Investment Rating - The report maintains a cautious outlook on the fiscal situation in China, expecting further fiscal easing ahead due to ongoing economic challenges [1][9]. Core Insights - Fiscal revenue growth improved to +0.3% year-on-year in March from -1.6% in January-February, driven by stronger-than-expected activity data [2][5]. - Fiscal expenditure growth rose to +5.7% year-on-year in March from +3.4% in January-February, primarily due to increased spending in energy saving, environmental protection, and agriculture [6]. - The ongoing property downturn continues to negatively impact local government funding, with land sales revenue declining by -16.3% year-on-year in March [7][8]. Summary by Sections Fiscal Revenue and Expenditure - On-budget fiscal revenue growth was +0.3% year-on-year in March, a recovery from -1.6% in January-February, with tax revenue contraction narrowing to -2.2% [2][5]. - Fiscal expenditure growth increased to +5.7% year-on-year in March, up from +3.4% in January-February, driven by specific sectors [6]. Property Sector Impact - Property-related government revenue remained weak, with land sales revenue down -16.3% year-on-year in March, indicating continued pressure from the property market [7][8]. - The contraction in property-related tax revenue narrowed to -0.1% in March from -11.4% in January-February, suggesting some stabilization [7]. Augmented Fiscal Deficit (AFD) - The AFD metric narrowed to -10.9% of GDP in March from -11.6% in February on a 3-month moving average basis, while it widened slightly on a 12-month moving average basis [3][8]. - The forecast for the AFD metric is expected to widen by 4.1 percentage points of GDP to 14.5% in 2025, indicating a shift in fiscal policy from a growth drag to a potential driver [9].

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Asia utilities and energy sector**, highlighting the resilience of companies in this space against US tariffs, particularly in Hong Kong and Mainland China [2][19]. Core Insights - **Hong Kong Utilities**: Companies like CLP (2 HK, Buy) and CKI (1038 HK, Buy) are expected to maintain strong cash flows and shareholder returns due to their regulated business nature and predictable cash flows, despite macroeconomic uncertainties [3][13]. - **Mainland China Utilities**: Gas utilities are noted for their resilience, with companies like China Gas (384 HK, Hold) and BEH (392 HK, Buy) showing less exposure to industrial demand. The impact of US tariffs is minimal, with crude oil and LNG imports from the US accounting for only 2% and 5% of total imports, respectively [4][19]. - **ASEAN and India Utilities**: SCI (SCI SP, Buy) and NTPC (NTPC IN, Hold) are highlighted for their defensive characteristics against trade policies and macroeconomic risks [5][29]. Investment Recommendations - **Preferred Stocks**: The report lists six preferred stocks rated as Buy: CLP, CKI, Yangtze, Longyuan, SCI, and Hanwha Solutions, with no changes to target prices [11]. - **Valuation Metrics**: The report provides detailed valuation metrics for various companies, including target prices and expected upside percentages. For instance, CLP has a target price of HKD78.00, implying a 22.3% upside [35]. Risks and Challenges - **Oil and Gas Sector**: The report notes that the bearish expectations on oil prices could negatively impact earnings for companies like CNOOC (883 HK, Buy) and PetroChina (857 HK, Buy) [30]. - **Trade Policy Impacts**: The solar supply chain is under pressure due to US tariffs, particularly affecting Chinese manufacturers, while Korean suppliers like Hanwha are expected to outperform [6][31]. Additional Insights - **Cash Flow Resilience**: Gas utilities are highlighted for their strong cash flows and ability to maintain dividends, with BEH and CGH noted for their dividend policies [22][23]. - **Market Dynamics**: The report emphasizes that Hong Kong utilities have shown consistent outperformance against market risks, supported by favorable correlations with equity risk premiums and UST yields [3][13]. Conclusion - The Asia utilities and energy sector is positioned defensively against trade risks, with specific companies demonstrating strong fundamentals and cash flow resilience. Investment opportunities are identified in both Hong Kong and Mainland China utilities, as well as in select ASEAN and Indian companies.