Investment Rating - The report indicates a cautious outlook for the Middle East and North Africa (MENA) region, with a focus on selective stock picking in sectors such as real estate, infrastructure, transportation, and tourism, particularly within the OCU index and the Saudi market [2][7]. Core Insights - Geopolitical risks remain significant, particularly concerning Iran, with the potential for military action still a concern despite reduced immediate threats [1][2]. - Brent crude oil prices are projected to average $62 per barrel in 2026, leading to a moderate fiscal deficit for Gulf Cooperation Council (GCC) countries, with net borrowing needs estimated at approximately $160 billion [1][2]. - Saudi Arabia is shifting its investment focus from traditional real estate to artificial intelligence, aiming to become a key player in the global AI supply chain through initiatives like the U-Maine platform [1][4]. - Bahrain's government has proposed fiscal reforms, including subsidy cuts and corporate tax implementation, to balance its fiscal accounts, although the success of these reforms remains uncertain [1][5]. - Egypt's economic outlook is generally positive, with improved external financing conditions and a downward trend in inflation, but risks related to potential policy reversals post-IMF program and geopolitical tensions persist [1][6]. Summary by Sections Geopolitical and Oil Market Influences - The economic outlook for the MENA region is heavily influenced by geopolitical factors, particularly the situation in Iran, and the oil market, with a forecasted fiscal deficit for GCC countries [2][8]. Saudi Arabia's Economic Transition - Saudi Arabia is making significant investments in AI and data centers, indicating a strategic pivot towards emerging technologies while maintaining stable domestic spending [1][4]. Bahrain's Fiscal Reforms - Bahrain's proposed reforms aim to improve fiscal health, but historical challenges in policy implementation raise concerns about their effectiveness [1][5]. Egypt's Economic Prospects - Egypt shows a favorable economic outlook with strong external financing and decreasing inflation, but caution is advised due to potential policy shifts and geopolitical risks [1][6]. Stock Market Strategies - The report emphasizes a selective approach to stock picking in the MENA region, particularly in sectors benefiting from social reforms and capital expenditure, while highlighting the challenges in the broader market [2][7].

Market Overview - Global stock markets are expected to have potential upside in 2026, with the S&P 500 projected to reach a target price of 7,600, representing a 10% return[10]. - The MSCI Emerging Markets index is forecasted to increase to 1,600, indicating a 9% return[10]. Earnings Growth - Earnings per share (EPS) growth is anticipated to be 11% in 2025, 12% in 2026, and 12% in 2027 for the S&P 500[7]. - The MSCI Asia Pacific (excluding Japan) is expected to see EPS growth of 10% in 2025, 19% in 2026, and 12% in 2027, driven primarily by East Asia and the technology sector[29]. Valuation Metrics - Current valuations for major indices like the S&P 500 and MSCI Europe are at historical highs, with a price-to-earnings (P/E) ratio of 12x[5]. - The S&P 500's forward P/E ratio is projected to be around 22x, reflecting an increase compared to historical averages, which is deemed reasonable given the macroeconomic backdrop[19]. Dividend Contributions - Dividend contributions are expected to play a significant role in total returns, with the S&P 500's total return driven by earnings growth and valuation expansion[15]. - The forecasted dividend yield for the S&P 500 is approximately 1.5% for 2026[17]. Sector Performance - The report highlights strong performance in technology stocks, with significant contributions to EPS growth from major players like Amazon, Google, and Microsoft[25]. - The aerospace and defense sectors are expected to gain traction in 2026, alongside a focus on re-industrialization in the U.S.[35]. Economic Context - The U.S. monetary policy is expected to remain accommodative, supporting Asian markets amid a weaker dollar[27]. - The report indicates a healthy economic backdrop, with GDP growth projected to stabilize, further supporting market performance[27].

Investment Rating - The report upgrades MGP to Buy from Neutral, highlighting its sustainable growth and resilient margins in the premium beauty market [10] - Giant Biogene is rated Buy, with expectations of a gradual recovery in sales and strong long-term growth potential [16] - Shanghai Jahwa is also rated Buy, indicating a turnaround in its skincare business and solid growth prospects [22] Core Insights - The China cosmetics industry is expected to see sustained momentum driven by higher-quality channels and a focus on new product cycles [3] - The government's anti-involution measures are likely to increase traffic acquisition costs, impacting sales on platforms like Douyin [3] - There is a shift towards reliability and brand trust in consumer preferences, prompting companies to innovate and upgrade their product offerings [4] Summary by Sections Key Trends - Higher-quality channels are expected to maintain momentum, particularly on Tmall, supported by government measures [3] - The product landscape is shifting towards proven efficacy and brand trust, with companies innovating to create new value propositions [4] Company-Specific Insights - MGP is positioned for sustainable growth with a projected 34%/38% sales/NI CAGR from 2021-2025, and 23%/22% from 2025-2027 [10][11] - Giant Biogene anticipates a sales decline in the short term but expects recovery driven by its leading brand position and product pipeline [16] - Shanghai Jahwa is experiencing strong growth in its key brands, with a projected CAGR of 2%/34% for its personal care/cosmetics segment from 2025-2027 [22] Valuation Methodology - MGP's target price is set at HK$105 based on a 28x 2027E P/E, reflecting its high growth profile [12] - Giant Biogene's target price is HK$46, based on a 22x 2027E P/E, indicating a recovery in its sales profile [17] - Shanghai Jahwa's target price is RMB 28, based on a 30x 2027E P/E, reflecting its improving sales and net profit profile [23]

Investment Rating - The report emphasizes a "Fed credibility trade" and suggests that the current market does not feel like a volatility 5x market, indicating a cautious outlook on volatility levels [1]. Core Insights - The current market volatility is perceived as unusually low, reminiscent of the lowest levels seen during Trump's first term, with significant implications for trading strategies [1]. - There is a notable demand for cyclical assets, evidenced by large short positions in macro products and software, indicating a shift in investor sentiment [9]. - The report highlights that the total gamma estimates for SPX are showing a certain counter-cyclicality within the first 3% of spot price fluctuations, suggesting potential trading opportunities [5]. - The technology sector continues to face pressure, with a reported decline of -2.3 standard deviations, marking it as one of the most impacted sectors [12]. - Small-cap stocks have outperformed the S&P 500 for 11 consecutive trading days, a trend not seen since 2008, indicating a potential shift in market dynamics [20]. Summary by Sections 1. Prime Book - The total short positions in the U.S. fundamentals have been at the 100th percentile over the past 1, 3, and 5-year periods, indicating extreme bearish sentiment [12]. - Macro products are facing significant shorting, with investors looking to profit from increased market differentiation ahead of earnings season [12]. 2. Shares - The report notes a busy week with various meetings and earnings reports, highlighting the "Trump positive" trades being closed out [14]. 3. Futures - CTA positions remain heavily long, with increasing risks of liquidation as the market stagnates, despite no recent investor inquiries about these stocks [15]. 4. Derivatives - The report discusses the rare occurrence of both stock and fixed income volatility being low simultaneously, creating opportunities for high-leverage, low-premium stocks and fixed income double-digit bonds [17]. 5. Emerging Markets - A survey of over 400 fund managers shows a strong preference for returns from emerging markets, with significant investments in options indicating bullish sentiment [19]. 6. ETFs - Small-cap stocks are highlighted as popular trading targets, with IWC (micro-cap ETF) showing consistent daily gains this year [26]. 7. Baskets - The report suggests expanding investment scope, recommending long positions in companies leveraging AI to enhance productivity [22]. 8. Investment Opportunities - The report identifies opportunities in stocks and mixed-rate bonds, noting low implied prices that could yield convexity returns under reasonable strike prices [27].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The U.S. government may issue executive orders related to housing, credit card, and financial product affordability, but the actual impact may be limited due to constraints on the government's ability to drive significant change through existing executive powers [1][2] - The Supreme Court's decision on IEP tariffs remains uncertain, with the potential for tariffs to be retained if the deliberation period extends [1][3][4] - Major U.S. banks reported steady consumer spending growth and improved loan quality, although concerns exist regarding the potential impact of credit card pricing caps [1][8][9] - The U.S. dollar is expected to trend downward in 2026, with emerging market currencies facing slightly unfavorable prospects, leading to an upgrade in ratings for cyclical G10 currencies like the Australian and New Zealand dollars [1][10] - The Japanese yen, with an implied fiscal risk premium, remains a strong hedging tool and has significant potential for appreciation [1][12] Summary by Sections Government Policy Tools - The government has three main avenues to address growth and affordability issues: legislation, executive measures, and informal pressure on industries [2] Supreme Court Tariff Decisions - The Supreme Court's indecision on IEP tariffs could lead to a prolonged uncertainty, with the possibility of tariffs being reconstructed through specific legal provisions if they are invalidated [3][4] Banking Sector Trends - Recent financial reports from major U.S. banks indicate positive trends, including a steady increase in consumer spending and improved credit quality, with expectations of a decrease in loan write-offs [1][8] - Concerns about the impact of proposed credit card interest rate caps on banks' profitability are prevalent, with potential legislative actions being monitored [9] Currency Market Outlook - The report anticipates a downward trend for the U.S. dollar in 2026, influenced by a soft labor market and ongoing monetary policy [1][10] - The yen is highlighted as a valuable hedging instrument due to its significant potential for appreciation amidst fiscal risk [1][12] European Credit Market - The European credit market is expected to see stable or slightly increased issuance of high-yield bonds and leveraged loans in 2026, driven by mergers and acquisitions and AI-related capital expenditures [16][17] - Credit spreads are currently at historical lows, with expectations of a gradual widening due to increased supply from anticipated M&A activity [17][18]

Investment Rating - The report gives a premium rating for high-quality stocks expected in 2026, particularly those that faced profit margin pressure due to tariff pass-through effects in 2025, with anticipated growth of 9.5%, significantly above the industry average [7][8]. Core Insights - Approximately 65% of indicators at the company level in the European capital goods sector show a quarter-on-quarter acceleration trend, primarily driven by the electrical equipment and related markets, as well as certain commodity-related sectors [1][2]. - The capital expenditure tracker indicates a strong outlook for the next three years (2025-2028), with a Kiger tracking data of about 7.8, approaching levels seen during expansion peaks in 2011 and 2004-2007, driven mainly by large-scale enterprises [1][4]. - There is increasing investor concern regarding the concentration of business in the electrical equipment sector, with current sector P/E ratios at a nearly 50% premium to the Stoxx 600 index, far exceeding long-term averages [1][5]. - Key focus is on high-quality stocks with expected earnings guidance for 2026, such as cable manufacturers involved in the grid transmission and distribution sector, which have backlogs extending to the end of this year and are expected to achieve double-digit growth [1][6]. Summary by Sections Capital Expenditure Outlook - The capital expenditure tracker shows a robust outlook for both short-term and medium-term, with demand growth primarily driven by large-scale enterprises, which now account for one-third of the tracking data [4]. - The overall Kiger data has increased by approximately 1.7 percentage points globally, indicating a strong demand environment [4]. Industry Performance and Key Companies - Companies like Prisma, Rexel, Vol, Vopak, and Brabant Zeven are highlighted as examples of strong performance in the electrical equipment and maritime sectors [2]. - The report emphasizes the importance of proving the sustainability of profit growth and the potential for upward revisions in earnings expectations for the electrical equipment sector [5]. Specific Company Insights - Hewlett Packard Enterprise (HPE) is viewed positively, with 15% of its revenue coming from the data center vertical, and an expected organic growth rate of 17% CAGR for its photonics business by 2030 [3][10]. - Trellisburg, valued at approximately €7 billion, focuses on engineering rubber products and is expected to benefit from cyclical recovery in key end markets such as automotive and construction [12]. - Rational Group, the largest commercial kitchen oven manufacturer, is expected to return to high single-digit or at least double-digit growth by the end of this decade, driven by market expansion in China and new product lines in the U.S. [13].

Investment Rating - The report indicates a positive outlook for the industry, with a projected GDP growth of 2.5% year-on-year for 2026, significantly above market consensus [2]. Core Insights - The report highlights that AI is expected to automate approximately 25% of work hours, primarily in routine and repetitive tasks, which will lead to a productivity increase of 15% [6][7]. - It is anticipated that around 6% to 7% of employees may face job displacement due to AI, but new job opportunities created by AI advancements are expected to offset this impact [7][8]. - The Federal Reserve's interest rate cuts are now expected to occur in June and September 2026, with a potential reduction of 25 basis points each time, influenced by labor market conditions and AI-related risks [3][5]. Economic Growth Outlook - The economic growth outlook for the first half of 2026 is optimistic, driven by factors such as the reduction of tariff barriers and significant tax refunds amounting to approximately $100 billion for households [2]. - The financial environment is projected to contribute about 30 basis points to GDP growth [2]. Labor Market Dynamics - The report suggests that the unemployment rate may rise by approximately 0.5 percentage points under a scenario of orderly AI adoption over ten years, but this could increase to 2-3 percentage points if the adoption cycle is compressed to 2-3 years [4][8]. - In 2026, the labor market is expected to improve, with an estimated monthly addition of about 70,000 jobs and an unemployment rate stabilizing around 4.5% [9]. Federal Reserve Policy Expectations - The report expresses optimism regarding the Federal Reserve's future interest rate cuts, with a long-term neutral rate projected between 3% and 3.25% [5]. - The core PCE inflation is expected to decline to 2.1% by the end of the year, providing justification for the Fed to lower rates to the indicated long-term neutral level by 2026 [5].

Investment Rating - The report maintains a positive outlook on emerging markets, particularly in Asia, indicating a favorable investment environment due to strong economic growth and declining inflation [4]. Core Insights - The report highlights two main themes in the Asian emerging markets: the gradual appreciation of the Renminbi and the end of the Asian interest rate easing cycle, driven by strong economic growth and export performance [5]. - The report suggests that the market is currently in a "Goldilocks" state, characterized by good economic growth and declining inflation, which is favorable for risk assets [4]. - The report emphasizes the importance of monitoring geopolitical risks, technology bubbles, and the independence of the Federal Reserve as potential risk factors [4]. Summary by Sections Economic Data and Trends - U.S. December CPI data was slightly below expectations, while China's December PPI inflation rate was slightly above expectations, with exports growing by 6.6% year-on-year [1][2]. - The People's Bank of China has lowered several structural loan tool rates by 25 basis points and increased their quotas, indicating a credit expansion [1][2]. Currency Strategies - The report recommends a bearish options strategy on USD/SGD, targeting a move towards the 6.80 range in the next 3-6 months, as policy signals indicate Renminbi appreciation [5]. - The report notes that the Renminbi's appreciation has limited spillover effects on low-yield currencies, as it is driven by a significant trade surplus rather than domestic demand [5]. Market Outlook - The report suggests that the current low-volatility environment is an opportune time for establishing risk hedges, particularly in the foreign exchange market [4]. - The report anticipates strong industrial value-added data from China, while retail sales and fixed asset investment may show weakness [8].

Investment Rating - The report indicates a cautious outlook for the payment industry, with a focus on potential recovery in 2026 due to fiscal stimulus and a lower base effect from 2025 [1][3]. Core Insights - Consumer spending in the U.S. is expected to stabilize in 2026, driven by fiscal stimulus and positive responses from low-income groups, although high borrowing costs remain a challenge [1][5]. - The payment industry is experiencing valuation compression despite revenue and margin growth, attributed to concerns over increased competition and long-term sustainability [1][4]. - The introduction of the Credit Card Competition Act is anticipated to reshape the credit card market, potentially lowering merchant transaction fees and impacting the payment ecosystem significantly [1][9][8]. Summary by Sections Consumer Spending and Fiscal Stimulus - U.S. consumer spending is projected to grow steadily in 2026, with fiscal stimulus contributing approximately 20 basis points to this growth [3][5]. - Low-income consumers are expected to benefit from tax refunds, which may improve their financial situation in the first half of 2026 [5][6]. Payment Industry Valuation and Performance - The payment industry has faced a comprehensive valuation compression, with median stock prices declining by double digits despite revenue growth [4]. - Major banks have benefited from regulatory relaxations, while companies like Visa and Mastercard have not seen similar advantages, indicating a shift in market dynamics [4]. Innovations in Payment Ecosystem - Generative commerce, utilizing AI for shopping experiences, is emerging but remains in its infancy, facing significant fraud and security risks [7]. - Visa and Mastercard have introduced universal token solutions, but substantial growth in this area is not expected until 2026 [7]. Legislative Developments - The Credit Card Competition Act aims to enhance competition in the credit card sector by requiring banks to connect their cards to multiple networks, potentially lowering transaction fees for merchants [9][10]. - The act's passage is likely to have profound implications for the payment ecosystem, although the actual reduction in fees remains uncertain [9][10]. Market Outlook for Credit and Financing - The non-bank consumer finance sector is expected to stabilize in terms of funding availability, with companies like Klarna showing promise due to their low capital dependency [12][13]. - The report highlights a positive outlook for Klarna, which has recently secured significant funding and is positioned well in the market [13][16]. Preferred Stocks - The report identifies several preferred stocks, including Chime, Klarna, and Block, with Chime focusing on direct deposit services for low-income consumers and Klarna expanding its presence in the profitable U.S. market [16][17]. - Block is noted for its ongoing transformation and growth in transaction volumes, particularly through its Cash App platform [17].

Investment Rating - The report emphasizes a focus on reliability and essential services as core themes for investment, indicating a positive outlook for sectors that address these needs [2][3]. Core Insights - The report identifies a shift in sustainable investment towards risk mitigation and long-term returns, highlighting the importance of reliability, affordability, and security in the current investment landscape [2][3]. - There is a significant increase in electricity demand, reaching levels not seen since the 1990s, driven by aging infrastructure and the need for reliable energy sources [1][3]. - The report anticipates a substantial growth in data center electricity demand, projected to increase by approximately 175% by 2030 compared to 2023, necessitating significant infrastructure investments [6][9]. - The energy sector is expected to see a diversification in electricity procurement strategies, focusing on natural gas, nuclear energy, and renewable sources to ensure reliability and cost-effectiveness [9][12]. Summary by Sections Sustainable Development and Investment - Sustainable investment is increasingly centered on risk mitigation and long-term profitability, with a focus on identifying risk drivers and companies that can benefit from risk mitigation investments [2][3]. - The narrowing global trust circle has heightened the priority of reliability, affordability, and security, leading to a renewed focus on traditional sustainable development themes beyond just climate and decarbonization [2][3]. Energy Policy and Market Trends - The U.S. Energy Secretary emphasized the need to utilize domestic resources to maintain pricing advantages in natural gas and electricity, while cautioning against over-reliance on intermittent power sources [4][5]. - Despite challenges, renewable energy capacity is expected to grow healthily, supported by government incentives, although concerns remain regarding its reliability in achieving decarbonization goals [5][12]. Artificial Intelligence and Infrastructure - The development of AI is still in a phase of evaluation, with significant infrastructure investments required to support its growth and address increasing data processing demands [6][7]. - The report highlights that efficiency improvements in AI technologies have not negatively impacted overall R&D budgets, indicating continued investment in this area [7][11]. Supply Chain and Resource Management - The concentration of critical mineral supply chains poses significant risks, with China dominating the refining capacity for many strategic materials, prompting a push for diversification in supply sources [13][14]. - The report notes that the need for supply chain diversification is driving investments in local production capabilities, particularly in the U.S. and Europe [13][14]. Labor Market and Demographic Changes - The aging population and advancements in AI are expected to create labor market mismatches, with potential solutions including increased female workforce participation and skills retraining initiatives [14][15]. - Investment opportunities are identified in sectors addressing the needs of an aging population, including healthcare and education [14][15].