Credit and Financing Trends - In July, new credit decreased by 500 billion, marking a year-on-year reduction of 3.1 trillion under a low base[3] - Household loans saw a net decrease of 489.3 billion, with a year-on-year drop of 279.3 billion, indicating ongoing debt cycle contraction influenced by the real estate market[3] - Corporate medium and long-term loans decreased by 260 billion, with a year-on-year reduction of 390 billion, reflecting strict control over new hidden debt in traditional infrastructure investments[3] Social Financing and Government Support - New social financing in July reached 1.16 trillion, a year-on-year increase of 386.4 billion, primarily supported by government debt financing[3] - New government bonds issued amounted to 1.24 trillion, with a year-on-year increase of 555.9 billion, highlighting the government's role in boosting social financing[3] - Corporate bond financing increased by 279.1 billion, a year-on-year rise of 75.5 billion, as companies turned to bonds as an alternative to loans[3] Monetary Supply and Market Dynamics - M2 growth rebounded to 8.8%, a 0.5 percentage point increase, the highest since 2024, indicating a synchronized high growth trend with social financing[4] - Non-bank financial institutions saw a significant deposit increase of 1.39 trillion, suggesting a flow of wealth into capital markets[4] - M1 also rose by 1.0 percentage point to 5.6%, the highest since March 2023, reflecting improved corporate revenues and consumer spending[4]

Core Viewpoint - The macroeconomic environment shows a decline in domestic demand, necessitating further policy support to stimulate growth [3][14]. Economic Performance - In Q2 2025, GDP growth slowed to 5.2% year-on-year, down 0.2 percentage points from Q1, with a seasonally adjusted quarter-on-quarter growth of 1.1% [4][14]. - Industrial output in June increased by 6.8% year-on-year, driven by exports, while domestic demand showed significant decline [5][14]. - Retail sales growth in June was 4.8%, a decrease of 1.6 percentage points from May, influenced by earlier online promotions and regulatory policies [5][34]. Investment Trends - Fixed asset investment growth slowed to 2.8% year-on-year in the first half of 2025, with construction investment particularly affected [6][8]. - Manufacturing investment growth in the first half of 2025 was 7.5%, down from 8.5% in the first five months, primarily due to fundamental economic pressures rather than policy factors [7][8]. - Infrastructure investment growth declined to 8.9% in the first half of 2025, with traditional infrastructure projects lagging behind [8][9]. Real Estate Market - New housing sales in June saw a year-on-year decline of 5.5% in area and 10.8% in value, indicating a continued downturn in the real estate market [9][30]. - The investment in real estate development also faced pressure, with a year-on-year decline of 12.9% in June [31][32]. Financial Data - Financial indicators showed improvement, with M1 and M2 money supply growth accelerating, reflecting a more favorable liquidity environment [10][25]. - New social financing in June reached 4.2 trillion yuan, indicating a recovery in credit demand [25][26]. Consumer Behavior - Consumer spending showed signs of weakness, with a notable decline in discretionary spending categories, while essential goods maintained steady growth [34][35]. - The government is expected to implement more robust policies to stimulate consumer demand, particularly in the context of ongoing economic challenges [36][37].

Core Viewpoint - The recent surge in the A-share market, particularly in the semiconductor and consumer electronics sectors, is attributed to the lifting of U.S. export restrictions on chip design software to China, signaling a significant development in U.S.-China trade relations [3][4][11]. Group 1: Market Performance - The A-share market saw the Shanghai Composite Index rise by 0.18%, the Shenzhen Component Index by 1.17%, and the ChiNext Index by 1.9%, with small-cap stocks outperforming large-cap stocks [1]. - Key players in the semiconductor supply chain, such as Lens Technology and Industrial Fulian, experienced significant stock price increases, with Lens Technology rising over 11.4% and Industrial Fulian hitting a rare trading limit [1][4]. Group 2: Impact of EDA Software Export Lifting - The lifting of export restrictions on EDA software by major companies like Siemens and Synopsys is expected to enhance the efficiency of chip design in China, as domestic companies previously faced limitations in accessing advanced tools [3][4]. - The domestic EDA tool localization rate is only 11.5%, with U.S. companies holding over 80% market share, making this development crucial for the Chinese semiconductor industry [3]. Group 3: Related Stock Movements - A significant number of electronic component stocks experienced price surges, with several stocks hitting the daily limit of 20%, indicating strong market enthusiasm [4][5]. - Notable stocks include Yihau New Materials, which rose by 20%, and Jiuzhiyang, which increased by 15.02%, reflecting the positive sentiment in the sector [5]. Group 4: Trade Agreements and Supply Chain Adjustments - A new trade agreement between the U.S. and Vietnam, reducing tariffs on Vietnamese exports to the U.S., is expected to benefit Chinese companies with operations in Vietnam, such as Luxshare Precision and GoerTek, by allowing them to manage supply chain costs more effectively [6][8]. - The expectation of increased orders for Chinese consumer electronics manufacturers from companies like Apple, due to their established presence in Vietnam, is likely to enhance their stock performance [6]. Group 5: Future Market Trends - The easing of U.S. export restrictions and ongoing tariff negotiations are anticipated to lead to increased speculative trading in related sectors, particularly in the semiconductor and consumer electronics industries [11][18]. - The A-share market has shown a rising risk appetite since early May, with smaller-cap indices outperforming larger ones, indicating a shift in investor focus towards growth sectors [12][13][14].

Core Viewpoint - The overall economic growth in May remains stable, but the structure shows signs of divergence, with retail growth accelerating due to external factors, while fixed asset investment and real estate sales continue to weaken [1][8]. Macro - External factors support retail growth, with tariff reductions not fully reflected in May data, leading to a slight decline in industrial value-added growth to 5.8% year-on-year [2][8]. - May's industrial value-added growth slowed to 5.8% from 6.1% in April, with manufacturing and high-tech manufacturing also experiencing declines [2]. - Retail sales in May increased by 6.4% year-on-year, the highest growth rate in 2024, driven by trade-in policies and early promotions [3][8]. - Fixed asset investment growth slowed to 3.7% in the first five months, with declines in manufacturing, infrastructure, and real estate investments [4][5]. - Real estate sales continue to weaken, with a 3.3% year-on-year decline in sales area and a 6.0% decline in sales value in May [6][24]. Strategy - The economic data for May indicates a need for further policy support to stimulate demand, with a focus on stable recovery in the second half of the year [8][20]. - Investment strategies should focus on sectors with strong dividend yields and growth potential, particularly in mergers and acquisitions, artificial intelligence, and consumer sectors [8]. Real Estate - The real estate market shows continued weakness, with new housing sales declining and investment pressures persisting [24][25]. - The government is expected to enhance policy measures to stabilize the real estate market and stimulate demand [24][25].

Export Performance - In May, China's exports grew by 4.8% year-on-year, with a month-on-month increase of 0.1%[5] - Exports to the U.S. saw a significant decline, with a year-on-year drop from -21% to -34.5%[5] - The high tariff impact of 145% continued until mid-May, with a reduction to 30% announced on May 12[5] Tariff Impact - The average tariff rate on Chinese goods by the U.S. is estimated at around 42%, with approximately 40% of goods facing a rate of about 39.5%[6] - About 32% of goods are subjected to a 57% tariff rate, while the average tariff for other regions is around 12%[6] - The tariff reduction has not led to a significant increase in exports to the U.S., indicating limited immediate benefits[5][6] Trade Dynamics - There is a noted increase in China's exports to Africa (33%) and ASEAN (15%) in May, suggesting a shift towards re-exporting through these regions[6] - The shipping rates to the U.S. have increased significantly, with the CCFI indices for the East and West U.S. coasts rising by 21% and 23% respectively since May 9[9] - Despite the tariff adjustments, the overall demand for imports in the U.S. has declined, with a notable drop in import growth from 31.1% in March to 2.2% in April[11] Risks and Uncertainties - There remains considerable uncertainty regarding U.S.-China tariff policies, which could exert pressure on the Chinese economy[4][18] - The U.S. domestic economic uncertainty may lead to a decline in demand for Chinese goods, impacting future trade relations[4][18] - The potential for a rebound in Chinese exports to the U.S. in June is limited due to ongoing low shipping volumes compared to pre-April levels[10][13]

Macro and Strategy Research - In May 2025, China's exports in USD terms grew by 4.8% year-on-year, down from 8.1% in the previous month, while imports fell by 3.4%, compared to a decline of 0.2% previously. The trade surplus reached USD 103.22 billion, up from USD 96.18 billion [4][5] - The slowdown in export growth is attributed to high base effects and global economic downturn concerns, with the global manufacturing PMI remaining below 50 for three consecutive months. Exports to the US saw a significant decline of 34.5%, influenced by new tariffs and cautious sentiment among traders [4][5] - Import demand showed weakness, with agricultural imports rising by 17.9% year-on-year, while other major commodities experienced negative growth, indicating a need for policy support to boost domestic demand [5] Fixed Income Research - For the period from June 2 to June 8, 2025, the issuance of credit bonds increased, while transaction amounts decreased. The net financing amount for credit bonds rose, with corporate bonds and medium-term notes seeing increases, while company bonds and short-term financing bonds saw reductions [6][8] - The overall yield on medium and short-term notes and corporate bonds declined, while city investment bonds showed mixed results. The credit spread for medium and short-term notes widened, indicating a complex market environment [8] - The report suggests that despite short-term fluctuations, the long-term trend for yields is downward, and investors should focus on timing their investments and monitoring interest rate trends [8] Industry Research - In the steel sector, demand is expected to decline as the off-season deepens, leading to a potential accumulation of steel inventory. The short-term outlook remains weak for steel prices [10][11] - For copper, tight supply at the mine level supports prices, but the lack of demand during the off-season may lead to volatility, particularly influenced by US-China trade negotiations [10][11] - The aluminum market faces uncertainty due to macroeconomic factors, while low domestic inventory provides some price support. Overall, aluminum prices are expected to fluctuate in the short term [10][11] - Gold prices are bolstered by international trade tensions, US interest rate expectations, and geopolitical factors, with a focus on macroeconomic data and trade developments [10][11] - The lithium market is experiencing oversupply, leading to price weakness, while the rare earth sector is positioned for long-term growth due to policy support and emerging demand from robotics and renewable energy [10][11]

Trade Data Summary - In May 2025, exports increased by 4.8% year-on-year, down from 8.1% in April, while imports decreased by 3.4% year-on-year, compared to a decline of 0.2% in April[2] - The trade surplus reached $103.22 billion, an increase of $21.85 billion compared to the same month last year[2] - Export growth is expected to remain resilient in June to Q3 due to tariff reductions and pre-Christmas orders, but the overall external demand is still slowing down[2] Export and Import Trends - May exports totaled $316.10 billion, a historical high for the month, but the month-on-month growth was only 0.2%, below the four-year average of 3.48%[2] - The overall external demand is below the boom-bust line, with JPMorgan's global manufacturing PMI at 49.6% in May, indicating a contraction[2] - Imports in May were $212.88 billion, the lowest for the same month since 2021, with a month-on-month decline of 3%[3] Regional Export Performance - Exports to the EU increased by 12.02%, up 3.75 percentage points from April, while exports to the US fell significantly by 34.52%[2] - The ASEAN region saw a decline in exports by 14.84%, reflecting the impact of "export grabbing" on demand[2] Product-Specific Insights - Key products like integrated circuits and automobiles showed significant recovery, while labor-intensive products like toys and footwear remained at low levels due to tariff impacts[2] - The import of crude oil saw a decline of 22.1% year-on-year, while imports of grains and soybeans increased significantly, reflecting a shift in demand[3]

Investment Rating - The report maintains a "Buy" rating for the transportation sector [8] Core Views - The report is optimistic about the aviation sector, anticipating a recovery in industry prosperity driven by the summer travel peak and favorable oil and exchange rates [2][28] - It recommends high-dividend Hong Kong-listed road stocks due to stable performance and low Hibor rates supporting dividend valuations [2] - The report notes increased volatility in the shipping sector, particularly in container shipping, while highlighting the need to focus on companies with stable earnings and high dividend yields [2] Aviation Sector - The report highlights strong demand during the May Day holiday, with daily passenger volume averaging 2.23 million, a year-on-year increase of 11.8% [20] - Domestic flight ticket prices have improved, with an average price of 730 RMB, up 0.8% year-on-year [15] - The supply of aircraft is expected to grow slowly, with a projected increase of only 2.8% in the passenger fleet by the end of 2024 [21] - Recommended stocks include China National Aviation, China Eastern Airlines, and Huaxia Airlines, which are expected to benefit from supply-demand improvements [28] Airport Sector - Airports are experiencing high growth in passenger traffic, particularly in southern China, with Baiyun Airport and Shenzhen Airport seeing year-on-year increases of 26.3% and 23.5% respectively [29] - The report emphasizes the need for airports to enhance their non-aeronautical revenue generation capabilities [37] - It suggests focusing on airports with lower capital expenditure, such as Capital Airport, for better investment value [37] Shipping Sector - Container shipping rates have increased significantly, with the Shanghai Export Container Freight Index rising by 18.4% month-on-month in May [4] - The report anticipates further increases in shipping volumes and rates in June due to the easing of tariffs and seasonal demand [39] - It notes that while the crude oil tanker market is improving due to OPEC+ production increases, the dry bulk and product tanker markets remain weak [38] Road and Rail Sector - The report indicates that the road sector is benefiting from lower Hibor rates, which support dividend yields, and suggests focusing on high-dividend stocks like Wuhu Highway and Zhejiang Hu-Hangzhou-Ningbo [5] - The railway freight sector is experiencing weak demand, particularly for coal transport, with expectations of a recovery only in late June [5] Logistics and Express Delivery - The express delivery sector is facing competitive pressures, with a year-on-year increase in parcel volume of 19.1% in April, but prices are declining [68] - The report suggests monitoring the upcoming peak season for potential changes in volume and pricing dynamics [68] - It highlights the need for cross-border logistics to adapt to evolving tariff conditions [68]

Investment Rating - The report maintains a "Buy" rating for several companies in the non-ferrous metals sector, including Zijin Mining, Shandong Gold, and Chifeng Jilong Gold [3][4]. Core Views - The combination of "tariff easing + employment slowdown" provides a premise for the Federal Reserve to lower interest rates, potentially leading to a rebound in metal prices. Optimistic expectations regarding tariff policies have heightened market sentiment, although gold has seen a decline due to reduced safe-haven demand [1][36]. - Industrial metals, particularly copper, are in a state of fluctuation due to macroeconomic uncertainties and rising inventories, while aluminum prices are supported by decreasing social inventories despite tariff policy fluctuations [1]. - Energy metals, such as lithium, are experiencing a weak supply-demand balance, with lithium prices showing signs of fluctuation. The demand for electric vehicles continues to grow, but the market remains cautious [1]. Summary by Sections Non-Ferrous Metals - The non-ferrous metals sector has seen a general increase in prices, with specific attention to gold and silver, which are influenced by macroeconomic factors and market sentiment [12][18]. - Copper prices are currently in a consolidation phase due to fluctuating macroeconomic conditions and rising inventories, with global copper stocks reported at 537,000 tons, an increase of 12,300 tons week-on-week [1][23]. - Aluminum prices are supported by a decrease in social inventories, with theoretical operating capacity in China's electrolytic aluminum industry reaching 43.87 million tons, a slight increase from the previous week [1][23]. Precious Metals - Gold prices are expected to rebound following a period of adjustment, driven by the anticipation of interest rate cuts by the Federal Reserve. The recent employment data has raised concerns about economic growth, but the overall employment market is still showing signs of slowdown [1][36]. - Silver remains strong due to industrial demand, while gold has faced downward pressure from reduced safe-haven buying [1][36]. Energy Metals - Lithium prices are currently fluctuating, with industrial-grade lithium carbonate priced at 59,000 yuan/ton, down 0.8% week-on-week. The supply side is seeing slight increases, but demand remains cautious due to market conditions [1][27]. - The demand for electric vehicles continues to rise, with cumulative sales of passenger and electric vehicles reaching 880.2 million and 438 million units respectively, showing year-on-year growth of 9% and 34% [1][27]. Company Announcements - Companies such as Chifeng Jilong Gold and Zhongse Co. have made significant announcements regarding resource verification and project investments, indicating ongoing developments in the sector [34].

Core Viewpoint - The recent sell-off in U.S. Treasuries reflects a shift in market expectations towards optimism regarding economic growth [1] Group 1 - FHN Financial macro strategist Will Compernolle indicates that the sell-off in U.S. Treasuries is primarily driven by improved economic growth expectations [1] - There is evidence of resilience in economic hard data, suggesting that previous concerns about a potential crisis are diminishing [1] - The likelihood of the previously feared "doomsday scenario" occurring has significantly decreased, providing relief to the market [1]