end [2][14] - Seazen shows improving access to the CBICL-guaranteed bond market, with lengthened tenors and lower funding costs, and has relieved near-term refinancing pressure [7][8] Summary by Directory Trading Desk Comments - Yesterday, NWDEVL 27 - 31s and NWDEVL Perps rose 1.8 - 4.5pts and 1 - 1.5pts respectively on rumors and reports. CNH SWIPROs were largely unchanged. Swire Pacific 1H25 revenue rose 15.7% yoy to HKD45.77bn, while operating profit was down 62.4% yoy to HKD1.86bn. In Chinese properties, LNGFOR 27 - 32s/ROADKG 28 - 30s were 0.2pt lower to 0.1pt higher. Longfor begins phased early repayment of offshore syndicated loan. ROADKG failed to obtain bondholder consent. China IG was 0 - 2bps tighter. In Macau gaming, related bonds were 0.1pt lower to 0.1pt higher. Wynn Macau 2Q25 operating revenue was flat yoy, while MGM China 1H25 adjusted EBITDA slipped 1.4% yoy. TW lifers were 1 - 3bps wider. Japanese AT1s and insurance hybrids edged up c0.25pt, SOFTBKs were up 0.1 - 0.7pt. SoftBank Group 1Q26 net sales rose 7% yoy to JPY1.82tn. Korea space was largely unchanged, except HYNMTR 30s tightened 1bp [1] - This morning, the new CNH paper XYDXIV moved 0.5pt higher, while other CNH new issues remained largely unchanged. MTRC Perps were up c0.1pt. China IGs and Thailand BBLTB tightened 1 - 2bps, while LGENSOs widened 1 - 2bps [2] - Yankee AT1s continued to move up slowly. In SEA, VEDLN 28 - 33s were unchanged to 0.2pt higher. KBANK 31s were 2bps tighter and BBLTB unchanged. PETMKs were unchanged to 2bps wider [3] FUTLAN/FTLNHDs - The 8th tranche of CBICL - guaranteed bond. Maintain buy on FUTLAN/FTLNHDs. FTLNHD 4 5/8 10/15/25 was 0.2pt higher this morning [2] - Provide details of FUTLAN/FTLNHDs including Amt o/s, Maturity, Coupon, Offer price, and YTM [6] Seazen - On 4 Aug'25, Seazen issued the 8th tranche of CBILC - guaranteed bond with an issue size of RMB1bn, 5 - year tenor, and a coupon rate of 2.68%. The tenor has lengthened from 3 - year to 5 - year and the funding cost has trended lower. Proceeds will be used for project developments and repaying offshore debts. It has a RMB1bn bond maturing on 13 Sep'25 [7] - In Jun'25, Seazen completed partial tender offers and a concurrent new issue of 3 - year USD300mn bond, relieving near - term refinancing pressure. Its high - quality IPs, secured financing headroom, and growing recurring income offer financial flexibility for refinancing in the coming 2 - 3 years [8] China Economy - China's exports rebounded despite a contraction in exports to the US, with ASEAN and Africa making up for 129% of the US loss since Apr. Exports of motor vehicles and chips were strong, while ships, personal computers, and cell phones softened. Imports rebounded due to robust AI - related demand, and soybean imports from the US rebounded. However, there are headwinds in 2H25 for exports [9] - In July, exports edged up to 7.2% yoy, with exports to the US further slumping to - 21.7%. Shipments to Africa accelerated to 42.4%, and exports to ASEAN remained at 16.6%. Exports to the EU, Australia, Korea, and Canada rebounded. Trade surplus narrowed to US$98bn. Exports of transport equipment and tech products polarized. Imports increased to 4.1% yoy, with strong AI - related demand. Import volume of some energy products, machine tools, etc. dropped, while crops rebounded. Soybean imports from the US rebounded [11][12][13] New Issues - No offshore new issues were priced today [16] - There are no offshore new issues in the pipeline today [17] News and Market Color - Regarding onshore primary issuances, 152 credit bonds were issued yesterday with an amount of RMB148bn. Month - to - date, 501 credit bonds were issued with a total amount of RMB507bn, a 17.6% yoy increase [19] - AVIC plans to take direct control of AVIC International Leasing via an equity restructure. SK Hynix and Samsung Electronics will be exempt from 100% US tariffs on semiconductors. Longfor begins phased early repayment of HKD9.3bn offshore syndicated loan. MGM China 1H25 adjusted EBITDA slipped 1.4% yoy to HKD4.9bn. Mongolian Mining expects a consolidated net loss of USD15 - 25mn for 1H25. New World Development dismisses take - private reports. ORIX 1QFY26 revenue rose 8.5% yoy to JPY768.6bn. Rakuten Group will early redeem JPY16.8bn RAKUTN 1.81 11/04/55 on 4 Nov'25. Road King fails to obtain bondholder consent. SoftBank Group 1QFY26 net sales rose 7% yoy to JPY1.8tn. Wynn Macau 2Q25 operating revenue was down 0.2% yoy to USD883.5m [19]

Macro Economic Overview - China's exports exceeded expectations in July, driven by increased shipments to ASEAN and Africa, compensating for a 129% loss in exports to the US [4] - The forecast for China's export growth is expected to slow from 5.9% in 2024 to 2% in 2025, with imports also projected to decelerate slightly [4] Industry Insights - The automotive industry saw a reduction in average discounts in July, with a 0.3 percentage point decrease to 15.1%, primarily due to reduced discounts from German luxury brands [5] - New energy vehicle competition is intensifying, leading to a differentiation among traditional domestic brands, with Geely's discount rate rising to 11.2% [7] - The express delivery industry in Guangdong has set a minimum price of 1.4 RMB per package, which may serve as a model for other regions, potentially leading to price increases in the next 3-6 months [8] Company Analysis - Datadog reported a robust 2Q25 performance with total revenue of $826.8 million, a 28% year-on-year increase, exceeding market expectations [10] - BeiGene achieved total product revenue of $2.43 billion in the first half of 2025, a 45% increase year-on-year, driven by strong sales of its drug, Zebrutinib [11][12] - The company maintains a positive outlook on its CDK4 inhibitor, anticipating significant data releases by the end of the year [13] Stock Recommendations - Geely Automobile is rated as a "Buy" with a target price of 24.00 HKD, representing a 31% upside potential [15] - BeiGene is also rated as a "Buy" with a target price of $359.47, indicating a 21% upside potential [15] - Datadog is rated as a "Buy" with a target price of $162.00, reflecting a positive long-term business outlook [10]

Macro Economic Overview - The US economy shows signs of stagnation with July's service PMI nearly flat, indicating a slowdown in business activity and order demand [2] - Manufacturing PMI has dropped to a near one-year low, with employment contraction reaching a new high, while price expansion has slowed but remains significantly above post-pandemic averages [2] - Import indices and inventories are contracting, suggesting the end of a purchasing spree to avoid tariffs [2] Industry Insights - The cloud services sector is experiencing accelerated revenue growth among leading US cloud providers, with Amazon AWS, Google Cloud, and Microsoft Azure showing a combined year-on-year revenue growth of 23% in Q2 2025 [6] - Capital expenditure among leading cloud firms is being adjusted upwards due to strong demand, although supply constraints are expected to persist for the next six months [6] - AI-related capital investments are impacting profit margins, but operational efficiencies in core businesses are helping to mitigate these effects [6] Company Analysis - Xiaomi Group is expected to report strong Q2 2025 results, with revenue and adjusted net profit projected to grow by 32% and 66% year-on-year, reaching RMB 117 billion and RMB 10.3 billion respectively [7] - The growth drivers for Xiaomi include robust smartphone sales, strong demand for electric vehicles, and favorable policies for IoT [7] - The target price for Xiaomi is set at HKD 66.0, reflecting a P/E ratio of 34.4 for 2025 [7] Focus Stocks - Geely Automobile (175 HK) is rated as a buy with a target price of HKD 24.00, indicating a potential upside of 31% [8] - Luckin Coffee is also rated as a buy with a target price of USD 44.95, suggesting an 18% upside [8] - Tencent (700 HK) is rated as a buy with a target price of HKD 660.00, indicating a 16% potential increase [8]

Economic Indicators - The US services PMI stagnated at 50.1 in July, down from 50.8 in June, significantly below the market expectation of 51.5[3] - The manufacturing PMI fell to 48 in July, down from 49 in June, also below the expected 49.5, indicating a contraction in the manufacturing sector[4] - The employment index in the services sector dropped to 46.4, indicating a significant contraction in hiring[4] Inflation and Employment - The price index for services rose to 69.9, close to levels seen at the end of 2022, indicating heightened inflationary pressures[4] - The expected CPI growth may rebound, complicating the Federal Reserve's efforts to balance employment and inflation[3] - The unemployment rate is projected to rise slightly in Q3, with inflation expected to rebound, leading to potential interest rate cuts in October and December[3] Market Expectations - Following the PMI data release, market expectations for interest rate cuts decreased by 5 basis points to 58 basis points for the year[3] - The Federal Reserve is anticipated to maintain interest rates in September, with potential cuts in October and December, targeting a year-end policy rate of 3.75%-4%[3]

Global Economic Overview - The global economy is experiencing a slowdown with diverging growth rates and increasing inflation disparities, leading to differentiated monetary policies across countries [1][3] - The US aims to attract industrial investment through high tariffs, a small government, low tax rates, and low oil prices, while China plans to moderately expand fiscal stimulus and support for households [1][3] United States - The US GDP growth is projected to decline from 2% in the first half of the year to 1.3% in Q3 and 1% in Q4, with a further drop to 1.6% in 2025 [1][4] - Unemployment is expected to rise from 4.2% to 4.5% by year-end, while inflation is anticipated to rebound slightly before gradually decreasing [1][6] - The Federal Reserve is expected to lower interest rates twice in Q4, with the 10-year Treasury yield forecasted to decrease from 4.5% to 4.1% by year-end [1][9] United Kingdom - The UK economy is forecasted to slow down, with GDP growth decreasing from 1.3% in Q1 to 0.9% in Q4, and a projected decline to 1% in 2025 [1][14] - Inflation is expected to rise initially before declining, with CPI growth peaking at 3.6% in Q3 and falling to 3.2% in Q4 [1][17] - The Bank of England may lower interest rates once in Q4 and twice in the following year, with the 10-year government bond yield expected to decrease from 4.6% to 4.35% by year-end [1][21] Eurozone - The Eurozone is also facing economic slowdown, with GDP growth projected to fall from 1.5% in Q1 to 0.9% in Q4, and a slight recovery to 1.2% in 2026 [1][1] - Inflation is expected to decrease, with CPI growth declining from 2.3% in Q1 to 1.8% in Q4 [1][1] - The European Central Bank is anticipated to cut interest rates once in the second half of the year, with the 10-year AAA bond yield expected to rise from 2.75% to 2.9% by year-end [1][1] Japan - Japan's economy is projected to slow down, with GDP growth decreasing from 1.7% in Q1 to 0.4% in Q4, and a slight recovery to 0.9% in 2025 [1][1] - Inflation is expected to decline, with CPI growth falling from 3.8% in Q1 to 2.1% in Q4 [1][1] - The Bank of Japan is likely to delay interest rate hikes until January 2026, with the 10-year government bond yield expected to rise from 1.57% to 1.7% by year-end [1][1] China - China's GDP growth is forecasted to decrease from 5.4% in Q1 to 4.6% in Q4, with a further decline to 4.9% in 2025 [1][1] - Inflation is expected to fluctuate, with CPI growth projected to drop to -0.2% in Q3 before rising to 1% in Q4 [1][1] - The Chinese government plans to moderately expand fiscal stimulus, with a broad deficit rate expected to rise from 6.6% in 2024 to 9% in 2026 [1][1]

Investment Rating - The report maintains a "Buy" rating for Meta, Microsoft, Amazon, and Google, indicating a positive outlook for these companies in the cloud and AI sectors [4][34]. Core Insights - The growth of cloud business for leading US cloud vendors is becoming a significant driver for stock price increases, with a notable acceleration in revenue growth observed in 2Q25 [4][21]. - The overall cloud business revenue for Amazon AWS, Google Cloud, and Microsoft Azure grew by 23% year-over-year in 2Q25, up from 20% in 1Q25 and 21% in 2Q24, with Google Cloud and Microsoft Azure showing more pronounced acceleration [4][3]. - Capital expenditures for leading cloud vendors have been increased due to strong demand signals, with a total of $95 billion in capital expenditures reported for 2Q25, a 67% increase year-over-year [3][4]. - AI-related investments are impacting profit margins, with some companies experiencing a decline in segment profit margins while overall operating margins improve due to enhanced operational efficiency in other core businesses [4][11]. Summary by Relevant Sections Revenue Growth - Google Cloud's revenue grew by 32% year-over-year to $13.6 billion in 2Q25, driven by strong demand for GCP core and AI products [3][28]. - Microsoft Azure and other cloud services saw a 39% year-over-year revenue increase in 2Q25, exceeding previous guidance [15][34]. - Amazon AWS reported revenue of $30.9 billion in 2Q25, a 17.5% increase year-over-year [21][27]. Capital Expenditures - Total capital expenditures for Microsoft, Google, Amazon, and Meta reached $95 billion in 2Q25, reflecting a 67% year-over-year increase [3][4]. - Google raised its FY25 capital expenditure guidance to $85 billion, a 62% increase year-over-year, to meet strong cloud demand [28][4]. - Meta's capital expenditure is projected to be between $66 billion and $72 billion for FY25, a growth of 68%-84% year-over-year [12][34]. Profit Margins - Despite a decline in segment profit margins for Microsoft and Amazon, overall operating margins improved due to efficiency gains in other business units [4][19]. - Meta's operating profit margin is expected to decline by approximately 1 percentage point in FY25 due to rising depreciation and personnel costs, partially offset by revenue growth from AI [11][12]. - Google Cloud's operating profit margin improved by 9 percentage points year-over-year to 20.7% in 2Q25, aided by strong revenue growth [28][4].