Financial Services Practice Prudential embraces customer centricity: An interview with Priscilla Ng Prudential plc's shift to customer-centric insurance hinges on digital transformation, with data and artificial intelligence as key enablers and humans still playing a crucial role. August 2024 As Prudential plc embraces digital transformation, the 176-year-old insurance company finds itself navigating a delicate balancing act: harmonizing the power of AI with a human touch, essential to delivering exceptiona ...

2 – 8 August 2024 China Retail & E-commerce Weekly Update I. Sector Review..............................................................................................................2 Internet & E-commerce................................................................................................2 Taobao and Tmall test after-sales negotiation tools to help merchants reduce refund rates...................................................................................................................... ...

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The Republic of Armenia (RoA) has committed to adopting the OECD Crypto-Asset Reporting Framework (CARF) and aims to initiate the first automatic exchange of information by 2027, necessitating domestic legislation [12][20] - Currently, there are no specific provisions for crypto assets in the RoA's tax code, leading to uncertainty in tax treatment and valuation of crypto asset transactions [13][21] - The mission team provided a structured risk assessment template to the State Revenue Committee (SRC) to identify gaps in tax compliance related to crypto assets [14][39] Summary by Sections Executive Summary - The RoA's commitment to CARF requires the enactment of domestic legislation to facilitate automatic information exchange by 2027 [12] Recommendations - Finalize and document the Risk Assessment on Crypto Assets by July 2024 [19] - Review the draft law to ensure comprehensive coverage of crypto-asset-related activities by December 2024 [19][48] - Implement a step-by-step roadmap for the new laws once passed [19] Background - The RoA has committed to CARF and must enact domestic legislation to fulfill its obligations [20] - The SRC has drafted amendments to the tax code, which are under peer review by OECD experts [20][24] Key Issues - The lack of clarity in the current tax code leads to inappropriate tax outcomes for crypto asset transactions [33] - The SRC has identified gaps in the current tax framework and the need for reliable data to enforce tax compliance [41] Proposed Legal Framework - The SRC's draft amendments include provisions for tax obligations, rates, and reporting requirements, aligning with the forthcoming "RoA Law on Crypto-assets" [43][44] - Close coordination between the SRC and the Central Bank of Armenia (CBA) is essential for effective implementation [44] Next Steps - The SRC aims to close identified gaps to enhance the effectiveness of the RoA's tax framework and ensure compliance with CARF [26] - The mission team emphasized the importance of understanding the technical aspects of crypto asset transactions for effective law design [22][40]

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies [1]. Core Insights - The Reserve Bank of New Zealand (RBNZ) has lowered its policy rate forecast for 2024 and 2025, now expecting a 25 basis points cut in both October and November meetings, totaling 175 basis points of cuts in 2025 [3]. - Inflation forecasts have been slightly increased for Canada, Hungary, the Philippines, and Brazil [3]. Economic Forecasts Summary - **United States**: Real GDP growth forecast for 2024 is 2.5%, with CPI at 2.9% and a fiscal balance of -6.9% [6]. - **Japan**: Real GDP growth forecast for 2024 is 0.0%, with CPI at 2.5% and a fiscal balance of -3.5% [6]. - **Canada**: Real GDP growth forecast for 2024 is 0.8%, with CPI at 2.6% and a fiscal balance of -1.2% [6]. - **Eurozone**: Real GDP growth forecast for 2024 is 0.6%, with CPI at 2.4% and a fiscal balance of -2.9% [6]. - **China**: Real GDP growth forecast for 2024 is 4.9%, with CPI at 0.4% and a fiscal balance of -4.6% [6]. - **India**: Real GDP growth forecast for 2024 is 7.0%, with CPI at 4.3% and a fiscal balance of -7.9% [6]. - **Latin America**: Real GDP growth forecast for 2024 is 1.9%, with CPI at 28.5% and a fiscal balance of -5.6% [6]. Global Assumptions - The EUR/USD exchange rate is projected to be 1.08 by the end of 2024 and 1.10 by the end of 2025 [7]. - The average Brent oil price is expected to be $84.0 in 2024 and $80.0 in 2025 [7].

Investment Rating - The report indicates an expectation of three 25 basis point rate cuts in 2024, specifically in the September, November, and December FOMC meetings [2][16][47] Core Insights - The FOMC is reassessing the degree of monetary policy restrictiveness, with Chair Powell expected to advocate for a gradual withdrawal of such policies [3][4][16] - The current economic outlook suggests a slowdown in growth, with real GDP projected to decrease from over 3% in 2023 to approximately 1.5% in 2024 [21][23] - Inflation is anticipated to stabilize around 2.6% to 2.7% for the remainder of the year, with core PCE inflation expected to touch 2.0% by Q2 of the following year [12][18] Summary by Sections Economic Outlook - The FOMC has indicated a slow removal of policy restraint, with the unemployment rate currently at 4.25% and real GDP growth ranging from 1.8% to 2.1% [8][12] - A significant increase in nonfarm payroll employment (114K) and a three-month moving average of 170K are seen as sufficient to shift risk assessments [5][30] Inflation and Wage Growth - The core PCE price increase in July was slightly lower than previous estimates, with nominal wage growth slowing to a year-over-year change of 3.6% [7][12] - The report suggests that inflation may appear sticky due to base effects and residual seasonality, but underlying progress is viewed as encouraging [7][12] Labor Market Dynamics - The labor market is expected to slow in response to the broader economic slowdown, with projections indicating an average pace of nonfarm payroll employment of 165K in Q3 and 130K in Q4 [30][32] - Concerns are raised about the vulnerability of the expansion, particularly as consumer spending is projected to slow due to pressures on lower-income households [27][29] Policy Implications - The FOMC's policy outlook is expected to be updated at the upcoming Jackson Hole meeting, with a focus on recalibrating monetary policy to align with economic conditions [16][48] - The report emphasizes that if inflation continues to move toward the 2% target, it would be appropriate to gradually lower the federal funds rate to avoid overly restrictive conditions [13][18]

Investment Rating - Neutral rating maintained with a price target of ¥2,850 [4][7] Core Insights - The report indicates that Mabuchi Motor's Q2 operating profit (OP) was ¥5.3 billion, exceeding forecasts by 15% and consensus by 20%, driven by a weaker yen and higher volumes in the life & industrial products segment [1][2] - Automotive electrical equipment volume in H1 FY12/24 fell 5.2% below guidance, leading to a 1.4% cut in the full FY12/24 volume outlook, which is projected to grow by 1.3% year-on-year [2] - Management noted intensified competition in China, while market share in the US and Europe remains stable due to competitor withdrawals [2] - Manufacturing-related costs are expected to exceed initial estimates by ¥2.2 billion, influenced by delayed productivity improvements and rising overseas personnel costs [2] - The company's FY12/24 OP guidance was slightly raised from ¥18.8 billion to ¥18.9 billion, reflecting positive H1 performance [3] Summary by Sections Financial Performance - Q2 OP margin improved from 8.6% in Q1 to 10.5% in Q2, attributed to higher volumes, a weaker yen, price increases, and a better product mix [1] - The forecast for automotive electrical equipment volume in Q3 is an 8% quarter-on-quarter increase, but a decline of 8% is budgeted for Q4 [3] Valuation Metrics - The report provides a valuation based on a FY12/24E price-to-earnings ratio (PER) of 23X, with a current share price of ¥2,252 [4][7] - Forecast price appreciation is estimated at 26.6%, with a dividend yield of 3.6%, leading to a total forecast stock return of 30.2% [10] Company Overview - Mabuchi Motor, founded in 1954, has shifted its focus from consumer electronics to automotive products, with automotive electronics now accounting for nearly 70% of sales [11]

Investment Rating - The report indicates a positive outlook on inflation trends, with a headline CPI increase of 0.15% in July and a 12-month inflation rate decreasing to 2.9%, the lowest since May 2021 [2][3]. Core Insights - The core CPI rose by 0.17% in July, leading to a 12-month core inflation rate of 3.2%, down from 3.3% in June, showing a significant decline from its peak in September 2022 [3][4]. - The report highlights that the increase in food prices away from home (21bp) aligns closely with pre-pandemic trends, indicating a potential stabilization in inflation [2][3]. - Owners' equivalent rent (OER) saw a notable increase of 36bp in July, suggesting that rent prices are a key factor in the current inflation landscape [4][18]. Summary by Sections Headline CPI - The headline CPI increased by 15 basis points in July, with a 12-month inflation rate of 2.9%, down from 3.0% in June [2]. - Energy prices remained stable, while food prices increased moderately, indicating a controlled inflation environment [2][3]. Core CPI - Core CPI rose by 17 basis points in July, with a 12-month inflation rate of 3.2%, reflecting a downward trend from previous months [3]. - The report notes that core inflation remains approximately 90 basis points above the Federal Open Market Committee's PCE inflation target [3]. Rent and Housing - Owners' equivalent rent increased by 36 basis points in July, which is still below the previous range of 42-47 basis points observed over the past ten months [4]. - The report emphasizes the importance of monitoring OER as it significantly influences core inflation [4][18]. Volatile Components - Core goods prices fell for the 13th time in 14 months, with used vehicle prices declining by 2.3%, indicating ongoing deflationary pressures in certain sectors [4][7]. - Core non-rent services saw a rise of 21 basis points, driven by increases in lodging and transportation services [4][6]. Future Projections - The report anticipates a moderate strengthening in CPI monthly changes through October, with core CPI projected to increase by 19 basis points in the next release [8]. - The 12-month core CPI inflation is expected to remain stable until the end of the year due to base effects [8].

Investment Rating - The report upgrades the GDP growth forecast for Poland in 2024 to 3.0% from a previous estimate of 2.2% [1] Core Insights - Strong Q2 GDP growth of 3.2% year-on-year (unadjusted) exceeded the Bloomberg consensus of 2.7% [1] - The positive statistical carry-over for FY 2024 GDP has increased from approximately 1 percentage point to 2.7 percentage points due to revisions in past quarters [1] - The report anticipates further GDP acceleration to 3.4% in 2025 and 3.6% in 2026, aligning with consensus forecasts for 2024 but remaining more conservative for 2025-2026 [1] Summary by Sections Economic Performance - Q2 GDP growth was significantly stronger than expected, with a sequential increase of 1.5% quarter-on-quarter, surpassing the 1% consensus [1] - Revisions to previous quarters contributed 0.5 percentage points to the current forecast, indicating a robust economic recovery [1] Consumption and Investment - The report suggests that inventories and potentially consumption are likely drivers of the GDP rebound, despite subdued activity data in construction and retail sales [2] - Industrial output showed a modest increase of 1.7% quarter-on-quarter in Q2, following a decline in Q1 [2] - Investment is expected to remain a drag on headline GDP, while net exports likely contributed negatively to growth due to weak external demand [2] Inflation and Energy Prices - July tariff increases for electricity and gas were lower than expected, contributing to a dovish consumer price index (CPI) print [3] - Electricity prices rose by 19.9% month-on-month, and gas prices increased by 16.8% month-on-month, which were below earlier projections [3] - The report anticipates that household energy tariff increases in January 2025 may be smaller than previously estimated, potentially leading to a peak headline CPI of around 5% year-on-year in Q1 2025 [5]

Investment Rating - The report maintains a positive outlook on the Swedish economy, expecting the Riksbank to cut rates by 25 basis points to 3.5% next week, with further cuts anticipated in September and December [2][4][8]. Core Insights - Headline inflation in July rose to 1.7% year-on-year, driven by electricity prices, while core inflation decreased to 2.2% year-on-year [2][5]. - The Riksbank is expected to guide for two additional rate cuts this year, reflecting a dovish shift in its monetary policy stance [4][7]. - The report forecasts CPIF inflation to remain below the target for the rest of the year, with annual forecasts of 2.0% for 2024 and 1.9% for 2025 [3][8]. Summary by Sections Economic Overview - July headline inflation increased to 1.7% year-on-year from 1.3% in June, while core inflation fell to 2.2% from 2.3% [2][5]. - The Riksbank's rate cut is supported by a downward trend in core inflation and a contraction in GDP of -0.8% quarter-on-quarter in Q2 [4][6]. Inflation Analysis - Core goods inflation turned negative at -0.4% year-on-year, while food prices and services inflation remained stable at 1.8% and 3.2% year-on-year, respectively [3][5]. - The report anticipates CPIF inflation to stay below the target for the remainder of the year, with fluctuations expected in CPIF ex energy between 2.1% and 2.7% [3][8]. Riksbank Policy Outlook - The Riksbank is expected to cut rates by 25 basis points in August, followed by another cut in September, bringing the policy rate to 3.0% by the end of 2024 [8]. - The report suggests that the Riksbank will not publish new forecasts at its upcoming meeting but will likely provide more explicit guidance on the rate path [7][8].

Investment Rating - The report does not explicitly provide a numerical investment rating for the industry but indicates a general positive outlook based on the continuity of pro-corporate policies under the Liberal Democratic Party (LDP) [2][3]. Core Insights - The resignation of Prime Minister Kishida is expected to lead to a presidential election within the LDP, with potential candidates including Shigeru Ishiba and Shinjiro Koizumi among others [1]. - The report anticipates that while there may be no major ideological shifts, differences in fiscal and monetary policies could impact the stock market [2]. - Historical trends suggest that stock prices tend to rise during periods of political dissolution and general elections, indicating a potential buying opportunity during these phases [3]. Summary by Sections Political Context - Prime Minister Kishida's decision not to run for re-election could lead to a shift in leadership within the LDP, with elections scheduled for late September [1]. - The report notes that the approval ratings of the Cabinet and LDP are currently stagnant, and improvements could lead to a general election [3]. Economic Policies - The continuity of pro-business policies is expected as long as the LDP remains in power, although variations in specific policy areas such as fiscal and monetary strategies may arise [2]. - The report emphasizes the importance of monitoring the stock market's reaction to the upcoming political changes and potential policy shifts [2][3].