Market Performance - The Japanese and South Korean stock markets performed strongly last week, with energy, technology, and defensive sectors showing varied performance across different markets [1] - The MSCI Global index decreased by 0.3%, with MSCI Developed down by 0.3% and MSCI Emerging remaining flat [1] - International crude oil prices continued to rise, while the German 10Y government bond yield saw the largest increase [1] Trading Sentiment - Global stock market trading volume showed divergence, with increased trading volume in European and American markets, while Hong Kong's Hang Seng Index saw a decrease in trading volume [1] - Investor sentiment in Hong Kong improved, reaching historically high levels, while sentiment in the US also rose to historical highs [1] - Volatility decreased in Hong Kong, US, and Japanese markets, while European market volatility increased [1] Earnings Expectations - Global stock market earnings expectations were mostly revised downwards last week, with European stocks showing the best marginal change [2] - The earnings per share (EPS) forecast for the Hang Seng Index was revised down from 2234 to 2231 for 2025 [2] - The EPS forecast for the Eurozone STOXX50 index was revised up from 345 to 346 for 2025 [2] Economic Expectations - Economic expectations showed mixed changes globally, with the US economy showing signs of weakness and European economic trends improving [2] - The Citigroup Economic Surprise Index for the US fell significantly, influenced by the Federal Reserve's hawkish stance and trade negotiation challenges [2] - The Economic Surprise Index for Europe increased slightly due to strong economic data and progress in trade negotiations [2] Capital Flows - Global macro liquidity showed marginal improvement last week, with central banks in the US, Japan, and the UK maintaining interest rates, while Switzerland and Norway cut rates by 25 basis points [3] - The futures market implied a market expectation of 2.1 rate cuts by the Federal Reserve within the year [3] - Capital primarily flowed into the US, China, and Japan, with continued inflows into Hong Kong [3]

Summary of Key Points from Conference Call Records Industry Overview - The macroeconomic cycle and asset pricing globally have deviated from traditional patterns, necessitating attention to three main themes: technology, new consumption, and innovative pharmaceuticals [1][3][4] - The performance of global capital markets in the first half of 2025 was chaotic, with U.S. stocks experiencing fluctuations, European stocks performing well, and an increase in risk appetite for Chinese stocks [1][9] Core Insights and Arguments - The three macro themes that dominated the economic landscape in the first half of 2025 were technology, new consumption, and innovative pharmaceuticals, which are expected to continue influencing capital markets [1][13] - The Chinese bond market is primarily driven by liquidity rather than fundamentals, with a notable decline in U.S. credit assets impacting global markets [1][11][12] - The real estate market in China is stabilizing but still requires time, as interest rates are not low enough to stimulate domestic demand [1][14] - The transformation of China's policy framework focuses on upgrading technology manufacturing, transitioning from traditional growth models, and reshaping the international payment system, rather than relying on short-term counter-cyclical stimulus [1][15] Additional Important Content - The sentiment in the bond market is currently positive, with expectations of further declines in bond yields due to the Federal Reserve's cautious stance on interest rates [5] - Geopolitical tensions in the Middle East are influencing market dynamics, although the exact impact remains uncertain [6] - The global fiscal landscape has entered a new phase, moving away from large-scale fiscal stimulus towards structural reforms and innovation [18] - The U.S. fiscal situation, characterized by a reduction in deficit rates, is causing market concerns about the sustainability of U.S. credit assets [21] - Japan and Europe are undergoing significant fiscal policy changes, with Japan tightening its monetary policy and Europe increasing fiscal spending [22] Market Performance and Expectations - The performance of U.S. credit assets is expected to weaken in the second half of 2025, influenced by trade war dynamics and the gradual tightening of Japan's monetary policy [30] - The Chinese bond market is anticipated to perform positively due to increasing pressures from declining exports and the real estate sector [31] - The stock market outlook is complex, with a recommendation against investing in cyclical sectors due to insufficient interest rate reductions to stabilize the real estate market [32] Conclusion - The current economic environment is characterized by a focus on liquidity-driven asset pricing, with significant implications for investment strategies in both domestic and international markets [1][11][32]

Core Viewpoint - The recent US-China Geneva trade talks resulted in significant tariff reductions, with the US committing to cancel 91% of tariffs imposed on Chinese goods since April 8 and suspending 24% of tariffs for 90 days, while China reciprocated with similar actions. This indicates a stabilizing economic relationship and highlights the resilience of Chinese manufacturing in the global supply chain [1][5][9]. Group 1: Trade Agreement Implications - The trade agreement is expected to lower constraints on Chinese exports to the US, reducing the risk of export decline and potentially increasing export elasticity in the short term [9]. - The agreement is likely to mitigate the risks of recession in the US and global economies caused by tariffs, thus stabilizing external demand and financial environments [9][10]. Group 2: Manufacturing Competitiveness - Chinese manufacturing has strengthened its global position, with a significant increase in both scale and efficiency since 2018. In 2021, China's manufacturing value added accounted for approximately 31% of the global total, far surpassing the US at 16% and Japan at 6% [7][8]. - The Competitive Industrial Performance (CIP) index shows that China has improved its ranking from 35th in 1990 to 2nd in 2021, indicating a robust competitive edge in manufacturing [8]. Group 3: Economic Policy Direction - The macroeconomic policy aimed at expanding domestic demand remains unchanged despite tariff impacts. The focus is on optimizing the supply-demand relationship and enhancing consumption contributions to economic growth [12]. - The recent trade talks and resilient export data may provide a more extended window for policy adjustments, allowing for potential fine-tuning based on economic conditions [12]. Group 4: Asset Pricing and Market Impact - The progress in trade talks is expected to lead to upward revisions in nominal growth expectations, a decline in liquidity expectations, and an increase in risk appetite, which may drive interest rates higher [13]. - Equity assets are likely to benefit from improved fundamental expectations and the elimination of extreme scenarios, particularly in sectors sensitive to external demand and overall economic volume [13].