Investment Rating - The report initiates coverage on Huaqin Technology with a "Buy" rating and includes it on the APAC Conviction List [1]. Core Insights - Huaqin's target price is raised to Rmb94, with expectations for net income to grow at a 27% CAGR from 2024 to 2027, driven by an increase in AI server shipments [1]. - The contribution of AI servers to Huaqin's revenues is projected to rise from 14% in 2024 to 45% by 2027 [1]. - The company is diversifying from consumer electronics to data centers, capitalizing on stronger market demand and healthier competition [1]. Revenue and Growth Projections - Huaqin's blended revenues are expected to grow at a 29% CAGR from 2024 to 2028 [5]. - The data center business, which includes general servers, switches, and AI servers, is anticipated to see AI servers grow at a 73% CAGR from 2024 to 2028, followed by switches at 67% CAGR and general servers at 8% CAGR [6]. - Data center revenues are expected to increase from 21% in 2024 to 51% by 2028 [6]. Earnings Revisions - Revenue estimates for 2025-2028 have been revised upwards by 1%, 14%, 21%, and 29% respectively, primarily due to higher expectations for AI servers and switches [9]. - Despite a reduction in net income estimates by 12% to 0% for 2025-2028, the target price is raised by 14.9% due to a higher target P/E multiple [9][13]. - The new target P/E multiple is set at 18.8x, reflecting a positive outlook on earnings growth driven by the data center business [13]. Financial Metrics - The report outlines expected revenues of Rmb147.2 billion in 2025, Rmb208.4 billion in 2026, and Rmb253.2 billion in 2027 [21]. - The net income for 2025 is projected at Rmb3.89 billion, increasing to Rmb5.07 billion in 2026 and Rmb5.91 billion in 2027 [21]. - The gross margin is expected to decline from 9.4% in 2025 to 8.4% in 2028, while the operating margin is projected to decrease from 2.6% in 2025 to 2.5% in 2028 [10][18].

Investment Rating - The report does not explicitly provide an investment rating for the industry but discusses the relationship between macroeconomic conditions and implied volatility in FX markets, suggesting that current levels of implied volatility are justified given the macro backdrop [4][46]. Core Insights - The report highlights that FX volatility has declined due to improved macroeconomic conditions, including a recent trade deal between the US and China, which has alleviated some recession and inflation risks [4][46]. - There is a strong positive relationship between FX implied volatility and macroeconomic uncertainty, indicating that when uncertainty increases, implied volatility tends to rise [28][32]. - The report emphasizes that US macroeconomic uncertainty has a more significant impact on FX volatility compared to other regions, particularly through factors like CPI uncertainty [28][31]. Summary by Sections Macro Drivers of Implied Volatility - Recent declines in FX implied volatility are linked to a less uncertain macroeconomic environment, with reduced tail risks related to recession and inflation [4][46]. - The report quantifies the impact of macro uncertainty on FX implied volatility using economic forecasts from Consensus Economics [21][27]. Relationship Between Realized and Implied Volatility - Implied volatility is closely related to realized volatility, often leading to mispricing in the early stages of economic shifts [9][12]. - Realized volatility has exceeded implied volatility for most of the year, indicating that markets have underpriced the actual volatility in FX markets [12][46]. Literature on Macro Drivers of Volatility - Previous studies confirm that macroeconomic conditions, particularly monetary policy, are key drivers of FX volatility [16][19]. - The report discusses how inflation and interest rate differentials have historically influenced volatility trends in FX markets [16][19]. Estimating the Impact of Macro Uncertainty - The report employs regression analysis to demonstrate the strong relationship between macroeconomic uncertainty and FX implied volatility across major currency pairs [27][28]. - US CPI uncertainty is identified as the strongest explanatory factor for FX volatility, followed closely by domestic monetary policy uncertainty [31][32]. What Matters at Different Points in Time - The report notes that while inflation has been a key driver of volatility, this relationship can shift over time based on economic conditions [34][35]. - Recent benign inflation data from the US has contributed to lower FX volatility, but potential increases in tariff rates could heighten macro uncertainty and volatility [34][46].

Investment Rating - The report indicates a positive outlook for the steel and cement sectors in China, suggesting potential benefits from a more supportive policy environment on supply discipline [1][12][13]. Core Insights - There is a renewed policy focus on addressing supply discipline in China, with a call for a unified national market and a crackdown on excessive competition leading to lower prices [1]. - The report highlights that excess capacity in various industries ranges from 30% to 50%, with specific figures for steel and cement being around 30% to 50% [2][11]. - The potential for executing production cuts in the steel sector is noted, with a target of 50 million tons, which could lead to a significant reduction in crude steel output in the second half of 2025 [13][18]. - The cement sector is also undergoing capacity categorization and is targeting a reduction of unauthorized and energy-intensive capacities, which could improve capacity utilization from 50% to 70% [13][14]. Summary by Sections Supply Side Expectations - The report discusses ongoing policy efforts to discourage overly fierce competition and control output in sectors like hog farming and steel, aiming to reverse price deflation trends [12]. - The clarity of future policy guidance remains uncertain, but discussions suggest a more supportive context for executing supply plans in the steel and cement sectors [13]. Excess Capacity Analysis - Excess capacity is a persistent challenge, with estimates indicating that unauthorized excess clinker capacity in the cement industry exceeds 400 million tons, representing nearly 18% of the industry [14][15]. - The report estimates that additional requirements could lead to a targeted exit of 277 to 377 million tons of clinker capacity, further reducing excess capacity [13]. Market Impact - The report anticipates that the execution of steel production cuts could create a meaningful deficit in the market, similar to conditions observed in the second half of 2021, which previously led to margin expansion and reduced exports [18][19]. - The implied spread from rebar futures suggests a potential margin expansion of nearly RMB 200 per ton in the steel sector, indicating a strong possibility of production cuts [16].

Investment Rating - The report does not explicitly provide an investment rating for Longcheer (603341.SS) but indicates a positive outlook on the company's growth opportunities in AI PC and AI/AR glasses [1][2]. Core Insights - Longcheer is optimistic about the increasing penetration of AI PCs, which are expected to have higher average selling prices (ASP) due to enhanced specifications for computing power and storage [3]. - The company is expanding its business into AI/AR glasses, leveraging its strengths in lightweight design and customized solutions, with projected annual shipments in China expected to grow at a 56% CAGR from 2024 to 2030, reaching 7 million units by 2030 [7]. - Longcheer is also focusing on overseas expansion, with production facilities in Vietnam and India, targeting markets in the US, Europe, Japan, and Korea [8]. Summary by Sections AI PC Market - Management is positive about the rising AI PC penetration rate, viewing Longcheer as a key beneficiary in the supply chain due to its R&D efficiency and automated production lines [3]. - The company has already penetrated local brands and aims to collaborate with global-tier brand clients [3]. AI/AR Glasses Market - Longcheer is actively providing PCBA and accessory services for AI/AR glasses, with a focus on enhancing user experience through lightweight solutions and proofing/simulation [7]. - The management anticipates significant growth in the AI/AR glasses market, driven by affordability and increased use cases [7]. Overseas Expansion - Longcheer has established production sites in China, Vietnam, and India, with plans to expand capacity in Vietnam to mitigate concentration risks amid trade tensions [8]. - The company is building a Manage Sales & Marketing (MSM) framework to enhance product development efficiency and service quality for its overseas markets [8].

Investment Ratings - PetroChina: Buy with a 12-month target price of HK$8.30/Rmb12.60, reflecting a potential upside of 21.5% [19][24] - CNOOC: Buy with a 12-month target price of HK$20.90, indicating a potential upside of 14.6% [26][29] - Sinopec: Neutral with a 12-month target price of HK$3.70/Rmb4.90, suggesting a downside of 11.7% [30][35] Core Insights - The report emphasizes a preference for free cash flow (FCF) leaders like PetroChina and CNOOC, both expected to achieve double-digit FCF yields in 2026E [2][19] - PetroChina and CNOOC are projected to achieve FCF breakeven at Brent oil prices of US$30-$40/bbl, with attractive FCF yields of approximately 11% for both companies under various oil price scenarios [21][17] - Sinopec is expected to face weak FCF due to prolonged chemical market surplus and elevated capital expenditures, leading to a Neutral rating [30][39] Summary by Sections Earnings Estimates - PetroChina's estimated net income for 2Q is projected to decline by 30% year-on-year, while Sinopec's is expected to drop by 46% [1] - CNOOC's 1H net income is estimated to decrease by 16% year-on-year [1] Valuation Comparisons - PetroChina and CNOOC are trading at discounted valuations of 3.1X-3.2X on 2026 EV/DACF compared to a global average of 5.5X [2][14] - The report highlights that both companies could maintain attractive FCF yields even at lower oil prices, with PetroChina and CNOOC achieving yields of approximately 10% and 9% respectively at US$60/bbl [2][18] Price Sensitivity Analysis - For PetroChina, total EBITDA is projected to range from Rmb351.6 million at US$50/bbl to Rmb542.5 million at US$90/bbl [20] - CNOOC's EBITDA is expected to range from Rmb176.2 million at US$50/bbl to Rmb308.0 million at US$90/bbl [28] Market Dynamics - Recent geopolitical events have supported oil prices, leading to low domestic oil product inventories and robust refining margins despite weak demand [1][2] - The report notes that deep utilization cuts among state-owned refiners have contributed to the current market conditions [2][8]

Investment Rating - The report assigns a "Buy" rating to Feihe, Yili, and Mengniu, indicating a positive outlook for these companies in light of the new child-raising subsidies [10][26]. Core Insights - The Chinese government is planning to implement nationwide child-raising subsidies of Rmb3,600 per year for each child under three years old, which is expected to significantly impact disposable income and support the fertility rate recovery [1][2][3]. - The total potential government spending on these subsidies is estimated to be around Rmb100 billion in 2025, based on a forecast of 9.3 million new births [1]. - The subsidies are expected to account for approximately 9% of the per capita disposable income, which is projected to be Rmb41,000 in 2024 [1]. Summary by Sections Government Policy - The nationwide child-raising subsidy will be effective from January 1, 2025, and will cover all eligible children, including first-borns [1][2]. - The policy includes supportive measures such as tax exemptions for the subsidies and the establishment of a grant fund to assist regional governments [1]. Demographic Impact - The report suggests that the subsidies could help recover the fertility rate, particularly among mothers aged 20-24 and 30-44, who have seen declines in birth rates compared to pre-COVID levels [3][9]. - The age group of 0-4 is expected to see a sequential narrowing of declines, returning to positive growth by 2033 [13]. Company Implications - Companies like Feihe, Yili, and Mengniu are likely to benefit directly from the subsidies, as they have significant exposure to the milk powder and dairy markets [10][17]. - Yili and Feihe have the highest exposure to milk powder sales, with 24% and 92% of their 2024 sales, respectively, being related to children's consumption [10][17].

Investment Rating - The report maintains a "Buy" rating on ZDT and raises the target price (TP) to NT$140 from NT$130, maintains a "Neutral" rating on Unimicron and NYPCB with TP raised to NT$97 and NT$110 respectively, and maintains a "Sell" rating on Kinsus with a new TP of NT$70 from NT$63 [8][21][31]. Core Insights - The increase in BT substrate prices in early Q3 2025, driven by T-glass and gold price hikes, is expected to improve revenue trends for substrate makers, particularly Kinsus and NYPCB, with BT revenue exposure projected to exceed 25% of total revenue in 2025 [2][3]. - The report anticipates a potential further pricing hike for high layer count ABF substrates in the coming months, which could enhance revenue and profitability outlook for substrate suppliers in the second half of 2025 [3][7]. - The T-glass shortage is expected to ease by the first half of 2026, which may stabilize pricing levels despite the current supply constraints [4][7]. Summary by Sections Pricing and Revenue Outlook - BT substrate prices have increased by 5%-20% in early Q3 2025 due to T-glass supply tightness and rising gold prices, which account for 30-40% of BT cost of goods sold (COGS) [1][2]. - The report expects improved profitability for BT substrates in the second half of 2025 compared to the first half, despite potential unfavorable gross margin and operating profit margin conditions due to material cost hikes and currency appreciation [2][3]. Company-Specific Earnings Revisions - Unimicron's 2025 earnings estimate has been cut by 25% due to unfavorable foreign exchange conditions, while revenue is expected to increase by 1% [17][19]. - NYPCB's earnings estimates for 2025, 2026, and 2027 have been revised up by 3%, 11%, and 7% respectively, reflecting a positive outlook on substrate pricing [23][25]. - Kinsus's 2025 earnings estimate has been reduced by 16% due to unfavorable FX conditions, but 2026 and 2027 estimates have been increased by 10% and 11% respectively [28][30]. - ZDT's earnings estimates for 2025, 2026, and 2027 have been revised down by 17%, 1%, and 1% respectively, primarily due to unfavorable FX conditions [33][35].

Investment Rating - The report maintains a price forecast for Brent crude oil averaging $59 in Q4 2025 and $56 in 2026 despite an increase in OPEC+ production quotas [2][9][18] Core Insights - OPEC+ announced a production increase of 0.55 million barrels per day (mb/d) for August, exceeding both consensus and previous expectations [2][3] - The report anticipates a further increase of 0.55 mb/d for September, completing the return of 2.2 mb/d of cuts and a 0.3 mb/d increase in UAE production [4][6] - The rationale behind these increases includes a steady global economic outlook and resilient demand, as indicated by low oil inventories [3][5] - Compliance with OPEC+ compensation cuts has been stronger than expected, contributing to the revised production assumptions [9][10] - The report highlights that reduced OPEC+ spare capacity is likely to raise long-dated oil prices, estimating a decline in global spare capacity to 2.5-4% of global demand by September 2025 [14][18] Summary by Sections OPEC+ Production Adjustments - OPEC+ has announced a total production increase of 1.92 mb/d, which corresponds to 78% of the total voluntary cuts and the increase in UAE production [3][4] - The expected rise in OPEC+ crude production from March to September is projected to be 1.67 mb/d, reaching 33.2 mb/d by September [6][12] Price Forecast and Market Dynamics - The report keeps the price forecast stable despite the production increases, citing stronger compliance with cuts and potential upside risks to demand forecasts [9][14] - The anticipated increase in global oil demand is projected at 0.6 mb/d in 2025 and 1.0 mb/d in 2026, driven by robust demand from China and global economic activity [14][21] Compliance and Production Realization - The report notes that actual increases in OPEC+ production have been in line with quotas after adjusting for compensation cuts, with a significant portion of the increase attributed to Saudi Arabia [10][13] - The compliance rates among OPEC+ members have varied, with some countries exceeding their required production levels [10][13]

Investment Rating - The report does not explicitly provide an investment rating for Lens Tech (300433.SZ) as it is categorized as "Not Covered" [1]. Core Insights - Management is optimistic about the demand for foldable phones, driven by differentiation, new use cases, and improved technology that enhances user experience [1][4]. - The company is diversifying its end markets beyond smartphones to include vehicle glass, AI glasses, and robotics, which supports long-term growth [1][8]. Summary by Sections Foldable Phones - Foldable phones are expected to drive significant growth, with management highlighting strong market demand and potential for increased shipments [4][7]. - The global shipment penetration rate for foldable phones is projected to rise from 1.5% in 2024 to 4.1% by 2027, excluding iPhones [2]. Vehicle Glass Expansion - Lens Tech is expanding into vehicle glasses, leveraging its experience in smartphone glass to provide high-precision and lighter-weight solutions for leading car OEMs [8]. - The company is collaborating with over 30 electric vehicle manufacturers, indicating a strategic move into the automotive sector [9]. Long-Term Outlook - Revenue growth in 2025 is anticipated to be bolstered by new smartphone model launches and the increasing trend of foldable phones [9]. - Contributions from vehicle glasses and AI/AR glasses are expected to ramp up over the long term, driven by rising popularity and affordability [9].

6 July 2025 | 11:36PM KST Vietnam: US-Vietnam Trade Deal: 20% US Tariffs (40% for Transshipment) Bottom line: On July 2, President Trump announced a new trade deal between the US and Vietnam. It includes a 20% tariff on US imports from Vietnam, a 40% tariff on goods transshipped through Vietnam, and zero tariffs on Vietnamese imports from the US. Since over one-third of Vietnam's intermediate imports come from China, Chinese goods routed through Vietnam could be significantly affected by the 40% tariff. Mai ...