Group 1 - The report highlights a significant transformation in the supply structure of the primary market for offshore bonds, with a notable shift from traditional city investment bonds to industry bonds, government bonds, and TMT bonds as the new mainstays [3][10] - The offshore bond market has seen a continuous expansion, with a total issuance of 1.24 trillion yuan in the first ten months of 2025, although net financing from city investment bonds has sharply declined to only 422 million yuan [3][10] - The secondary market has experienced a decline in yields, with the 3-year offshore bond yield dropping approximately 40 basis points, outperforming domestic bonds [3][17] Group 2 - The report anticipates that the offshore bond market will continue to thrive in 2026, driven by two major changes: narrowing interest rate spreads and a shift in supply dynamics, necessitating more refined selection criteria for bonds [3][4] - The narrowing of the offshore-onshore interest rate spread has reached historical lows, with sovereign bonds at 10-25 basis points and credit bonds at 40-65 basis points, making it challenging to find excess returns [3][4] - The report emphasizes the need to explore investment opportunities in foreign government bonds and Hong Kong government bonds due to limited yield spread in domestic government bonds [3][48] Group 3 - The macroeconomic environment is favorable for Chinese dollar bonds, with expectations of 2-3 interest rate cuts by the Federal Reserve in 2026, targeting a rate of 2.75-3.00% [5][6] - The report suggests focusing on investment-grade dollar bonds and short-term securities to capture certainty in returns, as the credit risk has eased but remains present [5][6] - The investment strategy for 2026 includes a focus on high-grade offshore bonds, with an emphasis on long-duration bonds for insurance companies and high-grade foreign financial bonds for public funds [5][6] Group 4 - The report outlines the expansion of the "Southbound Bond Connect" program, which has significantly enhanced market liquidity and investor participation [29][33] - The trading volume of RMB debt instruments has reached 2.13 trillion yuan by October 2025, accounting for over 90% of the total volume in 2024, indicating a robust market activity [29][33] - The report notes that the expansion of the "Southbound Bond Connect" has opened new channels for domestic investors to diversify their asset allocation [29][33]

Group 1: Macro Insights - The economic situation in October showed a significant downturn, with external demand affected by base disturbances and a drop in export prices, leading to a substantial decline in export growth [4] - Domestic demand weakened due to a slowdown in real estate and infrastructure investment, alongside a decrease in consumer spending, indicating a dual weakness in production and demand [15] - The overall economic environment suggests a need for policy intervention to stabilize growth, with expectations for a GDP target of around 5% for 2026 [4][15] Group 2: Fixed Income Market - The "Southbound Bond Connect" is expanding, allowing more non-bank institutions to participate in the bond market, which is expected to enhance investment opportunities in Hong Kong's bond market [16] - The bond market remains volatile, with limited changes in interest rates across various maturities, reflecting a cautious approach from institutional investors amid a weak economic backdrop [9][13] - The overall credit demand is weak, with new loans decreasing, indicating a continued trend of reduced financing activity [17] Group 3: Company-Specific Insights - Tencent Holdings reported a revenue of 192.9 billion yuan for Q3 2025, a year-on-year increase of 15.4%, driven by strong growth in its gaming and advertising segments [20] - Electric Power Investment's acquisition of 100% equity in Baiyin Hua Coal Power is expected to enhance its profitability, with projected annual net profit increasing significantly post-acquisition [23][24] - Wangfujing's Q3 2025 revenue was 2.35 billion yuan, a decline of 4.73% year-on-year, reflecting ongoing challenges in the retail sector [27] Group 4: Industry Trends - The coal industry is experiencing a consolidation phase, with Electric Power Investment expanding its integrated coal-electricity-aluminum business model through strategic acquisitions [23] - The advertising revenue for Tencent is expected to benefit from AI-driven enhancements, contributing significantly to its overall revenue growth [21] - The pharmaceutical sector shows promising growth in emerging business areas, with expectations for continued revenue increases in the coming years [28]

Summary of Offshore RMB Bond Market Conference Call Industry Overview - The offshore RMB bond market has evolved since its inception in 2007, going through four stages: initial development, gradual expansion, scale contraction, and renewed growth [1][3][4] - As of 2022, despite the inverted interest rate differential between China and the U.S., the issuance scale of offshore RMB bonds exceeded 400 billion RMB, with a projected increase to 800 billion RMB in 2024 [1][5] Key Points and Arguments - **Market Composition**: - The market is predominantly led by Chinese entities, with a projected share of 74% in 2024. The main types of bonds are certificates of deposit, followed by credit bonds and interest rate bonds [1][6] - The Hong Kong market is the largest offshore RMB market, with the issuance scale of dim sum bonds reaching 1.07 trillion RMB by the end of 2024, a 37% year-on-year increase [1][8] - **Issuance Trends**: - The issuance of dim sum bonds has shifted towards Chinese government entities, with the proportion of urban investment bonds increasing significantly from 2023 to 2025, expected to reach 47% by July 2025 [1][10] - The offshore RMB bond market has seen a significant influx of issuers due to low financing costs, with 2024 issuance expected to grow further [5][15] - **Investor Structure**: - The investor base has diversified, now including smaller brokerages, asset management firms, and private equity funds, alongside traditional large financial institutions [11] - The introduction of green bonds has attracted ESG-focused investors, with 85% of dim sum bonds currently held in the CME system [11] Important but Overlooked Content - **Investment Channels**: - Major investment channels for offshore RMB bonds include QDII, southbound trading, TRS, and Hong Kong mutual recognition funds, with QDII quotas being expanded to meet domestic demand [12][14] - **Interest Rate Dynamics**: - Offshore RMB interest rates generally align with onshore rates but exhibit a spread influenced by liquidity changes, central bank operations, and market supply-demand dynamics [13][16] - **Market Characteristics**: - The offshore RMB bond market is characterized by a predominance of medium to short-term bonds, with a notable increase in long-term bond issuance [6][7] - **Future Outlook**: - The market is expected to continue expanding due to supportive policies and increasing demand for offshore assets, particularly in a low-interest environment [15]

Core Viewpoint - UBS has included Harbin Electric (01133) in its key recommendations for the Asia-Pacific region, upgrading its rating to "Buy" and raising the target price from HKD 9.6 to HKD 18 [1] Financial Projections - UBS has increased its earnings per share (EPS) forecasts for Harbin Electric for the years 2025 to 2027 by 27% to 31% [1] - The expected compound annual growth rate (CAGR) for EPS from 2024 to 2029 is projected to be 27% [1] - Forecasted dividend yields for 2025 to 2027 are 5.9%, 8.7%, and 10.2%, with payout ratios adjusted from 34%, 35%, and 36% to 41%, 50%, and 50% respectively [1] Revenue and Profitability - Revenue growth is expected to accelerate, with increases of 5%, 5%, and 7% for the years 2025 to 2027 [1] - Despite maintaining the gross margin forecasts, the net profit margin estimates have been raised from 4% in 2024 to 6% to 7% for 2025 to 2027 due to improved revenue and enhanced cost control [1] Market Opportunities - There is potential for Harbin Electric's shares to be included in the Southbound Trading list, alongside a strong approval cycle for nuclear power projects in mainland China, which may provide further upside [1]

Group 1 - The core viewpoint is that southbound funds have become a crucial driving force in the Hong Kong stock market, with their influence expected to deepen due to unique investment opportunities and long-term policy support [1][2] - Southbound funds account for over one-third of the daily turnover on the Hong Kong Stock Exchange and hold nearly 15% of the free float market capitalization, with both metrics showing over 30% growth compared to before 2024 [2] - Cumulative net inflows from southbound funds have reached $14 billion since 2025, surpassing the total for 2024, with daily inflows increasing by 84.6% year-on-year [2] Group 2 - Historically, stocks included in the southbound trading scheme show strong performance prior to inclusion, with an average increase of 3.7% in the 30 days before inclusion, outperforming the Hang Seng Index by 5.2% [3] - In February, 26 out of 27 stocks that were included in the southbound scheme saw price increases in the 30 days prior, with an average absolute return of 41% [3] - Post-inclusion, stocks may experience short-term pressure, with an average relative return of -2.0% against the Hang Seng Index in the following 30 days, but a long-term excess return of 4.6% over 90 days [3] Group 3 - Morgan Stanley has developed a southbound stock selection model (MSSBT) that accurately predicts stocks to be included, achieving an average hit rate of 85% across the last four semi-annual inclusion cycles [4] - The model's hit rate reached 97% in the August 2024 cycle, with a simulated portfolio showing an average absolute return of 10.1% in the 30 days prior to inclusion [4] - The model employs strict selection criteria, including market capitalization above HKD 50 billion and compliance with turnover standards, while excluding stocks with high ownership concentration [4] Group 4 - In September, 19 stocks are predicted to be included in the southbound trading scheme, with a focus on the healthcare (6 stocks) and industrial (5 stocks) sectors, indicating increased interest in innovative drug development and high-end manufacturing [5][6] - The top five candidates by market capitalization include Cao Cao Inc (02643), Yimeng Biotech (09606), Nanshan Aluminum International (02610), Zhengli New Energy (03677), and Yunzhisheng (09678) [6] Group 5 - The recommended strategy for maximizing returns includes entering positions one month prior to inclusion, diversifying with equal-weighted stock selections, and selling on the official inclusion date to lock in short-term gains [8]

Group 1 - The core viewpoint is that southbound funds have become a crucial driving force in the Hong Kong stock market, with their influence expected to deepen due to unique investment opportunities and long-term policy support [1][2] - Southbound funds account for over one-third of the daily net inflow in the Hong Kong Stock Exchange's main board trading volume and hold nearly 15% of the free float market capitalization of Hong Kong stocks, both metrics having increased by over 30% since before 2024 [2] - Cumulative net inflow from southbound funds has reached $14 billion since 2025, surpassing the total for 2024, with daily inflows increasing by 84.6% year-on-year [2] Group 2 - Stocks included in the southbound trading scheme typically show strong performance prior to inclusion, with an average increase of 3.7% in the 30 days before inclusion, outperforming the Hang Seng Index by 5.2% [3] - In February, 26 out of 27 stocks included in the southbound scheme rose in the 30 days prior, with an average absolute return of 41% and a relative return of 19% compared to the Hang Seng Index [3] - Post-inclusion, stocks may experience short-term pressure, with an average relative return of -2.0% over 30 days, but still show a long-term excess return of 4.6% over 90 days [3] Group 3 - Morgan Stanley has developed a southbound stock selection model (MSSBT) that accurately predicts stocks to be included in the scheme, achieving an average hit rate of 85% across the last four semi-annual inclusion cycles, with a peak of 97% in August 2024 [4] - The simulated portfolio under equal-weight allocation shows an average absolute return of 10.1% in the 30 days prior to inclusion, outperforming the Hang Seng Index by 7.4% [4] - The model employs strict selection criteria, including market capitalization above 50 billion HKD and compliance with turnover rate standards, while excluding stocks with high ownership concentration [4] Group 4 - The latest forecast indicates that 19 stocks will be included in the southbound scheme in September, covering seven major sectors, with healthcare (6 stocks) and industrials (5 stocks) making up over 50% of the list [5][6] - The top five candidates by market capitalization include Cao Cao Inc (Industrials), Ying En Biological (Healthcare), Nanshan Aluminum International (Materials), Zhengli New Energy (Industrials), and Yunzhisheng (Information Technology) [6] Group 5 - The recommended strategy for maximizing returns involves entering positions one month prior to inclusion, diversifying risk through equal-weight allocation of selected stocks, and locking in short-term gains by selling on the official inclusion date [8]

Group 1: Report Title and Basic Information - Report title: Outlook for the Credit Bond Market from August to October 2025 [2] - Analysts: Huang Weiping, Yang Xuefang, Zhang Jinyuan [3] - Date: August 5, 2025 [3] Group 2: Core Viewpoints - In the short - term (within 1 month), credit spreads may still have room to compress, but in the next 1 - 3 months, spread compression faces resistance and potential adjustment risks are greater [4][6][32][70][71] - Credit strategy: moderately reduce duration and seize the profit - taking window [4][6] Group 3: 7 - month Review 3.1 Primary Market - In July 2025, the issuance of traditional credit bonds decreased slightly month - on - month, and net supply increased month - on - month. Industrial bond net financing decreased month - on - month but remained at a high level, and urban investment bond net financing turned positive. Bank perpetual and secondary capital (two - tier) bonds' issuance and net supply increased significantly month - on - month. Secondary capital bond issuance and net financing increased, while perpetual bond issuance and net financing decreased [13][16][32] 3.2 Secondary Market - In July, credit bond yields fluctuated upwards, and credit spreads were passively narrowed. Short - term yields decreased slightly, medium - and long - term yields mostly increased, and long - term yields increased more significantly. Credit spreads generally narrowed, with weak - quality medium - term notes and bank perpetual bonds performing better. In terms of credit spreads, ordinary credit bonds' spreads mostly narrowed, two - tier capital bonds' spreads mostly widened, and bank perpetual bonds' spreads mostly narrowed. The term spreads within 5 years generally widened, especially the 3 - 1 year term spread. In terms of holding - period yields, the capital gains of medium - and long - term credit bonds were negative, and the short - term holding - period yields remained positive [19][23][27][31][32] Group 4: 8 - 10 Month Outlook 4.1 Compression Phases of Credit Spreads - Phase 1 (May 1 - May 23): Overall catch - up of credit bonds under loose liquidity. Driven by the implementation of reserve requirement ratio and interest rate cuts, and the expectation of financial disintermediation and deposit transfer, except for some long - term secondary capital bonds, credit bonds generally rose, with yields and credit spreads declining [39][43] - Phase 2 (May 23 - July 18): A scramble for constituent bonds under the expansion of credit bond ETFs, further compressing credit spreads. Driven by continuous loose liquidity and the rapid expansion of credit bond ETFs, medium - and long - term credit bonds continued to catch up, and constituent bonds outperformed non - constituent bonds [48][52][58] 4.2 Characteristics of Credit Bond Market under Recent Adjustments - Credit bond yields had a pulse - type adjustment, but the widening of credit spreads was not obvious. Driven by the rapid rise of commodities and equity assets under the "anti - involution" background, along with tightened liquidity, the bond market had a pulse - type adjustment. The adjustment range of credit bond yields was mostly around 10BP, and the widening of credit spreads was mostly within 5BP. The credit spreads of long - term general credit bonds were even passively narrowing, and the spreads of constituent bonds and non - constituent bonds did not converge [61][65] 4.3 Market Outlook - Short - term (within 1 month): Credit spreads may still have room to compress. Market sentiment eases, redemption pressure eases, and credit bonds still have a positive carry environment and room for carry - trade and leveraging. The VAT recovery policy on interest income of treasury bonds, local bonds, and financial bonds may indirectly benefit general credit bonds [4][70] - Next 1 - 3 months: Spread compression faces resistance, and potential adjustment risks are greater. August - October may be a volatile period for the bond market, with the curve possibly becoming steeper. The difficulty of further loosening liquidity is increasing, and the probability of double - cuts (RRR and interest rate cuts) decreases. The incremental funds for credit bonds may be relatively limited, and their sustainability remains to be seen. The current credit spread protection space is thin, and the market trading structure is fragile. Credit bond ETFs may amplify market volatility [4][32][71] Group 5: Credit Strategies - Moderately reduce duration and seize the profit - taking window. For ultra - long - term credit bonds and credit bond ETF constituent bonds, it may be approaching the profit - taking window [4][6] - For financial bonds,建议 reduce the position and duration of two - tier bonds and pay attention to TLAC non - capital bonds with both offensive and defensive attributes [6] - For general credit bonds, be vigilant about constituent bonds and focus on urban investment bonds and inter - bank bonds. Pay attention to the investment opportunities in 1 - 3 - year AA + and above - grade inter - bank bonds and 1 - 3 - year AA/AA(2)/AA - grade urban investment bonds [6] - Pay attention to the investment opportunities brought by the expansion of the Southbound Bond Connect. The expansion may bring allocation opportunities, and the dim - sum bond market is one of the core expansion directions [6]

Group 1: Report Industry Investment Rating - No information provided in the given content Group 2: Core Viewpoints of the Report - Bond Southbound Connect is about to be expanded. In the situation of "asset shortage", the influx of non-bank funds into Chinese overseas bonds may increase the demand for Chinese overseas bond varieties to some extent. The report focuses on the overview of Bond Southbound Connect, the performance of Chinese overseas bonds in H1 2025, and the opportunities for Chinese overseas bonds in H2 2025 under the expansion of Southbound Connect [15] Group 3: Summary According to the Table of Contents 1. Bond Southbound Connect Overview - **Southbound Connect Expansion Policy Support**: In 2025, multiple meetings or events mentioned the expansion of Southbound Connect. Measures include extending settlement time, supporting multi-currency bond settlement, and expanding the scope of eligible domestic investors [15] - **Southbound Connect Concept and Constraints**: "Southbound Connect" allows domestic investors to invest in bonds traded in the Hong Kong bond market. The previous domestic investors were 41 bank - class financial institutions, QDII, and RQDII. The funds can only be used for bond investment, and there are restrictions on investment额度 and scope [20][28][33] - **Southbound Connect Full - Process Mechanism**: The trading method is Request for Quote (RFQ). It adopts a nominal holder system for custody and full "Delivery versus Payment (DVP)" for settlement [37][41][51] 2. Review of Chinese Overseas Bonds in H1 2025: Narrowed Spreads and Relatively Attractive Returns - **Primary Market Changes**: - **Chinese US Dollar Bonds**: The primary issuance improved, with the issuance scale from January to June 2025 reaching $89.4 billion, a 12% year - on - year increase. The issuance interest rate volatility decreased [52] - **Dim Sum Bonds**: The primary issuance slightly contracted, with a 9% year - on - year decrease in the issuance scale from January to June 2025. The issuance interest rates were differentiated [61] - **Secondary Market Performance**: - **Chinese US Dollar Bonds**: The index rose steadily, and the credit spreads continued to repair. The overall return rate as of June 30, 2025, was 4.23% [72] - **Dim Sum Bonds**: Priced against Chinese government bond yields, they followed the narrowing of on - shore credit spreads. As on - shore funds flow in and financing costs decrease, offshore spreads may narrow [82][92] 3. Outlook for Chinese Overseas Bonds in H2 2025: Southbound Connect Expansion Facilitates Layout - **Overview of the Hong Kong Bond Market**: As of the end of 2024, the outstanding scales of Hong Kong dollar bonds, offshore RMB bonds, and G3 currency bonds were $195.5 billion, $173.2 billion, and $565.6 billion respectively. CMU - hosted debt instruments are only a small part of the Hong Kong bond market [99][107] - **Investment Strategy for Chinese US Dollar Bonds**: Driven by the on - shore and offshore spread gap and the continuous implementation of debt resolution policies, urban investment US dollar bonds are expected to continue to perform well, and real estate US dollar bonds will also benefit. The primary supply of investment - grade financial and non - financial sectors is relatively sufficient, and valuations are still attractive [123] - **Investment Strategy for Dim Sum Bonds**: Considering the lock - in cost, Dim Sum Bonds are more cost - effective than Chinese US Dollar Bonds. With the expected influx of Southbound funds, there is a large narrowing space for Dim Sum Bond spreads, so they have high allocation value [7]

Core Viewpoint - The People's Bank of China announced three new measures to enhance the interconnectivity between the mainland and Hong Kong financial markets, aiming to support the development of the offshore RMB market and promote RMB bonds as a global high-quality liquid asset [1][3]. Group 1: New Measures Announced - The three optimization measures focus on improving the "southbound" operation mechanism of the Bond Connect, allowing more domestic investors to invest in the offshore bond market [3]. - The measures include facilitating domestic investors' access to multi-currency bonds, extending settlement times, and increasing the number of custodians [3]. - The scope of domestic investors will be expanded to include four types of non-bank institutions: securities firms, funds, insurance companies, and wealth management [3]. Group 2: Offshore Repo Business Optimization - The optimization of the offshore repo business mechanism is a significant part of the reforms, broadening the tradable currencies from RMB to include USD, EUR, HKD, and others [3]. - The Hong Kong Central Moneymarkets Unit (CMU) will adopt international practices by removing the freeze on pledged bonds in repos, enhancing liquidity [3]. - Simplification of bond account opening processes in the CMU will improve operational convenience, with plans for cross-border bond repo business to be introduced in the future [3]. Group 3: International Status of RMB Bonds - As of May 2025, foreign institutions held RMB bonds totaling 4.4 trillion yuan, a nearly 400% increase since the launch of the Bond Connect [4]. - A total of 1,169 foreign institutions from over 70 countries and regions have entered the Chinese bond market, indicating strong international interest [4]. - The weight of Chinese bonds in international indices has increased, with Chinese bonds ranking second in the FTSE Global Government Bond Index and third in the Bloomberg Barclays Global Aggregate Index, surpassing initial expectations [4].