Investment Rating - The report indicates a cautious outlook for the US economy, with a 12-month recession probability revised from 45% to 65% [3] Core Insights - The US is expected to experience weak growth of just 0.5% on a Q4/Q4 basis in 2025, influenced by significant trade policy uncertainties and potential tariff impacts [3] - In the Euro area, growth is projected at only 0.3% for 2025, with the European Central Bank expected to continue cutting rates [3] - China's growth forecast for 2025 has been downgraded to 4%, with aggressive fiscal and policy easing anticipated to cushion the impact of tariffs [3] Summary by Sections US Economics - The effective tariff rate is expected to rise by about 16 percentage points, with broad-based tariffs not effectively targeting industries that could boost domestic employment [5] - Historical data suggests that a 10 percentage point increase in tariffs raises employment in protected industries by 0.4%, but a 1 percentage point increase in costs lowers employment by 0.6% [5] - The report estimates that tariff protection will create a net drag of approximately 480,000 jobs in downstream industries [5] Europe Economics - The Q1 GDP tracking estimate for Europe has been boosted to +0.4%, driven by a rise in core retail sales [7] - UK pay growth was below expectations at 5.9% in February, with a stable unemployment rate of 4.4% [7] - Euro area final inflation for March showed a headline rate of 2.18% year-on-year, with core inflation at 2.43% [7][8] Asia/EM Economics - China's Q1 GDP growth was reported at 5.4% year-on-year, exceeding market expectations, with strong performance in industrial production and retail sales [9] - Despite high tariffs, US importers remain reliant on China for many goods, with 36% of US imports from China having over 70% reliance on Chinese supply [9] - The report notes that the USD-JPY exchange rate has implications for the Bank of Japan's policy, with the USDJPY dropping to 142 [11]

Investment Rating - The report has lowered the average 2025 net profit growth forecast for covered banks to -5%, reflecting a decrease of 1 percentage point from previous estimates [15]. Core Insights - Negative net profit growth in 1Q25 for large SOE banks and CMB has led to stock price declines, prompting a reassessment of profit forecasts and target prices [1]. - Despite negative net profit growth, banks may still attract long-term funds due to limited downside on dividend yields compared to government bond yields [2][3]. - The report emphasizes the increasing importance of net profit growth in 1Q25, as investors have heightened expectations for shareholder returns following two years of excess returns [3][4]. - The report indicates that banks are facing challenges in achieving positive net profit growth in 2025 due to lower-than-expected net interest income (NII) and loan growth [11][15]. Summary by Sections Net Profit Growth - The average net profit growth forecast for covered banks is now -5% for 2025, with small banks BONB and BONJ expected to achieve 7% growth [15]. - Most banks are still releasing provisions, but not sufficiently to drive positive profit growth, and the potential for further provision releases is limited [5][15]. Dividend Payout Ratios - Banks may need to increase their dividend payout ratios to maintain stable dividends per share (DPS) amidst negative EPS growth [22][30]. - The report suggests that banks have the capacity to increase dividends, but their willingness remains uncertain [22][26]. Loan Growth and NIM - Loan growth for major banks is projected to be lower than previously expected, with NIM also declining more than anticipated [11][13]. - The report notes that while credit growth is expected to accelerate, overall loan demand remains weak due to external factors such as tariffs [13][40]. Fee Income and Consumer Finance - Some banks have reported better-than-expected growth in fee income, driven by bancassurance and fund sales [33]. - A potential recovery in consumer finance is anticipated in the second half of 2025, influenced by low base effects and banks seeking new business opportunities [31][34]. Stock Selection and Recommendations - Among large and medium-sized banks, CMB is viewed as having the least EPS dilution and the lowest required increase in dividend payout ratio, making it more capable of maintaining stable DPS [41]. - BONB is favored for its high growth potential relative to larger banks, while BONJ is rated Neutral due to ongoing convertible bond conversion processes [41].

6 May 2025 | 3:57PM HKT China Agriculture Sector (quarterly) China Ag theme in play: tariff and soybean Tariff and soybean: The higher tariff China imposed on US goods import would add inflationary pressure on major grains. We estimate US Ag imports account for 21% of total China import of soybean, 15% in corn, 6-11% in major proteins such as poultry, pork and beef. However, the level of inflation is likely to be much milder than the incremental 135% tariff in our view, due to a strong harvest year in Brazi ...

Investment Rating - The report does not provide a specific investment rating for Espressif (688018.SS) as it is categorized as "Not Covered" [1]. Core Insights - Espressif is a local Wi-Fi chipset firm focusing on AIoT, energy, and industrial clients, leveraging RISC-V architecture for its products. The company is optimistic about growth in 2025, driven by product diversification and strong software capabilities [1][3][10]. - The company is expanding its product line to include Wi-Fi 7 and AI edge chipsets, aiming to capture a larger market share. A recent private placement plan was announced to fund this development [1][11]. - Espressif's products are primarily based on RISC-V architecture, which allows for lower royalty costs and in-house IP development. This aligns with a broader positive outlook on the RISC-V ecosystem in China [2][9]. Summary by Sections Company Overview - Espressif (688018.SS) is a fabless company providing Wi-Fi chipsets/modules for various applications, including consumer electronics and smart home solutions. The company integrates Bluetooth functionality and offers a comprehensive range of Wi-Fi SoC solutions [3][4]. Product Development and Market Outlook - The management is positive about the growth outlook for 2025, with expectations of a gross margin above 40% and plans to increase headcount by 10% to 15% for new product development [10]. - The company is focusing on upgrading its product offerings towards Wi-Fi 7, which features high throughput and low latency, suitable for high-end applications like AR/VR and HD video [11]. Competitive Positioning - Espressif's RISC-V based architecture provides a competitive edge with a broad product line that offers high performance and a favorable price-to-performance ratio. The company is also expanding into high-end solutions [2][4].

Investment Rating - The report indicates a positive outlook for the retail and consumer sector, suggesting that consumption has bottomed out and is expected to continue growing, particularly during holiday periods [1][10]. Core Insights - Retail sales growth during the Labor Day holiday was better than expected, with key retail and restaurant enterprises reporting a year-over-year growth of 6.3%, up from 4.1% during the Chinese New Year holiday [1][10]. - Tourism sales also showed strong performance, with an 8% year-over-year increase, reaching 136% of pre-COVID levels, supported by a 6.4% increase in tourism traffic [1][10]. - Spending patterns indicate a rational approach from consumers, with per capita tourism spending growing by only 1.5% year-over-year, still below pre-COVID levels [3][10]. Summary by Category Retail and Catering - Home appliances, auto, and telecom equipment saw significant sales growth, with key enterprises reporting increases of 15.5%, 13.7%, and 10.5% respectively [2][23]. - Catering services also performed well, with an 8.7% increase in sales, particularly benefiting from strong traffic and consumer willingness to pay for experiences [2][22]. Tourism - Domestic tourism sales grew by 8% year-over-year, with total tourism sales recovering to 123% of pre-COVID levels, driven by increased traffic [10][11]. - Outbound travel showed solid momentum, with a 21% year-over-year increase, particularly to Hong Kong and Macau [11][10]. Regional Performance - Consumer spending growth was balanced across different tiers of cities, with key tourism cities and lower-tier cities benefiting from increased traffic [9][26]. - Major cities like Shanghai and Beijing outpaced the national average in consumption growth, aided by domestic tourism and visa-free policies [28][26]. Specific Categories - Jewelry sales improved due to better sentiment around gold prices, with notable growth from brands like Chow Tai Fook [24][19]. - The box office experienced a significant decline of 51% year-over-year, attributed to a lack of blockbuster films [25][10].

Investment Rating - The report does not explicitly provide an investment rating for the industry or companies discussed Core Insights - The report highlights three main themes from the 1Q 2025 earnings calls: tariffs, consumer sentiment, and AI impact on businesses [1] Theme 1: Tariffs - 89% of S&P 500 companies mentioned "tariffs" during their earnings calls, indicating significant concern over trade policy uncertainty [3][8] - Companies are employing various strategies to mitigate tariff impacts, including supply chain adjustments and passing costs to consumers [3][4] - 28% of S&P 500 companies quantified the impact of tariffs, with some estimating cost increases of 6% to 8% [21][31] Theme 2: The Consumer - There is a noted decline in consumer sentiment, with both top and bottom income terciles reporting lower confidence levels than during COVID [9][10] - Despite negative sentiment, some companies report that consumer spending remains strong, while others see signs of weakness in discretionary spending [47][49] - Revisions to 2025 earnings estimates for consumer sectors show negative adjustments of -8% for Consumer Discretionary and -4% for Consumer Staples [10][12] Theme 3: AI - Companies express enthusiasm for AI, citing cost reductions and productivity improvements, although mentions of AI in earnings calls slightly decreased from 48% to 44% [14][20] - Major tech firms are investing heavily in AI, with significant capital expenditures planned to support growth in AI services [15][67] - AI is seen as a long-term growth driver, with companies reporting increased demand for AI-enabled products and services [15][78]

Investment Rating - The report indicates a positive outlook for the US-China trade relations, expecting a reduction in tariffs from approximately 160% to around 60% soon, which could enhance investment sentiment in related sectors [1][3]. Core Insights - The resilience in hard economic data has reassured investors, with improved employment reports and jobless claims indicating stability in the labor market, contributing to a significant easing of financial conditions [4][9]. - Despite the positive indicators, the report maintains a 12-month recession risk estimate of 45%, highlighting potential tariff increases in other sectors and the lagging nature of hard data during downturns [9][12]. - The outlook for monetary policy remains uncertain, with expectations of further rate cuts from the Federal Reserve and the European Central Bank, reflecting a dovish stance amid economic challenges [15][19]. Summary by Sections US-China Trade Relations - The Trump administration has softened aggressive tariff policies, with expectations of a significant reduction in tariffs on both sides, which could lead to improved trade dynamics [1][3]. Economic Resilience - Recent employment data and jobless claims suggest continued resilience in the labor market, contributing to a sharp easing of financial conditions, with a projected peak financial conditions drag on US GDP growth decreasing from 1.0 percentage points to 0.2 percentage points [4][8]. Recession Risks - The report highlights a 45% recession risk over the next 12 months, with concerns about potential tariff increases in various sectors and the impact of pre-buying on economic data [9][12]. Monetary Policy Outlook - The report anticipates further rate cuts from the Federal Reserve and the European Central Bank, with a dovish outlook for monetary policy in response to economic conditions [15][19]. Market Strategy - The report advises caution for investors, suggesting a weaker dollar and higher gold prices as key themes, while being bullish on UK rates, copper, and US natural gas, but bearish on oil [26].

Investment Rating - The report maintains a "Buy" rating for Pony AI Inc. with a 12-month price target of US$23.10, indicating an upside potential of 138.1% from the current price of US$9.70 [17]. Core Insights - Pony AI's commercialization trajectory is viewed positively, driven by decreasing hardware and algorithm costs, expanding service coverage, increasing consumer acceptance, and favorable policy support [1]. - The report anticipates that China's robotaxi industry will achieve operating break-even by 2032, with Pony AI expected to reach operating break-even by 2029, faster than the industry average [1]. - Competitive advantages for Pony AI include experience and successful track records, in-house technology with rapid iterations, and ongoing partnerships with various ecosystem players [1]. Summary by Sections Fleet and Technology - Pony AI's Gen7 robotaxis, announced on April 23, feature lower costs and enhanced safety, supporting large-scale commercialization. The Gen7 model has a designed life of 10 years or 600,000 km and includes advanced sensor technology [6]. - The Gen7 models achieve a 70% reduction in Bill of Materials (BoM) costs compared to Gen6, with 80% savings on the car computing unit and 68% savings on LiDARs [6]. Strategic Partnerships - Pony AI has partnered with Tencent to integrate its robotaxi service into WeChat Mobility Services and Tencent Maps, expanding user access and reducing customer acquisition costs [9]. Earnings and Financial Projections - The report revises earnings estimates for Pony AI from 2025 to 2032, reflecting a more optimistic view on cost of goods sold (COGS) reduction. Lower vehicle and autonomous driving kit costs, along with fleet growth, are expected to improve operational leverage and future earnings [10]. - Revenue projections show significant growth, with revenues expected to reach US$3.85 billion by 2032, reflecting a compound annual growth rate (CAGR) of 33% in EBITDA from 2030 to 2032 [11][13]. Valuation - The target price of US$23.10 is based on a discounted EV/EBITDA method with a target multiple of 17.4x for 2030E EBITDA, discounted back to 2025E using a cost of equity (COE) of 11.5% [14].

Investment Rating - The report provides a "BUY" rating for key Robotaxi companies such as Pony AI and Baidu, indicating a positive outlook for their growth potential in the Robotaxi market [19]. Core Insights - The China Robotaxi market is projected to reach a total addressable market (TAM) of US$47 billion by 2035, a significant increase from US$54 million in 2025, driven by decreasing costs of hardware and algorithms [13][24]. - The report emphasizes that the commercialization of L4 autonomous technology is not a question of readiness but rather how companies will capitalize on the rapid advancements in autonomous development [1]. - Positive gross margins are expected at the vehicle level by 2026 in Tier 1 cities, with revenues per Robotaxi projected to reach US$31,000 by 2035 [7][24]. Summary by Sections China Robotaxi TAM Snapshot - The report highlights a substantial growth trajectory for the China Robotaxi market, forecasting a TAM of US$47 billion by 2035, compared to US$54 million in 2025 [13][24]. Ecosystem: Supply Chain of Robotaxi - The supply chain for Robotaxis includes key players such as Pony AI and Baidu, along with semiconductor suppliers like Horizon Robotics and automotive OEMs like Tesla and Xpeng [7][19]. Market Size and Penetration - The report anticipates a fleet size of 1.9 million Robotaxis by 2035, achieving a penetration rate of 25% in the total shared mobility vehicle market [15][24]. - The market size is expected to grow significantly, with a forecast of 700 times the current TAM growth over the next decade [12]. Revenue Generation - Revenue per Robotaxi in Tier 1 cities is expected to reach US$31,000 by 2035, driven by longer operating hours and efficient route planning [7][24]. Cost Reduction - Operating costs for fleet owners are projected to decrease, with costs per vehicle in Tier 1 cities expected to drop to US$19,000 by 2035 [24]. Unit Economics - The report models positive unit economics, predicting profitability by 2026 in Tier 1 cities and by 2031 and 2034 in Tier 2 and other cities, respectively [7][24]. Policy and Insurance Support - Supportive government policies and the development of insurance for the Robotaxi industry are identified as crucial for facilitating growth [7][24]. Future Market Segmentation - The report discusses potential future developments in the Robotaxi market, including the introduction of new vehicle models and shared ownership models to encourage adoption [24].