18 June 2025 | 8:32PM EDT US Daily: June FOMC Recap: Taking Higher Tariffs on Board, Cautiously (Mericle) Jan Hatzius +1(212)902-0394 | jan.hatzius@gs.com Goldman Sachs & Co. LLC Alec Phillips +1(202)637-3746 | alec.phillips@gs.com Goldman Sachs & Co. LLC David Mericle +1(212)357-2619 | david.mericle@gs.com Goldman Sachs & Co. LLC Ronnie Walker +1(917)343-4543 | ronnie.walker@gs.com Goldman Sachs & Co. LLC Manuel Abecasis n FOMC participants raised their inflation forecasts and lowered their GDP growth fore ...

15 June 2025 | 1:53PM HKT Potential opportunities on other technology platforms: Referring to technology platform-based collaborations between China pharma / biotech and MNCs (see summary in Exhibit 1), the upfront payment of US$110mn for the announced AZ/CSPC collaboration is consistent with the historical range of US$10mn to below US$200mn, while the total deal size of US$5.3bn was the highest since 2023. With the current collaboration announced to date, we see growing recognition from MNCs for CSPC's tec ...

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The current market has approximately $15 billion of gamma, with a high concentration on strikes slightly below the current market level, indicating a potential shift post month-end due to rolling of large quarterly positions and re-striking of overwriting products [1][2] - The upcoming options expiration on June 20 is projected to be the largest June expiration on record, with over $5.9 trillion of notional options exposure, including $4.0 trillion of SPX options and $925 billion of single stock options [4][10] - The liquidity in the S&P E-mini market is moderate, with a top-of-book depth of $7.1 million, slightly below the year-to-date average [7] - Pension funds are expected to sell approximately $20 billion of US equities at quarter-end, but this may be offset by an estimated $10 billion of buying if the SPX trades above 5905 on the last day of the month [9][10] - A significant number of companies (approximately 40%) are currently in a blackout period for buybacks, which is expected to end around July 25 [12] - Systematic strategies currently hold $126 billion in US equities, with a projected small sell-off of $310 million in a flat market scenario, but potential buying demand of $790 million over the next week [14][15] - Historically, the second half of June has shown positive returns for the S&P, averaging 45 basis points from June 17 to July 1 [17] - The AI-led rally has resulted in a divergence in stock performance, with AI winners reaching new highs while companies perceived to be at risk from AI have declined [19] - There is increased demand for tail options, particularly in the QQQ market, indicating a preference for hedging strategies amid market volatility [21][22] - The vega of the VIX ETN has increased significantly, with the UVIX ETF's assets under management growing more than fivefold in recent months, highlighting the product's role in the VIX futures market [27][28]

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The market is currently facing multiple challenges, including geopolitical tensions in the Middle East, rising oil prices, and a flat S&P 500 index despite these pressures [2][3] - There is a notable correlation between long-duration bonds and equity markets, indicating investor concerns about US exposure and a desire to diversify away from US assets [3] - The AI sector is experiencing renewed interest, with significant demand and strategic deals indicating a robust growth trajectory [24][25] - Europe is being viewed as an emerging opportunity for investment, with major firms planning substantial investments due to favorable conditions [38][33] Market Dynamics - Increased volatility in the market is attributed to geopolitical uncertainties and economic indicators showing signs of retail and cyclical slowdowns [4][6] - Credit markets remain stable despite various risks, with a preference for high-quality assets indicating a cautious risk-on sentiment [21][22] - The energy sector is under scrutiny due to potential shortages exacerbated by geopolitical tensions and domestic issues, particularly in Europe [26] Investment Flows - There has been a consistent net buying trend across global markets, particularly in North America and Asia, with emerging markets also seeing renewed demand [7][8] - The report highlights a shift in capital flows from the US to other regions, although there is hesitance regarding investments in China [19] Economic Outlook - The US deficit and bond market are facing scrutiny, with concerns about how the US will manage its debt and economic growth moving forward [20] - The cyclical nature of investment products is emphasized, with a resurgence in secondary funds indicating a shift in investor priorities towards liquidity and cash returns [42]

Investment Rating - The report indicates a cautious outlook for the A-share market, suggesting a barbell strategy with micro-cap and bank stocks performing steadily [6][10]. Core Insights - The A-share market has remained flat amid Middle East tensions, supported by the Lujiazui Forum, while H-shares lagged due to increased risk-off sentiment [1]. - Biotech and New Consumption sectors in Hong Kong have seen a sharp pullback after significant gains of 30-50% YTD, with the HS Biotech Index dropping over 9% in the past five days [2][3]. - The Lujiazui Forum has announced measures to support Shanghai as a global financial center, including the reopening of IPOs for unprofitable tech firms under new standards [10][11]. Summary by Sections A-share Market - The A-share market is experiencing a barbell strategy with micro-cap and bank stocks outperforming, while foreign participation remains light [6]. - Limited liquidity is driving small-cap beta, while deflationary pressures keep dividend plays attractive [7][8]. Hong Kong Market - The biotech and new consumption sectors have both declined after strong rallies, with notable sell-offs in stocks like CSPC and Innovent [2][3]. - The new consumption sector has seen significant drops in stocks such as PopMart and Laopu, attributed to profit-taking rather than clear negative catalysts [4]. Lujiazui Forum Insights - The forum emphasized credibility and global financial connections, with discussions on reopening IPOs for unprofitable tech firms and expanding QFII investment scope [10][12]. - AI and semiconductor companies are likely to be prioritized for new listings, with stocks in the growth tier marked with a "U" label to indicate investment risk [11]. Macro Economic Context - Retail sales showed strong performance in May, but sustainability is questioned due to potential payback effects in June [13]. - Property prices in 70 cities have continued to decline, with secondary market data indicating a drop of 5-15% over the past year [14]. Investor Behavior - Overall A-share flows indicate a selling trend, with long-only and hedge funds both showing net selling behavior despite the geopolitical tensions [18]. - Specific sectors like AI infrastructure are seeing renewed interest, with notable buying in companies like Zhongji Innolight and Eoptolink [17].

Investment Rating - The report maintains a positive outlook on the China Internet sector, particularly focusing on AI applications and their monetization potential. Core Insights - The report highlights the steady engagement trends in AI applications, with significant growth in daily token usage and monetization strategies across various platforms. It emphasizes the competitive pricing of AI models and the increasing adoption of AI functionalities in existing applications. Summary by Sections AI Adoption and Engagement - Key investor focuses include rising use cases for AI across both consumer (to-C) and business (to-B) applications, with notable engagement from platforms like DeepSeek and Bytedance's Doubao, which reported a daily token usage of 16.4 trillion in May 2025, a 29% month-over-month increase [1] - The overall top 400 mobile apps saw an 8% year-over-year increase in total time spent in May 2025, with Douyin's main app engagement up 23% year-over-year [1][6] Monetization Strategies - The report notes steady progress in AI monetization, particularly with Kuaishou's Kling achieving an Annualized Revenue Run Rate (ARR) surpassing US$100 million, and other companies also reporting scalable ARR for their AI products [1][6] - Subscription-based productivity tools and advertising-based AI search engines are highlighted as key monetization avenues, with Alibaba's Quark and Baidu's AI chatbots expected to leverage adtech for improved transaction capabilities [1] Competitive Pricing and Model Developments - The report discusses the competitive pricing landscape, with Kuaishou's Kling 2.1 version offering a significant cost reduction of 60-80% compared to its predecessor, and ByteDance's Seedance 1.0 outperforming Google's video generation model [1][6] - The report also mentions the advancements in multi-modal capabilities and the launch of various AI models by leading companies, indicating a strong competitive environment in the AI sector [1][6] Engagement Trends Across Verticals - Engagement in eCommerce platforms accelerated to 10% year-over-year in May, with JD's time spent increasing by 87% year-over-year, driven by food delivery initiatives [1] - Social engagement remained stable with a 6% year-over-year increase, while gaming engagement picked up to 6% year-over-year in May [1][6] Stock Preferences and Recommendations - The report recommends a dual-pronged approach to stock picking, emphasizing defensive sub-sectors and domestic policy beneficiaries with discounted valuations. Preferred stocks include Tencent in gaming, JD in eCommerce, and Kuaishou for AI application monetization [1][6]

Investment Rating - The report upgrades ADNOC Gas to Buy with a target price of 4 AED, reflecting a positive outlook on gas-to-power demand [1][5][12]. Core Insights - The GCC is positioned to capture a 5% market share in the global AI sector this decade, driven by low energy costs and favorable capital conditions [1][2]. - The region's AI capacity is expected to grow tenfold to 6 GW by 2030, contributing to 20% of ex-US growth during this period [2][9]. - ADNOC Gas is identified as a key beneficiary of rising gas-to-power needs, with a projected domestic sales growth of 5% CAGR by 2030 [5][12]. Summary by Sections AI and Data Center Growth - The Middle East's current market share in AI is only 1%, but it is anticipated to grow at four times the broader market rate, reaching 5% by 2030 [9]. - Significant investment of approximately $100 billion is required for data center infrastructure and advanced GPUs to support this growth [10][19]. Energy Demand and Supply - The report forecasts a 0.5-2.0% uplift in power demand across the GCC this decade, with the UAE likely at the upper end [3][28]. - The region benefits from low-cost gas and renewable energy sources, with gas prices at $2.15/mmbtu compared to $3/mmbtu in the US and $7/mmbtu in Europe [25][27]. Geopolitical and Regulatory Environment - US-led investments in Middle East data centers and favorable regulations, such as Saudi Arabia's draft 'Global AI Hub' law, enhance the region's attractiveness for AI processing [4][42]. - The report highlights the need for robust regulatory frameworks to manage data protection and digital jurisdiction as the region positions itself as a global AI hub [41][43]. Cooling and Infrastructure Challenges - The shift towards hyperscale data centers necessitates advancements in cooling technologies, with liquid cooling emerging as a more efficient solution compared to traditional air cooling [38][40]. - The report notes that the Middle East's solar energy costs are among the lowest globally, which supports the region's energy needs for data centers [29][33].

Investment Rating - The report assigns a "Buy" rating to several companies including Microsoft, Alphabet, Salesforce, ServiceNow, HubSpot, Adobe, and Intuit, indicating a positive outlook on their potential to capture market share in the evolving software landscape driven by agentic AI capabilities [16][18][19]. Core Insights - The report emphasizes that the next phase of AI-driven productivity gains in enterprises will depend on the effectiveness of agents at the software application layer over the next three years, with current examples primarily being basic chatbots [1]. - The total addressable market (TAM) for software is projected to grow by at least 20% by 2030, particularly in customer service software, which is expected to expand by 20-45% compared to a scenario without AI integration [2]. - SaaS companies are well-positioned to capture a significant share of the new agent TAM, with estimates suggesting that agents will constitute over 60% of the total software TAM by 2030 [3]. Summary by Sections Agentic Architectures - The report defines agents as autonomous AI entities capable of performing tasks, making decisions, and adapting to changes in their environment [22]. - It highlights the importance of distinguishing between traditional chatbots and more advanced agents that exhibit agency and context awareness [22]. The Evolving Software TAM - The report discusses the potential for TAM expansion across various software segments, noting that sectors tied to revenue generation and innovation, such as sales and marketing, have higher expansion potential compared to those viewed as cost centers [2][70]. - It provides a detailed analysis of how agents can drive productivity and enhance the software TAM, particularly in customer service and security operations [70]. SaaS Incumbents vs. New Entrants - The competitive landscape is characterized by SaaS incumbents, AI natives, and platform/model vendors, with the report mapping their strengths and weaknesses against key ingredients for success in capturing the agentic profit pool [8][10]. - It notes that while SaaS companies are adapting to the new agentic landscape, they face risks from new competition based on AI-native tech stacks and pricing model compression [8]. Companies, Strategies, and Case Studies - The report identifies key companies to watch, including Microsoft, Alphabet, Salesforce, ServiceNow, HubSpot, Adobe, and Intuit, each with unique strategies to leverage agentic AI capabilities [16][18][19]. - It emphasizes the importance of innovation pace, domain experience, and value-oriented pricing as critical factors for success in the agentic AI market [8][10].

Investment Rating - The report maintains a long gold trade recommendation, forecasting gold prices to reach $3,700 per ounce by the end of 2025 and $4,000 by mid-2026 [3][16]. Core Insights - Amid rising tensions in the Middle East, gold prices are near all-time highs, driven by increased safe-haven demand, although speculative positioning remains low due to investor hesitancy [3][8]. - A World Gold Council survey indicates that 95% of central banks expect global gold holdings to increase over the next 12 months, with 43% planning to increase their own gold holdings, the highest since 2018 [5][10]. - Interest has shifted towards other precious metals like platinum and silver, but these rallies are seen as primarily speculative and lacking fundamental support [9][10]. Summary by Sections Central Bank Demand - The report highlights structurally high central bank demand for gold since the Russian central bank asset freeze in 2022, with major Asian central banks expected to continue strong accumulation for another 3-6 years [10]. - The survey conducted between February 25 and May 20, 2025, included 71 central banks, with none anticipating a reduction in gold holdings [6][15]. Speculative Positioning - Speculative inflows into gold have been muted, with positioning remaining low compared to historical levels, as investors feel they missed the initial rally [3][8]. - In contrast, the silver trade is currently crowded with speculative positioning significantly higher than gold, despite their typical strong correlation [9]. Price Forecast - The report projects that strong central bank buying and increased ETF holdings due to Federal Reserve cuts will drive gold prices higher, with specific targets set for the end of 2025 and mid-2026 [16].

Investment Rating - The report assigns a "Buy" rating for Laopu Gold (6181.HK) with a target price raised to HKD 1,090, indicating an upside potential of 23.7% from the current price of HKD 881.50 [1]. Core Insights - Laopu Gold's earnings are expected to grow by 15-26% in 2025-27E, driven by strong year-to-date sales performance and rapid store expansion, supported by increasing brand awareness and a rising gold price forecast [1][2]. - The company has successfully launched a new product series, "七子葫芦" (Seven-color enamel gold gourd), which has received positive feedback and is expected to enhance brand equity while allowing for higher pricing [2]. - The upcoming quarter is anticipated to be eventful with several strategic initiatives planned, including new product launches and store optimizations, aimed at reinforcing Laopu's market position against traditional jewelers [2][16]. Financial Performance - Revenue projections for Laopu Gold have been significantly revised upwards, with estimates for 2025 increasing from RMB 19,585 million to RMB 26,310 million, reflecting a robust growth trajectory [4]. - The company's online sales have shown remarkable growth, with a total GMV of RMB 1.6 billion from January to May, representing a 511% year-on-year increase [1][22]. - The EBITDA and EPS forecasts have also been adjusted upwards, with 2025 EPS now estimated at RMB 27.60, up from RMB 22.13 [4]. Market Position and Competitive Advantage - Laopu Gold has demonstrated strong same-store sales growth (SSSG) above triple-digit percentages, outperforming both local and international competitors in the jewelry sector [25][26]. - The company is expanding its total store pipeline beyond the initially guided 6-8 new stores, indicating a proactive approach to market expansion [1][2]. - The successful performance of new product launches and the strategic focus on brand differentiation are expected to sustain growth and expand the total addressable market (TAM) [2][25].