Key Insights - The report highlights a cautious approach towards the bond market, suggesting a wave of critical long-short battles as market sentiment shifts [2][3] - The "U-shaped" structure of the US Treasury yield curve reflects a complex interplay of monetary policy expectations, economic growth, inflation pressures, and debt issues [3] - The coal market is facing a supply-demand imbalance, with high inventory levels leading to declining prices, but potential "anti-involution" policies could catalyze a valuation recovery [4] - The aluminum sector shows strong fundamentals, with rising prices driven by low inventory levels and increased downstream activity, particularly in the photovoltaic sector [5] - The construction sector is poised for a valuation reassessment due to the "Yaxi" hydropower project, benefiting both directly involved companies and undervalued construction firms [5] - Financial stocks are seeing increased fund allocations, particularly in the banking sector, driven by public fund reforms and strong performance from regional banks [7] - The real estate sector is stabilizing, with a focus on core cities and companies with strong credit and dividend performance, particularly in the A-share and Hong Kong markets [7] - The report indicates a new phase of asset revaluation in Hong Kong, with improved external conditions and domestic policy changes expected to support market growth [8] - TCL Electronics is projected to see a significant increase in mid-year profits, driven by strong sales in high-end TV segments [9] - Harbin Electric is expected to report a substantial profit increase due to new equipment orders and improved operational efficiency [13]

Investment Rating - The report maintains an "Overweight" rating for the real estate development and real estate services sectors [7]. Core Insights - The retail sales in Hong Kong showed a positive trend with a year-on-year increase of 2.4% in May 2025, marking the first positive growth in 15 months, driven by factors such as improved local consumption and a rebound in tourism [2][3]. - Non-essential consumption has recovered, with a year-on-year growth of 3.5% in May 2025, significantly outpacing essential consumption, which is expected to positively impact commercial real estate [3][4]. - The commercial real estate sector remains at a low level of activity, but the recovery in retail sales is seen as a leading indicator for potential rent stabilization and improvement in occupancy rates [4]. Summary by Sections Retail Sales Performance - In May 2025, Hong Kong's retail sales reached HKD 31.3 billion, with a month-on-month increase of 7% after seasonal adjustments [1][2]. - The improvement in retail sales is attributed to the "May Day" holiday and the positive effects of talent policies implemented in late 2022, which have started to show results in 2023 [2]. Non-Essential Consumption Recovery - Non-essential consumption categories, such as pharmaceuticals and cosmetics, saw significant growth, with increases of 8.7% and 6.9% respectively [3]. - Luxury goods, while still declining by 3.2%, have shown a narrowing of the decline compared to previous months, indicating a potential recovery [3]. Commercial Real Estate Outlook - The commercial real estate sector's rental index remains below the threshold of recovery, but the rebound in retail sales could enhance tenant leasing willingness and reduce vacancy rates [4]. - The Hong Kong government is actively promoting consumption through incentives for the retail and dining sectors, which may further support the recovery of commercial real estate [4]. Investment Recommendations - The report recommends focusing on local developers and commercial operators in Hong Kong, particularly those with high dividend yields and substantial land reserves along the MTR lines [5][9]. - Specific stock recommendations include "Link REIT" (823 HK) with a target price of HKD 50.59 and "MTR Corporation" (66 HK) with a target price of HKD 29.50, both rated as "Buy" and "Overweight" respectively [9][14].