Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Financials - **Industry View**: Attractive [5] Regulatory Developments - **Regulatory Notice**: On February 6, 2026, financial regulators issued a notice aimed at preventing cryptocurrency-related risks, renewing a similar notice from 2021. This notice explicitly bans the tokenization of real-world assets (RWA) onshore unless pre-approved by regulators and built on specific financial infrastructure [8] - **Stablecoin Licensing in Hong Kong**: The development of stablecoins in Hong Kong is expected to proceed independently. Mainland companies must obtain onshore regulatory approval to participate in stablecoin issuance in Hong Kong, as the notice prohibits them from issuing cryptocurrencies overseas without such approval [2] Company-Specific Insights - **Futu Holdings**: The company is already blocking any crypto-related offerings and market information access to mainland clients. Future offerings may focus more on overseas assets due to regulatory complexities surrounding onshore asset-linked RWAs [3] Market Controls - **Implementation of Controls**: A comprehensive set of controls will be established, covering market entity registration, advertising, financial services, and technology services to mitigate crypto-related risks [8] Analyst Insights - **Analyst Certification**: Analysts have certified that their views on the companies discussed are accurately expressed and that they have not received compensation for specific recommendations [13] - **Investment Banking Relationships**: Morgan Stanley has received compensation for investment banking services from various companies in the financial sector, including Agricultural Bank of China and Bank of China [16][18] Stock Ratings Overview - **Stock Ratings Distribution**: As of January 31, 2026, the distribution of stock ratings includes: - Overweight/Buy: 41% - Equal-weight/Hold: 43% - Underweight/Sell: 16% [28] Important Disclosures - **Conflict of Interest**: Investors should be aware of potential conflicts of interest that may affect the objectivity of Morgan Stanley Research [6] - **Research Methodology**: The research is based on public information, and while efforts are made to ensure accuracy, no guarantees are provided [45] Conclusion - The regulatory landscape for cryptocurrencies in China is tightening, with significant implications for companies involved in crypto and stablecoin activities. Futu Holdings appears well-positioned given its current compliance measures. The overall outlook for the China financial sector remains attractive, with ongoing monitoring of regulatory developments essential for investment decisions.

Summary of Conference Call on China Banks Industry Overview - The conference call focused on the Chinese banking sector, particularly the implications of recent monetary and fiscal stimulus measures announced by the People's Bank of China (PBoC) [1][2]. Key Points and Arguments Monetary Policy Changes - PBoC announced new supportive monetary policies on January 15, including: - Expansion of relending facilities with an additional quota of approximately RMB 1.1 trillion, targeting private enterprises and key industries such as agriculture, small businesses, technological innovation, carbon reduction, service consumption, and elderly care [1]. - A 25 basis points (bps) interest rate cut for relending facilities, reducing the rate from 1.5% to 1.25% [7]. - Potential for further cuts in the Reserve Requirement Ratio (RRR) and Loan Prime Rate (LPR) [1][2]. Impact on Banks' Net Interest Margin (NIM) - The relending facilities rate cut is expected to benefit banks' NIM by approximately 0.3 bps, as banks can borrow cheaper funds from PBoC [1]. - The balance of relending facilities reached around RMB 5 trillion by Q3 2025, representing about 1% of banks' total assets [1]. - The anticipated fiscal stimulus, including interest subsidies on consumer and micro loans, is expected to have a limited negative impact on banks' NIM [1]. Credit Growth and Loan Demand - The stimulus measures are designed to incentivize banks to direct credit towards policy-favored sectors, supporting loan growth at the beginning of 2026, coinciding with the start of the 15th five-year plan [1]. - There is an expectation of stronger-than-expected loan growth in early 2026 due to these targeted lending initiatives [1]. Treasury Bond Market Dynamics - Lower treasury bond yields are projected to widen the spread between banks' dividend yields and the 10-year China treasury bond yield, attracting yield-seeking investors [2][5]. - The PBoC may actively participate in treasury bond trading to rebalance supply and demand dynamics, potentially lowering treasury bond yields further [2]. Investment Outlook for China Banks - China banks' H-shares have underperformed the Hang Seng Index by 7 percentage points year-to-date in 2026, but there is optimism for recovery due to: - Expected growth in insurers' premiums, leading to increased inflows into high-yield bank stocks [6]. - The attractiveness of banks' dividend yields due to lower treasury bond yields [6]. - The positive impact of monetary and fiscal stimulus on loan growth with limited negative effects on NIM [6]. - Specific banks highlighted for potential investment include ICBC-H and BOC-H, which offer above-peer dividend yields and favorable valuations [6]. Insurer Investments in Banks - Notable changes in equity stakes by insurers in various banks were discussed, indicating a trend towards increased financial investments in the banking sector [12]. Additional Important Information - The conference call emphasized the importance of monitoring the evolving regulatory environment and market conditions that could impact the banking sector's performance [1][2][6]. - Analysts expressed caution regarding the potential for NIM compression in FY26, estimating a 6 bps decrease, but noted that RRR cuts and potential deposit rate cuts could provide some offset [2]. This summary encapsulates the key insights and projections regarding the Chinese banking sector as discussed in the conference call, highlighting the implications of recent monetary policies and the outlook for investment opportunities.

Market Overview - Hong Kong stocks traded sideways, with the Hang Seng Index closing up 0.1% at 25,498.13, while the Hang Seng Tech Index dropped 0.7% [1] - The CSI 300 Index on the mainland slid 0.6%, and the Shanghai Composite Index added 0.2% [1] Company Performance - Xiaomi's stock fell 2.5% to HK$40.20, and Pop Mart International Group's stock decreased by 1.3% to HK$193.20 due to concerns over profitability sustainability [2] - Alibaba Group Holding lost 1.3% to HK$144.10, and Baidu slipped 0.8% to HK$117.60 [2] - Conversely, China Petroleum and Chemical Corp (Sinopec) rallied 6.5% to HK$8.01, and China Merchants Bank added 2.4% to HK$50.60 [3] Technology Sector Sentiment - Sentiment in the technology sector was skittish following a significant drop in US equities, particularly the Nasdaq 100, which lost almost 2% [4] - Oracle's stock tumbled over 5% after a partner reportedly refused to finance a US$10 billion data center, raising concerns about AI spending by US tech companies [4] Analyst Insights - Concerns about technology stocks have intensified, with some AI sales falling short of high investor expectations, leading to doubts about an AI bubble [5] - Analysts suggest that stocks need fresh catalysts to recover, and investors are closely monitoring upcoming US inflation data [5] Economic Indicators - The consensus estimate for US consumer price growth in November is 3.1%, up from 3% in September, which could influence Federal Reserve interest rate decisions [5]

Market and Performance Overview - Emerging markets experienced a 10.6% increase in Q3 2025, outperforming developed markets, with China leading at 20.4% growth driven by AI opportunities and favorable valuations [2] - Taiwan and Korea also showed strong performance, rising 14.3% and 12.7% respectively, fueled by AI demand, with Taiwan being a key semiconductor manufacturer and Korea a memory product supplier [2] Sector Performance - The materials sector was the top performer, up 24%, largely due to rising gold prices boosting mining shares [4] - Technology-related sectors, including communication services, consumer discretionary, and IT, outperformed the overall market, benefiting from AI and Internet services [4] - Cyclical sectors generally underperformed, with energy and financials showing the greatest weakness [4] Company Contributions - In China, Tencent and CATL were significant contributors, with Tencent benefiting from strong operating results and positive market sentiment, while CATL capitalized on its leadership in battery supply amid rising EV demand [6] - Taiwan's Delta Electronics and South Korea's Samsung Electronics saw share price increases due to their critical roles in AI development, with Delta's market share in data centers and Samsung's memory supply benefiting from high AI demand [7] Portfolio Positioning - The ClearBridge Emerging Markets Strategy outperformed its benchmark, with strong stock selection in China, Taiwan, and South Korea offsetting negative impacts from China and India [5] - New purchases included Sieyuan Electric, expected to grow through grid investment and market share gains, and HD Hyundai Electric, which is positioned to benefit from global power equipment demand [12][13] Outlook - The long-term investment outlook for emerging markets remains robust, with expectations for technology adoption, urbanization, and services sector growth to drive returns [18] - Emerging markets are anticipated to succeed in the next 12 months, particularly in technology, with India expected to recover and China continuing its key role in the asset class [22]

Tokenization & Digital Assets - BNB Chain上的通证化正在快速发展 [1] - 招商银行（China Merchants Bank）的子公司 CMB International 在 BNB Chain 上推出了 38 亿美元的货币市场基金，由 CMBMINT 和 CMBIMINT 代币代表 [1] Financial Market Impact - CMB International's $3.8 billion Money Market Fund launch on BNB Chain is significant [1]

Onchain Finance Adoption - Institutional finance is increasingly adopting onchain solutions, choosing BNB Chain as a platform [1] - CMB International, a subsidiary of China Merchants Bank, has launched its $3.8 billion Money Market Fund on BNB Chain [1] Tokenization - The $3.8 billion Money Market Fund is represented by the CMBMINT and CMBIMINT tokens [1] Industry Implication - This move signifies the growing importance of blockchain technology in traditional finance [1]

招商+BNBBNB Chain (@BNBCHAIN):CMB International, a subsidiary of China Merchants Bank, has launched its $3.8B Money Market Fund on BNB Chain, represented by the CMBMINT and CMBIMINT tokens.Here’s why this matters 🧵👇 https://t.co/Cqw7uoqsX0 ...

完美融合 https://t.co/adaCLOo8FtBNB Chain (@BNBCHAIN):CMB International, a subsidiary of China Merchants Bank, has launched its $3.8B Money Market Fund on BNB Chain, represented by the CMBMINT and CMBIMINT tokens.Here’s why this matters 🧵👇 https://t.co/Cqw7uoqsX0 ...

JUST IN: 🇨🇳 $1.72 trillion China Merchants Bank subsidiary launches 24/7 Bitcoin trading in Hong Kong 🇭🇰 https://t.co/w1q5i38gl9 ...

Company Strategy - CMB International Securities (招商银行子公司) 计划开放加密货币交易 [1] - 中国正在进入加密货币领域 [1]