Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report highlights significant changes in futures positions among various market participants, indicating a shift towards flattener positions in the back end and steepener positions in the front end [5][22][19] - There were notable inflows in equities, particularly from private investors, with Japan and the Caribbean being the top Treasury buyers in June [1] - Large commercial banks saw an increase in deposits and cash assets, while their holdings in UST/Agency and MBS also rose [42] Summary by Sections CFTC Non-Commercial Futures Positions - Non-commercials removed $20.6 billion in the front end and added $5.6 billion in the back end, resulting in a total of $26.2 billion of a flattener position [5][9] - The breakdown of front-end positions included SOFR (-$2.4 billion), TU (-$2.1 billion), and FV (-$2.1 billion) [9] Traders in Financial Futures - Asset managers put on $8.8 billion of a steepener position, increasing their net longs in FV contracts to the highest level in six months [2][16] - Leveraged funds added $9.0 billion of a steepener position, increasing their net shorts in TY contracts to the highest level in six months [2][19] Primary Dealer Positions - Dealers added $2.7 billion in the front end and $22.3 billion in the back end, resulting in a total of $19.6 billion of a flattener position [22][26] - Dealers decreased their net shorts in TY contracts to the lowest level in six months [26] Large Commercial Bank Positions - Deposits increased by $45.7 billion, and cash assets rose by $6.3 billion, with UST/Agency holdings increasing by $18.0 billion and MBS holdings by $16.4 billion [42] Foreign Central Bank Positions - Foreign Central Bank UST holdings decreased by $16.9 billion, while Agency/MBS holdings decreased by $0.4 billion [47]

M Update Payments and Processing | North America August 26, 2024 12:39 PM GMT Stock Performance Review: V/ MA, PYPL, AFRM Morgan Stanley & Co. LLC James E Faucette Equity Analyst James.Faucette@morganstanley.com +1 212 296-5771 Shefali Tamaskar Research Associate Shefali.Tamaskar@morganstanley.com +1 212 761-4948 Meryl R Thomas, CFA Research Associate Meryl.Thomas@morganstanley.com +1 212 761-0774 Michael N Infante Equity Analyst Michael.Infante@morganstanley.com +1 212 761-4631 Antonio Jaramillo Research A ...

Investment Rating - The report upgrades the ratings for CITIC Securities H shares and East Money to Overweight (OW) and downgrades China International Capital Corporation H shares to Equal-weight (EW) [1][19]. Core Insights - The valuation of most major brokers has dropped to near historical lows due to increased uncertainty regarding future business and regulatory environments, alongside a rapid cooling of private equity and venture capital investments [1]. - The capital market has supported industrial financing and supply chain upgrades, but has resulted in disappointing investor returns, leading to a temporary tightening of capital markets and reduced visibility for brokerage businesses [1]. - A more diversified and inclusive IPO structure could enhance the quality of listed companies and investor returns, aiding the recovery of underwriting businesses [1]. - There are still alpha opportunities in the securities industry, particularly in companies that can benefit from the shift in capital market focus from financing to shareholder returns [1]. Summary by Company East Money (300059.SZ) - Rating upgraded to Overweight (OW) as its P/E ratio has compressed from approximately 13 times to only 3.7 times, presenting an attractive buying opportunity [1]. - The business model's replicability, cost efficiency, and potential for market share growth justify a valuation premium over traditional brokers [1]. CITIC Securities (6030.HK) - Rating upgraded to Overweight (OW) with an expected recovery in ROE leading the industry, projected to rise to 8.1% by 2025, potentially returning to double digits with improved market conditions [1]. - Anticipated dynamic P/B ratio recovery to 0.6-0.7 times, the highest among peers [1]. China International Capital Corporation (3908.HK) - Rating downgraded to Equal-weight (EW) due to various factors creating uncertainty around future ROE [1]. - The P/B ratio has fallen from approximately 0.6 times in Q4 2023 to 0.3 times, reflecting market concerns [1].

Investment Rating - The report does not explicitly provide an investment rating for the company or sector discussed Core Insights - The focus of the report is on the potential risks associated with tariff increases and their implications for Asian economies, particularly in the context of trade tensions and supply chain diversification [3][5][30] Summary by Relevant Sections Trade Tensions and Economic Impact - The report highlights that apart from China, other Asian economies such as Vietnam, Japan, South Korea, and Taiwan are also facing increased trade tensions with the US, with Vietnam's trade surplus with the US growing significantly from $39 billion in 2017 to $111 billion [3][4] - The report discusses the significant changes in trade flows since 2018, indicating a shift in US imports from China to other countries like Mexico and Vietnam, with a total reduction of $97 billion in the trade deficit with China and an increase of $338 billion with other major trading partners [5][6] Currency Depreciation and Tariff Effects - The report anticipates potential currency depreciation in Asia if tariffs are enacted, drawing parallels to the 2018-19 period when the Chinese yuan depreciated by 11.6% amid rising tariffs [15][25] - It is noted that the effective tariff rate on Chinese imports has increased by 17.8%, and the report suggests that policymakers may be reluctant to allow similar levels of currency depreciation this time due to concerns over capital outflows [15][25] Sector-Specific Impacts - The report identifies specific sectors that may face greater pressure from tariffs, including electronics, industrial machinery, and textiles, which constitute a significant portion of US imports from China [36][37] - It emphasizes that if a 10% tariff is applied to all US imports, the impact would be broader and affect various sectors beyond those currently facing tariffs [36][37] Economic Growth and Central Bank Responses - The report estimates that the economic growth slowdown in China from 2018 to 2019 was approximately 130 basis points, primarily driven by reduced exports and weakened business confidence [30][32] - It discusses the challenges faced by central banks in emerging markets in responding to potential economic slowdowns due to tariffs, suggesting that fiscal measures may be prioritized over immediate interest rate cuts [33][34]