Investment Rating - The report raises the real GDP growth forecast for China to 4.6% in 2025 and 3.8% in 2026, up from previous estimates of 4.0% and 3.5% respectively [1][10][19] Core Insights - The US-China trade talks resulted in larger-than-expected tariff rollbacks, with US tariffs on Chinese goods dropping to 30% for an initial 90 days, significantly reducing the previous tariff burden [2][8] - The effective US tariff rate on China is estimated to be around 39%, down from 107% previously, while China's effective tariff rate on the US is around 30%, down from 144% [2][10] - The report anticipates that Chinese real exports will be roughly flat in 2025/26, a significant improvement from the previous forecast of a -5% annual decline [1][10] Summary by Sections Economic Impact - The report indicates that the tariff rollbacks will lead to a smaller drag on China's growth, resulting in less demand for domestic policy easing than previously expected [8][10] - The net export contribution to China's GDP growth is now expected to be +0.1 percentage points, compared to a previous expectation of -0.5 percentage points [10] Policy Adjustments - Monetary policy easing expectations have been adjusted to only one 10 basis point cut in Q4 2025, down from two cuts previously anticipated [1][10] - The augmented fiscal deficit estimate for China has been lowered to 13.0% of GDP for 2025, down from 13.5% [1][10][16] Growth Forecast Revisions - The report raises sequential growth forecasts for Q2 and H2 2025, resulting in a 0.9 percentage point increase on a Q4/Q4 basis [10][19] - The revised forecasts for China's GDP growth reflect a more stable outlook amid ongoing trade negotiations, with balanced risks primarily surrounding US-China trade relations [9][10]

Investment Rating - The report maintains a "Buy" rating for JD.com (JD/9618.HK) with a target price of US$50/HK$194, reflecting its attractive valuation compared to peers in the eCommerce sector [7][12][16]. Core Insights - JD Retail has shown strong profit growth, with a revenue acceleration across all categories, particularly in healthcare (+26% year-on-year) and general merchandise, making it one of the fastest-growing eCommerce platforms in China [1][2]. - The food delivery business has ramped up faster than expected, reaching nearly 20 million daily orders, which is about one-third of Meituan's food delivery volume [1][9]. - Despite the strong performance in JD Retail, the report anticipates a decline in JD Group's adjusted net profit by 9% year-on-year to Rmb43 billion for FY25 due to increased investments in food delivery [2][11]. Summary by Sections JD Retail Performance - JD Retail's revenue growth is projected at 14% for 2Q25 and 12% for FY25, driven by strong sales in electronics and appliances (+17% year-on-year) and general merchandise (+15% year-on-year) [10][11]. - The adjusted EBIT for JD Retail is expected to reach Rmb53 billion for FY25, reflecting a 26% year-on-year increase [1][11]. Food Delivery Business - The food delivery initiative has onboarded over 1 million merchants and is expected to incur losses of Rmb20 billion for FY25, up from previous estimates due to higher-than-expected order volumes [1][9]. - The report highlights the potential for cross-selling opportunities between food delivery and other JD Retail categories, which could enhance customer acquisition and retention [2][12]. Market Position and Valuation - JD's market share in the retail sector has increased significantly, with JD Retail's growth at 16%, nearly three times the industry average of 6% [15]. - The report emphasizes JD's unique business model combining first-party sales and a third-party marketplace, which positions it favorably against competitors [7][12]. Financial Estimates - Revenue estimates for JD Group have been raised by 2-3% for FY25-27, while adjusted net profit estimates have been revised down by 13% due to food delivery losses [11][38]. - The report projects a non-GAAP net margin of 3.3% for FY25, down from 4.0% previously, reflecting the impact of increased food delivery investments [11][38].

Investment Rating - The report maintains a consistent sector preference, favoring sports brands, diversified retailers, dairy, beverages, and restaurants, while being less favorable towards apparel/footwear OEM, furniture, projectors, discretionary small kitchen appliances, jewelry, and non-super-premium spirits [11]. Core Insights - Consumption in China has shown signs of recovery, with retail sales growth improving to +4.6% year-over-year in 1Q25, and companies in the coverage reporting an average growth of 14% compared to 12% in 4Q24 [1]. - Despite the positive growth, companies remain cautious about the outlook due to ongoing volatility and external factors such as US-China tariff developments impacting consumer confidence [2][1]. - Margin performance in 1Q25 was mixed, with some companies benefiting from favorable raw material prices and cost control, while others faced risks from marketing investments and competition [1]. - Companies are generally maintaining disciplined pricing strategies and healthier inventory levels, although some categories like spirits and sportswear are experiencing challenges due to demand pressures [1]. - The impact of tariffs on earnings and consumer sentiment is significant, with companies cautious about the second half of 2025 amid uncertainties [2]. Summary by Sections Key Findings from 1Q25 Results - Retail sales growth improved to +4.6% year-over-year, with coverage companies reporting an average growth of 14% [1]. - Labor Day consumption growth accelerated, indicating a potential rebound in consumer spending [1]. Expectations for 2Q25 - Companies are cautious about the outlook for 2H25 due to tariff uncertainties, although those with market share gain opportunities may be more resilient [2]. Sector/Stock Preferences - Preferred sectors include sports brands, diversified retailers, dairy, beverages, and restaurants, while least preferred sectors include apparel/footwear OEM and furniture [11]. Macro Data Points - The report notes that macroeconomic data points are solid, but ongoing tariff developments and policy support need to be monitored [11]. Valuation Methodology - The report emphasizes the importance of understanding the valuation methodology and the potential risks associated with it [11].

Dividend ETF Overview - Dividend ETFs in Taiwan have a total AUM of US$62 billion, representing 4.0% of the Taiwan ex-TSMC full float market cap[1] - The upcoming rebalancing period for these ETFs is crucial, occurring from May to June, which will influence stock flows and volatility[1] ETF Rebalancing Details - The 12 largest ETFs manage a combined US$60 billion in assets, with individual AUM ranging from US$400 million to US$14.1 billion[2][7] - Key rebalancing dates include review cut-off dates and effective dates, with significant changes expected in constituent stocks[10][18] Beneficiaries and Risks - A list of the top 50 beneficiaries of dividend ETF flows has been updated, focusing on stocks with high ETF ownership or those likely to be included in the rebalancing[3] - Stocks facing exclusion risks are identified, particularly those with declining dividend yields or weakened fundamentals[6] Stock Selection Criteria - Stocks are selected based on criteria such as liquidity, dividend yield, and market capitalization, with specific thresholds for inclusion in the ETFs[12][15][20] - The selection process includes a buffer zone for additions and exclusions, ensuring a structured approach to rebalancing[11][14][19]

Investment Rating - The report maintains a neutral investment rating across assets for a 12-month horizon, with a modest overweight to cash depending on risk tolerance [3]. Core Insights - The report highlights a shift towards a more neutral stance on risky assets following recent tariff de-escalation events and positive trade negotiations, which have led to a recovery in investor sentiment and positioning [1][2]. - The S&P 500 is projected to have a total return forecast of 0% over the next 3 months and 9% over the next 12 months, reflecting a less attractive asymmetry for equities in the current macroeconomic environment [6]. - The report emphasizes the importance of selective defensive overlay strategies, including protective option hedges, in light of the recent volatility reset [6]. Summary by Sections Economic Outlook - Recent tariff de-escalation events and trade agreements have positively influenced the US macroeconomic outlook, prompting economists to upgrade their baseline forecasts [1]. - The Federal Reserve has maintained the Fed Funds rate at 4.25-4.50%, despite rising uncertainty and weak Q1 GDP data [1]. Market Performance - US equities have shown mixed results, while the STOXX 600 has risen for four consecutive weeks, indicating a recovery in European markets [1]. - The VIX index has dropped below 20, marking its lowest level since early April, reflecting reduced market volatility [1][2]. Asset Allocation Recommendations - The report suggests a neutral stance on equities and bonds for the next 3 months, while maintaining an overweight position in cash and underweight in commodities to mitigate risk [6][23]. - Specific forecasts for major indices include a projected S&P 500 level of 5660, with a 12-month target of 6200, indicating a potential upside of 11% [23]. Currency and Commodity Insights - The US Dollar has weakened approximately 5% against other G10 currencies since February, while currencies like the Euro and Swiss Franc have appreciated [2][19]. - Commodity prices, including Brent and Copper, are projected to experience declines, with Brent expected to average $57 per barrel over the next 12 months [23].

Investment Rating - The report raises the S&P 500 return and earnings forecasts, indicating a positive outlook with new 3- and 12-month return forecasts of +1% and +11% respectively, leading to levels of 5900 and 6500 [2] Core Insights - The report emphasizes that lower tariff rates, improved economic growth, and reduced recession risk have led to an upward revision of S&P 500 earnings and returns forecasts [2][5] - Revised S&P 500 EPS forecasts are $262 in 2025 and $280 in 2026, reflecting a 7% year-over-year growth for both years, which is an increase from previous estimates [2][5] - The current P/E ratio of 21x is in the 90th percentile since 1990, with a forecasted 12-month P/E valuation of 20.4x, indicating reduced uncertainty and faster earnings growth [2][10] - The report highlights that light equity investor positioning suggests potential for continued near-term market upside, with the US Equity Sentiment Indicator registering -1.5 standard deviations [2][17] - The report recommends focusing on stocks with high pricing power to maintain margins amid elevated input costs, as tariff rates are expected to be higher in 2025 than in 2024 [2][26] Summary by Sections Earnings Forecasts - The report updates the S&P 500 EPS growth estimates to +7% for both 2025 and 2026, reflecting an improved economic outlook and lower tariff rates [5] - The revised 2025 real US GDP growth forecast is 1% on a Q4/Q4 basis, an increase from 0.5% previously, indicating a more favorable economic environment [6] Valuation - The report notes that the current P/E of 21x is 5% below the peak of 22x earlier this year, with an updated fair value estimate reflecting lower inflation and renewed confidence in fundamentals [10][18] - The report anticipates only one Fed rate cut in 2025, down from three previously expected, which may influence market dynamics [10] Positioning and Market Sentiment - The report indicates that light investor positioning creates the possibility for equity prices to overshoot fair value in the near term, with hedge fund net leverage at low levels [17] - The report also mentions that cyclical stocks have outperformed defensives by 18 percentage points since April 4, indicating a shift in market expectations [21] Sector Focus - The report suggests that AI stocks are expected to regain momentum as tariff-related volatility diminishes, with strong earnings growth profiles attracting investor interest [3][32] - The report emphasizes the importance of high pricing power stocks, which have historically outperformed during periods of margin pressure [26][30]

Investment Rating - The report maintains a "Buy" rating for GDS and VNET, with target prices set at US$42/HK$41 for GDS and US$13 for VNET, indicating upside potentials of 65% and 118% respectively [8][64]. Core Insights - The growth outlook for the China data center sector remains unchanged, with expectations for GDS and VNET to report revenue growth of +16% and +18% year-over-year respectively for 1Q25 [1][61]. - The industry-wide utilization rate is projected to improve from approximately 60% in 2024 to over 70% by 2026, driven by increasing demand from AI and cloud services [20][22]. - Recent developments in domestic chips and AI technologies are expected to sustain wholesale data center demand in the mid-term, while retail demand may recover in the near term [37][41]. Summary by Sections 1. Company Performance Expectations - GDS is expected to report 1Q25 revenue of Rmb2.8 billion (+16% YoY) and adjusted EBITDA of Rmb1.3 billion (+18% YoY), aligning with consensus data [60]. - VNET is anticipated to report 1Q25 revenue of Rmb2.2 billion (+18% YoY) and adjusted EBITDA of Rmb610 million (+13% YoY), slightly below consensus expectations [61]. 2. Demand-Supply Dynamics - The report highlights a dual scenario of supply tightness and oversupply in China's data center market, with utilization rates expected to rise significantly by 2026 [20][36]. - Demand for data center capacity is projected to grow at a CAGR of 21% from 2024 to 2027, reaching 26GW by 2027 [22][25]. 3. Financing Developments - GDS and VNET have made significant progress in financing, enabling them to meet their capital expenditure requirements for 2025, with GDS needing Rmb4.3 billion and VNET Rmb10-12 billion [50][55]. - GDS has completed an ABS issuance, monetizing data center assets and generating Rmb1.2 billion in net cash proceeds [51]. 4. Market Outlook - The report anticipates that AI will account for 24% of the market demand by 2027, up from 11% in 2024, indicating a substantial shift in demand drivers [28]. - The upcoming results from major cloud players like Tencent and Alibaba are expected to provide insights into capital expenditure trends, which are crucial for the data center sector [38][59].

Investment Rating - The report does not explicitly provide an investment rating for the transportation industry but discusses trends and potential impacts of tariffs on trade flows, indicating a cautious outlook for the sector. Core Insights - The ongoing trade tensions between the US and China are leading to a significant decline in freight flows from China to the US, with a reported drop of 22% year-over-year in laden container vessels [4][9][14]. - There is a bifurcation in trends, with concerns about product availability if the trade war continues, particularly as the second half of the year approaches [4]. - The report highlights the potential for a freight air pocket in the second quarter, which could affect inventory levels and order spikes in the second half of 2025 [5][8]. Summary by Sections Trade Flow Trends - Freight flows from China to the US have decreased by 22% year-over-year, with a sequential drop of approximately 21% in the most recent week [4][9]. - Expected TEU imports into the Port of Los Angeles are set to drop for a third consecutive week, although a sharp spike is anticipated in the following weeks, possibly indicating a shift in trade patterns [4][30]. Inventory and Demand - The Logistics Managers Index (LMI) indicates an expansion in inventory costs, suggesting that goods are not moving as expected, which could lead to empty shelves if the situation persists [4][57]. - There are two main questions being monitored: the potential for empty shelves and whether there will be a spike in orders in the second half of the year, which depends on consumer resilience and the severity of the freight air pocket [4][5]. Future Scenarios - The report outlines three potential scenarios for 2025: continued pull forward leading to inventory build followed by a sharp fall in demand, a stall in pull forward creating an air pocket for volumes, or a scenario where the economy does not fall into recession, leading to a surge in orders [8]. - UPS anticipates a decline of up to 25% in China to US business as the second quarter progresses, while trade from China to the rest of the world is expected to pick up some of the slack [5][8]. Container Rates and Shipping Activity - Ocean container rates from China to the US West Coast have increased by 3% week-over-week but are down 38% year-over-year, indicating a lack of recovery in shipping rates [27]. - Planned TEUs into the Port of Los Angeles have decreased by 32% year-over-year, with forecasts showing a potential increase as trade shifts from China to other regions [30][32].

Investment Rating - The report maintains a "Buy" rating for both Innolight and Eoptolink, with a 12-month price target of Rmb115 for Innolight and Rmb136 for Eoptolink, indicating potential upside of 19.2% and 26% respectively [30][34]. Core Insights - The optical transceiver demand outlook for 2025 remains firm, driven by AI infrastructure needs, with key customers maintaining their transceiver volume expectations [1][16]. - Supply constraints are expected to ease as new laser capacity comes online around the end of 2Q25, which could support a faster shipment cadence in 2H25 [8][15]. - The 1.6T shipment ramp is anticipated to concentrate in 2H25, with initial demand forecasts for 2026 expected to be communicated by customers in mid-2025 [14][3]. Summary by Sections Demand Outlook - The demand for optical transceivers is primarily driven by AI infrastructure, with a robust outlook for 800G transceiver orders in 2025 [1][13]. - Concerns regarding 2026 demand persist, but clarity is expected as customers begin to communicate their forecasts [3][20]. Supply Chain Dynamics - The supply chain is experiencing tightness in laser components, but improvements are anticipated as new capacities are introduced [15][8]. - The ongoing ramp of 800G products is expected to be a key growth driver, with significant shipments anticipated in 2H25 [4][11]. Earnings Revisions - Earnings estimates for Innolight and Eoptolink have been revised upward, reflecting improved supply conditions and steady demand [17][22]. - Innolight's revenue estimates for 2025-2027 have been increased by 3%-8%, while Eoptolink's estimates have been raised by 4%-9% [21][22]. Competitive Positioning - Innolight is positioned as a leader in the 800G/1.6T optical transceiver market, benefiting from strong relationships with major customers [26][28]. - Eoptolink is also well-positioned to capitalize on the ramp-up of 400G/800G transceivers, with a focus on AI infrastructure [31].

Investment Rating - The report maintains a "Buy" rating for both Mindray and United Imaging, indicating a positive outlook for their stock performance in the near future [82][83]. Core Insights - The procurement value of main medical devices in China has shown strong year-over-year (YoY) growth, with a month-over-month (MoM) increase of 13% in April, surpassing expectations [1]. - The report anticipates a high level of activity in medical equipment procurement throughout 2025, driven by government funding and a recovery in hospital demand [1][25]. - Mindray is expected to maintain its market leadership with multiple growth drivers, while United Imaging is projected to see significant long-term growth potential due to increasing service-related revenue [82][83]. Summary by Sections Procurement Trends - The total bidding value for nine main medical devices in China has reached a high level, with positive MoM growth observed in seven out of nine devices in March [26]. - The report notes that procurement activities are supported by government funding and the implementation of a trade-in program, which is expected to drive demand in the coming quarters [1][25]. Company Performance - Mindray's revenue growth is projected to be +10% in 2Q24, +40% in 3Q25, and +36.5% in 4Q25, reflecting a recovery in its end markets [9]. - United Imaging's management expressed optimism about the upcoming trade-in program in 2025, expecting a smoother process compared to 2024 [9]. Market Dynamics - The report highlights that both domestic and multinational companies achieved notable YoY growth in April, indicating a balanced competitive landscape in the medical device sector [64]. - The trend of domestic substitution is not particularly evident, as both local and multinational companies are performing well in the procurement market [64].