Investment Rating - The report indicates a dovish outlook for G10 policy rates through 2026, suggesting a significant decline in rates, particularly in the US, where 10-year Treasury yields are expected to reach 4.00% by the end of 2025 and just above 3.00% by the end of 2026 [6][27]. Core Insights - The report emphasizes that the US dollar is expected to weaken significantly, with the DXY forecasted to fall an additional 9% over the next 12 months to 91, driven by a convergence in US rates and growth to peers, alongside increased FX hedging flows [6][69]. - The report outlines a bearish outlook for global growth, particularly in the US, where real GDP growth is projected to decline from 2.5% in 2024 to 1.0% in both 2025 and 2026, influenced by tariffs and immigration restrictions [15][23]. - Inflation is expected to moderate globally, with core PCE in the US forecasted to reach 4.5% before declining, while the euro area is projected to undershoot the ECB's inflation target due to sluggish growth [23][34]. Interest Rate Strategy - In the US, Treasury yields are expected to range trade through 3Q25 before declining, with a forecast of 10-year yields at 4.00% by the end of 2025 and a larger decline in 2026 as the Fed is anticipated to cut rates by 175 basis points [3][27]. - The euro area is projected to see the 10-year Bund yield fall to 2.40% by 4Q25 and 2.20% by 4Q26, influenced by more ECB easing than currently priced in [3][35]. - In the UK, 10-year gilt yields are expected to end 2025 at 4.35% and 2026 at 3.80%, with the Bank Rate projected to decline further due to a slowdown in economic activity [41][43]. Currency & Foreign Exchange - The report forecasts continued weakness in the USD, with significant declines against safe-haven currencies such as EUR, JPY, and CHF, as the DXY is expected to fall to 91 by mid-2026 [8][69]. - Specific currency pairs are projected to move as follows: EUR/USD to rise to 1.25, GBP/USD to 1.45, and AUD/USD to 0.69 by mid-2026, reflecting various economic factors [8][69]. Inflation-Linked Bonds - In the US, breakevens are expected to remain elevated until 3Q25 due to tariff-induced inflation, with a tightening forecast around 2Q26 as inflationary pressures begin to cool [9]. Sovereign Supply Outlook - The report anticipates a decrease in net coupon bond supply across the G7, amounting to US$2.72 trillion in 2025, down 5% year-over-year, influenced by fiscal policy uncertainties [53][62].

Investment Rating - The report indicates a negative outlook for the manufacturing sector, as reflected by the Caixin manufacturing PMI falling to 48.3 in May, below the neutral level of 50, suggesting contraction in the industry [1][3]. Core Insights - The Caixin manufacturing PMI decreased significantly from 50.4 in April to 48.3 in May, marking the lowest level since September 2022 and missing market expectations [2][3]. - Major sub-indexes showed declines, with the output sub-index dropping to 47.5 from 51.6, the new order sub-index falling to 47.4 from 50.5, and the employment sub-index decreasing to 48.4 from 49.0 [3][4]. - The divergence between the Caixin and NBS manufacturing PMIs may be attributed to survey timing differences, as the Caixin PMI is typically conducted earlier in the month [1][9]. Summary by Sections Manufacturing PMI - The Caixin manufacturing PMI fell to 48.3 in May, indicating a contraction in the manufacturing sector, contrary to market expectations of an increase [2][3]. - The output sub-index and new order sub-index experienced the most significant declines, reflecting deteriorating demand conditions [3][4]. Trade-Related Sub-Indexes - The new export orders sub-index decreased to 46.2 in May, the lowest since July 2023, indicating weakened international demand [4]. - Inventory levels showed an increase, with raw materials inventory rising to 50.1 and finished goods inventory increasing to 50.3, suggesting a buildup of stock [4]. Price Indicators - Disinflationary pressures were noted, with the input price index falling to 48.8 and the output price index declining to 48.6, indicating reduced pricing power for manufacturers [4].

Investment Rating - The report maintains a "Buy" rating for Miniso, with a 12-month price target of $23.10 for ADR and HK$45.00 for H-share, indicating an upside potential of 34.5% and 33.7% respectively [14][17]. Core Insights - Miniso is expected to experience sequential sales growth acceleration, with management confident in margin improvement and a peak in DTC-related expenses in the first half of the year [1][2]. - Same-store sales growth (SSSG) turned positive in May for Miniso China, and positive trends were also observed in the US and other overseas markets [1][7]. - The company plans to enhance its product offerings, focusing on both intellectual property (IP) products and value-for-money lifestyle products, with localized designs for overseas markets [1][10]. - Management aims to expand to over 1,000 stores in the US market, targeting a 20% operating profit margin in the mid to long term, despite potential short-term volatility [1][11]. Summary by Sections Sales Growth and Guidance - For Q2 2025, Miniso China is expected to achieve low teens percentage sales growth, while Miniso Overseas and Top Toy are projected to grow by 25%-30% and 70%-80% year-over-year respectively [8]. - If the SSSG recovery trend continues, operating profits are likely to turn positive in Q3, with full-year adjusted operating profits targeted at RMB 3.6 billion to RMB 3.8 billion [8]. Product Strategy - The company is enhancing its IP product quality and focusing on localized designs for international markets, while also improving the merchandising of value-for-money products [10][12]. - A dedicated zone for top-selling products has been added to increase conversion rates, and inventory management will be prioritized to avoid stockouts of best-sellers [11]. Market Performance - Year-to-date, Miniso China's SSSG has shown improvement, with positive trends in the US market and other overseas markets noted in April and May [7][11]. - The US market has seen the opening of approximately 20 new stores, primarily in plaza locations, achieving double-digit operating profit margins despite being in a low season [11]. Long-term Outlook - Miniso is positioned to become a leading global IP retailer, with catalysts for share price growth including accelerated store expansion, improved SSSG, and higher contributions from IP products [14]. - The market currently underappreciates Miniso's potential adjusted net income compound annual growth rate (CAGR) of nearly 20% from 2024 to 2026, excluding contributions from Yonghui [14].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Fiscal easing has been the primary driver of China's cyclical policy in recent years due to weak private demand and muted monetary policy transmission [3][4] - The estimated short-term fiscal multiplier for China ranges from 0.2 to 1.9, with a mean of 0.7 and a median of 0.6 for a one-year horizon [13][16] - The report estimates China's fiscal multiplier to be around 0.5, indicating that a 1 percentage point widening in the augmented fiscal deficit (AFD) would boost real GDP by 0.5 percentage points after four quarters [6][24] - The AFD is projected to widen to 13.0% of GDP in 2025 and 13.5% in 2026, which is expected to increase real GDP growth by 1.1 percentage points in 2025 and 0.6 percentage points in 2026, compared to a 0.5 percentage point drag in 2024 [6][41] Summary by Sections Fiscal Multiplier Estimates - Recent literature suggests a wide range for China's fiscal multiplier, with discrepancies attributed to different sample periods and estimation techniques [13][14] - The report's analysis indicates a cumulative fiscal multiplier of approximately 0.2-0.3 in the first two quarters after a fiscal shock, rising to around 0.5 in the subsequent quarters [28][39] Augmented Fiscal Deficit (AFD) - The AFD has averaged over 11% of GDP in the past three years, while nominal GDP growth has been below 5% [17] - The report highlights a shift towards increasing the official government debt since the onset of COVID-19, enhancing the proportion of on-budget fiscal deficit in the AFD [17][21] Economic Growth Impact - The report anticipates that fiscal policy will significantly support GDP growth in the coming quarters, with a peak incremental fiscal boost expected in Q4 2025 [41][42] - The estimated growth impact of AFD widening is projected to be 1.1 percentage points in 2025 and 0.6 percentage points in 2026, with a quarterly incremental effect diminishing after the fourth quarter [41][44]

Investment Rating - The report indicates a bearish outlook for the aluminium market, with expectations of a surplus extending through 2027, leading to lower price forecasts [8][12][20]. Core Insights - The global aluminium demand forecast for 2025 has been raised from 1.1% y/y to 1.8% y/y due to less severe impacts from the trade war, but forecasts for 2026 and 2027 remain largely unchanged [3][8]. - Indonesian aluminium production is expected to grow faster than previously anticipated, contributing to a market surplus of 1 million tonnes in 2026, the largest since 2020 [8][12][13]. - Cost deflation from lower alumina and energy prices is expected to exert downward pressure on aluminium prices, with forecasts indicating a decline to $2,100/t in early 2026 [8][27][28]. Summary by Sections Demand Forecast - The report has adjusted the global aluminium demand forecast for 2026 and 2027 downwards due to reduced solar demand, resulting in a decrease of 0.3/0.6% in total aluminium demand [3][20]. - The solar sector's demand for aluminium is expected to decline significantly due to new policies affecting solar installations in China [20][24]. Supply Outlook - The supply forecast for Indonesia has been upgraded, with three new smelters expected to be operational by mid-2026, increasing the supply forecast by 750/550kt in 2026/2027 [12][13][14]. - Indonesia is projected to account for 9% of ex-China aluminium production by 2030, up from 2% in 2024 [13]. Price Forecast - The aluminium price is expected to fall to a low of $2,100/t in early 2026, with a trading range of $2,150-2,550/t anticipated in subsequent years [8][27]. - Average price forecasts for 2026 and 2027 have been lowered to $2,230/t and $2,500/t, respectively, reflecting a more bearish outlook [8][35].

Investment Rating - The report indicates a positive outlook for India's economy, with an upward revision of the GDP growth forecast for CY25 to 6.6% year-over-year, reflecting strong investment growth driven by public capital expenditure [6][11]. Core Insights - India's real GDP growth surged to 7.4% year-over-year in Q1 CY25, up from 6.4% in Q4 CY24, surpassing consensus expectations [3][6]. - The growth in real Gross Value Added (GVA) was recorded at 6.8% year-over-year in Q1 CY25, an increase from 6.5% in the previous quarter [2][6]. - Strong investment growth was noted, particularly in public capital expenditure, which exceeded revised estimates by 0.1% of GDP for FY25 [6][7]. - The agricultural sector showed growth of 5.4% year-over-year, while manufacturing and services sectors also demonstrated robust performance [6][7]. - Despite a contraction in private consumption expenditure growth, fixed investment growth rose sharply to 9.4% year-over-year, aided by back-loaded public capex [6][7]. Summary by Sections Economic Growth - Real GDP growth in Q1 CY25 was 7.4% year-over-year, with a sequential increase of 2.1% [2][3]. - Nominal GDP growth reached 10.8% year-over-year, up from 10.3% in Q4 CY24 [2][5]. Sector Performance - The agricultural sector grew by 5.4% year-over-year, while manufacturing growth hit a three-quarter high of 4.8% [6][7]. - Services growth remained strong at 7.3% year-over-year, primarily driven by financial services and real estate [6][7]. Investment Trends - Central government public capex in March increased by 68% year-over-year, significantly contributing to GDP growth [6][7]. - The report anticipates continued strong rural consumption, although policy uncertainty may dampen future investment growth [6][7].

Investment Rating - The report does not explicitly state an investment rating for the transportation industry or specific companies within it. Core Insights - The report indicates a potential surge in freight volumes from China to the US, driven by expected increases in imports at the Port of Los Angeles, with vessel traffic projected to rise by 6% and TEUs by 39% in the coming weeks [3][4][5] - Trade uncertainty remains high due to recent court involvement over tariffs, which could impact inflation, consumer spending, and global freight flows [2][7] - The report outlines three potential scenarios for trade dynamics in 2025, with a focus on the implications of a 90-day tariff pause with China [10][11][12] Summary by Sections Tariff Impact and Freight Trends - The report tracks high-frequency data to assess the ongoing impact of tariffs on global supply chains, noting that while there has been a recent decline in freight volumes from China, a rebound is anticipated [5][6][14] - Container rates have shown volatility, with a recent uptick followed by flattening, indicating potential shifts in demand and supply dynamics [15][38] Trade Volume Analysis - Year-over-year (YoY) comparisons show a significant drop in laden container vessels from China to the US, with a decrease of 37% YoY and TEUs down by 34% YoY [22][14] - The report estimates that April saw an increase of approximately $4 billion in imports compared to the previous year, while May experienced a decline of about $3 billion [4][61] Future Scenarios and Economic Implications - The report presents two broad scenarios for 2025: a pull-forward surge in activity or a continued slowdown due to uncertainty, impacting inventory levels and freight demand [7][11] - Potential outcomes include a strong second half of 2025 if consumer demand rebounds or a bear case scenario if economic conditions worsen [12][15] Company-Specific Insights - Companies such as FedEx, UPS, and freight forwarders like Expeditors International and C.H. Robinson are highlighted as potential beneficiaries of increased freight activity during periods of volatility [15][85] - The report notes that intermodal traffic has declined by 5% YoY, reflecting ongoing challenges in the transportation sector [47][15]

Investment Rating - The report does not explicitly provide an investment rating for the consumer goods trade-in program in China Core Insights - China's real GDP growth is projected to be above 5% year-over-year in H1 2025, driven by stronger-than-expected exports and the consumer goods trade-in program [3][4] - The trade-in program, launched in April 2024, has significantly boosted retail sales, with January-April 2025 retail sales averaging 2.5% above the pre-trade-in program trend [3][5][6] - The program's effectiveness is attributed to expanded product coverage and increased subsidies, with the National Development and Reform Commission allocating RMB 300 billion for 2025 [5][6] Summary by Sections Impact of Trade-in Program - The trade-in program has led to a year-over-year growth of headline retail sales improving to 4.7% in the first four months of 2025, compared to 3.5% in 2024 [6] - The expansion of eligible goods categories, including mobile phones and smart home devices, has contributed to the sales boost [8][11] Consumer Behavior and Market Dynamics - There is a large pool of potential trade-in demand for old autos and home appliances, with an estimated RMB 1.7 trillion worth of appliances aged over 8 years [20][23] - However, monthly auto trade-in applications have shown signs of slowing, indicating potential challenges in sustaining the program's momentum [24][30] Future Consumption Growth Areas - The report highlights a shift in policy focus towards services consumption, which currently accounts for 46% of household spending in China, significantly lower than the 60% seen in developed countries [35][39] - Structural issues and cultural factors are identified as barriers to increasing services consumption, necessitating substantial policy efforts for improvement [39][40]

Investment Rating - The report maintains a 12-month S&P 500 return forecast of 10%, targeting a level of 6500 [2][3]. Core Insights - The S&P 500 rose by 2% this week, driven by a delay in EU tariffs and a favorable US court ruling regarding tariffs [2][3]. - Rising bond yields, particularly the nominal 10-year US Treasury yield at 4.4%, are a significant concern for equity investors [2][4]. - The report emphasizes that the relationship between bond yields and equities is influenced more by the drivers of yield changes rather than the absolute level of rates [2][7]. - Elevated bond yields are expected to constrain potential S&P 500 valuation expansion, with a 100 basis point change in real Treasury yields correlating to a 7% change in S&P 500 forward P/E [2][27]. - Most S&P 500 debt is fixed-rate with maturities beyond 2028, minimizing the risk to earnings from elevated bond yields [32][33]. Summary by Sections Economic Outlook - The nominal 10-year US Treasury yield is projected to end 2025 at 4.5% and slightly increase to 4.55% in 2026, reflecting below-trend economic growth and above-target inflation [18][19]. - The report indicates that the market's focus on US fiscal outlook remains critical, especially following recent legislative developments [19][21]. Equity Performance - The report highlights that equities typically perform well when bond yields rise due to improved growth expectations, but struggle when yields increase due to fiscal concerns [7][14]. - The S&P 500 currently trades close to fair value, supported by strong corporate fundamentals, particularly among large-cap stocks [26][27]. Investment Recommendations - Investors are advised to avoid stocks with weak balance sheets, as these have underperformed compared to those with strong balance sheets [40][41]. - The report suggests rebalancing baskets of Weak Balance Sheet and Strong Balance Sheet stocks, as well as Interest Rate Sensitive stocks, which have outperformed amid rising bond yields [40][41].

30 May 2025 | 4:55PM HKT China Economic Activity and Policy Tracker: May 30 (Song) In this note, we update four sets of high-frequency indicators that we track: 1) consumption and mobility; 2) production and investment; 3) other macro activity; and 4) markets and policy. We publish our tracker on a bi-weekly basis. 1) Consumption and mobility Exhibit 1: 30-city daily property transaction volume in the primary market was largely in line with last year's level Source: Wind, Goldman Sachs Global Investment Res ...