Market Overview - Recent volatility in the copper market has been significant, with prices initially rising to 79,670 yuan before declining sharply, leading to a critical price point where market divergence has increased [2] - London copper has shown relative resilience, with its decline being less severe than that of Shanghai copper, primarily due to low exchange inventories [2] Macroeconomic Factors - The World Bank has revised its global economic growth forecast for 2025 down from 2.7% to 2.3%, while the OECD has cut its forecast from 3.3% to 2.9% [2] - The U.S. economic growth forecast has been halved from 2.8% to 1.6%, with warnings that the impact of weak economic activity will exceed spending cuts and tax revenue, leading to an expanding budget deficit [2] Inventory and Supply Dynamics - As of June 16, LME copper inventories decreased by 12,850 tons to 107,600 tons, indicating a tightening market due to previously accumulated stocks being depleted [3] - Shanghai Futures Exchange copper inventories fell by 5,461 tons to 101,900 tons, remaining relatively tight but not showing further depletion [3] - COMEX copper inventories increased by 7,641 tons to 197,400 tons, reflecting ongoing accumulation since March [3] Supply Side Analysis - Negotiations between Chinese smelters and Antofagasta have seen a significant drop in processing fees, with the latest import copper concentrate processing fee reported at -44.75 USD/ton, down 1.46 USD from the previous week [5] - Kamoa-Kakula's copper production guidance has been reduced by 28% from earlier estimates, indicating ongoing supply tightness [5] - The market for recycled copper remains tight, with both domestic and imported supplies under pressure [5] Demand Side Analysis - Demand from the cable and automotive sectors remains stable, with some recovery noted in cable production due to promotional activities [6] - The automotive sector, particularly for new energy vehicles, continues to show steady growth, while traditional vehicle production is also accelerating [6] - The air conditioning sector is experiencing a seasonal downturn, leading to a decrease in copper demand in this area [6] Conclusion - The overall supply-demand structure for copper appears stable, with tariffs and macroeconomic conditions significantly influencing copper prices, which are expected to continue fluctuating at high levels with increased volatility [7]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report emphasizes the delayed impact of tariffs on US economic data, with inflation expected to peak by Q3 2025 and growth data lagging behind [6][14] - The strategists anticipate a convergence of US growth towards global growth, particularly European growth, which will influence interest rates and currency exchanges [5][11] - The expectation is for US treasury yields to remain range-bound until Q4 2025, with potential for lower yields if growth and inflation data align with forecasts [5][12] Economic Outlook - The report outlines forecasts for US Real GDP growth, indicating modest growth rates ranging from 0.1% to 0.7% on a quarterly basis from 2023 to 2026 [7] - Core PCE inflation is projected to peak in mid-2025, with a significant lag in data response to tariff impacts [6][14] - Emerging markets are expected to experience adjustments due to changes in US economic policy, with cautious outlooks on returns tracking US Treasuries rather than outperforming [11] Central Bank Policies - The report discusses the Federal Reserve's anticipated policy path, suggesting that while the Fed may hold rates steady in 2025, other central banks have more room to ease due to slowing growth and inflation [12][13] - The Bank of Japan faces challenges from tariffs and currency appreciation, with expectations for an extended pause in rate hikes despite resilient inflation [10] Market Volatility - The report notes significant market volatility in April 2025 due to unexpected tariff levels, leading to a shift in equity/rates correlations as markets adjusted to new economic policies [4] - The strategists highlight that the current pause in dollar weakness is temporary, with expectations for renewed dollar strength as the Fed's path becomes clearer [5]

Investment Rating - The report maintains a positive outlook on the market with a base case index target for MXCN at 67 by the end of 2025, with a preference for sectors such as Energy, IT, and Utilities [36][38]. Core Insights - The report indicates a recovery in the MXCN index, driven by sectors like IT and Healthcare, with expectations of a market reversal by late January 2025 [9][11]. - The report highlights a cautious approach towards Consumer Discretionary and Staples, recommending a rotation into quality laggards and large caps over small and mid-caps [36][38]. - The anticipated GDP growth for China in 2025 is projected at 4.1%, slightly below the consensus of 4.2% [10]. Market & Sector Performance - MXCN sectors performance shows Consumer Discretionary up by 3.2% week-on-week, while Information Technology leads with an 8.3% increase [6]. - The MSCI China index has shown a year-to-date increase of 9.0%, with a notable recovery in sectors impacted by US tariffs [7][12]. Catalyst Calendar - The report outlines key upcoming macroeconomic indicators and sector-specific data releases, including PMIs and housing transactions, which could influence market movements [14]. Consensus Macro Forecasts - The consensus forecasts for China's GDP growth in 2025 are 5.1% for Q1, declining to 3.9% by Q4, indicating a gradual slowdown [16]. Index Targets - The MSCI-China index target for 2025 is set at 71, with a bull case of 80 and a bear case of 70, reflecting a potential upside of 13% from current levels [18]. - The CSI-300 index target for 2025 is projected at 3,787, with a bull case of 4,150, indicating a 10% upside potential [19]. Investment Recommendations - The report recommends overweight positions in Energy, IT, and Utilities, while advising underweight positions in Consumer Discretionary, Materials, and Staples [39]. - A barbell strategy is suggested, focusing on high-yielders and selected thematic plays in Internet and AI sectors [36][38]. Trading Statistics - Recent trading statistics indicate a net outflow of US$796 million from China equities, primarily driven by passive fund outflows, although there has been a positive development with resumed offshore ETF inflows [79][80].