Our framework to assess Asia ex China's exposure to China's deflationary pressures: We introduce a scorecard to assess the relative exposures, incorporating (1) PPI of sectors identified as more affected by China's deflationary pressures and their PPI weight, (2) correlation with China's PPI in the same sectors, and (3) exports similarity to capture the effects of competitive price pressures from China. Using this framework, we identify Thailand, Malaysia, and Korea as the more exposed economies within Asia ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the Chinese economy, highlighting the current economic conditions and anticipated policy responses in the context of structural reforms and stimulus measures [3][7]. Core Insights and Arguments 1. **Economic Performance**: Exports remain strong, but domestic demand is cooling. Short-term policies are expected to support infrastructure and alleviate local government debt [3][7]. 2. **Structural Reforms**: Significant structural reforms, such as the redesign of local incentive mechanisms and social security reforms, are anticipated to be addressed in the upcoming 15th Five-Year Plan [3][7]. 3. **Growth Momentum**: There is a noted weakening in growth momentum due to fiscal constraints and a diminishing marginal effect of consumption incentives. GDP growth is projected to decline to 4.5% in Q3 [7][9]. 4. **Policy Stance**: The government is likely to adopt a stance of "adjustment rather than a shift," focusing on minor policy tweaks rather than aggressive stimulus measures [7][9]. 5. **Fiscal Support**: Anticipated fiscal measures include a new policy financial tool worth 500 billion RMB for local infrastructure projects and 1 trillion RMB in support for local government debt [9][9]. Additional Important Content 1. **Retail Performance**: Retail sales in the automotive and home appliance sectors have further slowed since September, reflecting both high base effects and local government subsidy management [8][20]. 2. **Real Estate Market**: Residential sales remain sluggish, with expectations of a significant decline in growth rates due to high base effects in the future [8][17]. 3. **Construction Activity**: The construction industry is experiencing weak activity, with low demand for rebar and cement, indicating broader economic challenges [18][24]. 4. **Trade Dynamics**: Container throughput at major ports has shown a recovery, indicating a divergence in export performance between the U.S. and non-U.S. markets [15][11]. 5. **Inflation Expectations**: Structural reforms are deemed crucial for stabilizing inflation expectations and releasing excess household savings [9][9]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state of the Chinese economy and the anticipated policy responses.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China’s Economic Sentiment and Domestic Demand - **Date**: September 24, 2025 - **Source**: Morgan Stanley Asia Limited Core Insights 1. **Domestic Demand Cooling**: Domestic demand in China is slowing more than expected, attributed to a fading fiscal impulse and reduced effectiveness of consumer goods trade-in programs. The growth rate for Q3 GDP is projected at 4.5%[5][6][7] 2. **Exports Remain Firm**: Despite domestic demand cooling, exports are holding steady, with a year-over-year growth of 10.4% in container throughput as of the third week of September, largely due to a low base from adverse weather last year[4][5] 3. **Commodity Prices**: The anti-involution impulse is fading, leading to a short-lived rise in commodity prices. However, this increase may not be sustainable as rising costs for downstream firms may not be passed on to final demand[3][5] 4. **Policy Stance**: The Chinese government is expected to implement modest, targeted quasi-fiscal support rather than large-scale stimulus. This includes potential funding for infrastructure and settling local government payables[5][7] 5. **Cyclical Policy Measures**: Anticipated quasi-fiscal easing measures include Rmb500 billion in new policy-based financial instruments for local infrastructure investment and tapping into policy bank loans to help local governments settle payables, which could total Rmb5-10 trillion[7][5] 6. **Reform Discussions**: The Fourth Plenary Session is expected to discuss structural reforms related to cadre evaluations, tax systems, and social insurance systems, which are crucial for stabilizing inflation expectations and unlocking household savings[7][5] Additional Important Points 1. **Retail Growth Decline**: Retail growth in sectors such as autos and home appliances has cooled further in September, influenced by a high base effect and the diminishing impact of trade-in programs[6][20] 2. **Property Market**: Property sales and construction activities remain subdued, with year-over-year growth for housing sales expected to decline due to base effects[6][5] 3. **Container Throughput Divergence**: There is a notable divergence in performance between exports to the US and other regions, with US-bound shipments showing little change[4][12][14] 4. **High Frequency Data**: Recent high-frequency data indicates a negative sequential price momentum in major upstream sectors since mid-August, suggesting a potential downturn in commodity prices[3][8] This summary encapsulates the key insights and data points from the conference call, providing a comprehensive overview of the current state of the Chinese economy and its implications for investment opportunities and risks.

One year ago to the day, China’s top financial regulators and central bankers appeared together in an unprecedented press conference to unleash a raft of stimulus measures aimed at stabilizing the financial markets and support the country’s economic recovery.The decision prompted billionaire hedge fund icon David Tepper to appear on CNBC and declare that he is buying "everything" in China: ‘ETFs…futures…everything.’ In retrospect, he was right again.The market jolted higher on the following days, and over t ...

Group 1: Report Industry Investment Rating - No industry investment rating information is provided in the report. Group 2: Core Views of the Report - The copper fundamentals show resilience, with downstream开工 rising and weakening scrap substitution. Consider mid - term long positions below 79,000 - 79,500 yuan or selling put options below 78,000 yuan [1]. - For aluminum, the short - term fundamentals are okay, with inventory expected to decline in September. Hold on dips in a low - inventory situation and pay attention to far - month inter - month and internal - external reverse arbitrage [2]. - Zinc prices are moving down in a volatile way. The current internal - weak and external - strong pattern may further differentiate. Hold short positions and partially take profit on internal - external positive arbitrage [6]. - Nickel has weak short - term fundamentals, with high - level production and weak demand. The geopolitical risk in Indonesia has eased, but there are price - supporting policies [7]. - Stainless steel has weak fundamentals. Steel mills are expected to resume production slightly, with mainly rigid demand. The short - term macro - situation follows the anti - involution expectation [7]. - Lead prices rose due to macro factors. Supply is tight, while demand has a slight improvement, but inventory is at a high level. The price is expected to fluctuate greatly in the range of 16,800 - 17,200 yuan next week [9]. - Tin prices are in wide - range fluctuations. The domestic and overseas supply is expected to improve marginally. The short - term fundamentals are weak in both supply and demand. Suggest short - term waiting and light - position short selling above 275,000 yuan/ton [12]. - Industrial silicon is in a tight - balance state in September and October, affected by the resumption rhythm of Southwest and Hesheng. In the long - term, prices are expected to fluctuate at the cycle bottom [16]. - Carbonate lithium prices are moving strongly in a volatile way. With supply - side disturbances and seasonal demand, the price has high elasticity after the supply - side hype and strong downward support before that [18]. Group 3: Summary by Metal Copper - **Price and Market Data**: This week, copper prices fluctuated widely around 80,000 yuan. The downstream开工 rate increased, and the scrap substitution effect weakened. The internal - external positive arbitrage has space [1]. - **Strategy**: Consider mid - term long positions below 79,000 - 79,500 yuan or selling put options below 78,000 yuan [1]. Aluminum - **Price and Market Data**: Aluminum prices declined slightly. The downstream开工 improved, and the inventory is expected to decline in September [1][2]. - **Strategy**: Hold on dips in a low - inventory situation and pay attention to far - month inter - month and internal - external reverse arbitrage [2]. Zinc - **Price and Market Data**: Zinc prices moved down in a volatile way. Supply from overseas mines increased, and domestic demand is seasonally weak. The LME inventory is at a low level [6]. - **Strategy**: Hold short positions and partially take profit on internal - external positive arbitrage [6]. Nickel - **Price and Market Data**: Nickel prices declined slightly. Supply is at a high level, and demand is weak. The geopolitical risk in Indonesia has eased [7]. - **Strategy**: No specific strategy is mentioned other than the analysis of fundamentals [7]. Stainless Steel - **Price and Market Data**: Stainless steel prices were relatively stable. Steel mills are expected to resume production slightly, with mainly rigid demand [7]. - **Strategy**: No specific strategy is mentioned other than the analysis of fundamentals [7]. Lead - **Price and Market Data**: Lead prices rose due to macro factors. Supply is tight, and demand has a slight improvement, but inventory is at a high level [9]. - **Strategy**: The price is expected to fluctuate greatly in the range of 16,800 - 17,200 yuan next week [9]. Tin - **Price and Market Data**: Tin prices fluctuated widely. Domestic and overseas supply is expected to improve marginally, and demand is mainly rigid [12]. - **Strategy**: Suggest short - term waiting and light - position short selling above 275,000 yuan/ton [12]. Industrial Silicon - **Price and Market Data**: Industrial silicon is in a tight - balance state in September and October, affected by the resumption rhythm of Southwest and Hesheng [16]. - **Strategy**: In the long - term, prices are expected to fluctuate at the cycle bottom [16]. Carbonate Lithium - **Price and Market Data**: Carbonate lithium prices are moving strongly in a volatile way. Supply - side disturbances and seasonal demand affect the market [18]. - **Strategy**: The price has high elasticity after the supply - side hype and strong downward support before that [18].

Core Viewpoint - The article discusses the current economic recovery trends in the U.S. and Europe, highlighting the dual easing of fiscal and monetary policies in the U.S. and the stable recovery in Europe, while also addressing the implications for investment strategies in various asset classes. Group 1: U.S. Economic Overview - The U.S. is experiencing a "dual easing" of fiscal and monetary policies, with a significant increase in fiscal deficit from $300 billion in Q2 to an expected $5.28 trillion in Q3, indicating a shift towards expansionary policies [15] - Consumer spending is showing signs of recovery, with a projected annualized growth rate of 2.2% in Q3, rebounding from a low of 0.5% in Q1 [21] - Business investment remains weak but is expected to rebound in Q4 due to favorable monetary conditions, despite a significant decline in housing investment [21][24] Group 2: European Economic Recovery - The Eurozone is witnessing a moderate recovery, with the manufacturing PMI rising to 50.5, indicating a return to expansion after three years of contraction [37] - Inflation in the Eurozone remains stable at 2.0%, aligning with the European Central Bank's target, which suggests that further rate cuts are unlikely [38] - The ongoing geopolitical situation, particularly regarding the Russia-Ukraine conflict, is being monitored closely, as it could impact economic stability and recovery in Europe [39] Group 3: Investment Strategy Recommendations - The article suggests maintaining a balanced allocation in equities and fixed income, with a focus on sectors that are expected to benefit from the economic recovery [48] - U.S. equities are projected to continue their upward trend, supported by strong corporate earnings growth, despite high valuations [48][49] - Fixed income strategies should favor medium to short-duration bonds due to potential interest rate volatility, while high-yield bonds may offer additional returns as trade tensions ease [55][56] Group 4: Currency and Commodity Outlook - The U.S. dollar is expected to remain in a range-bound trading pattern due to the anticipated interest rate cuts by the Federal Reserve, while the euro's performance will largely depend on U.S. monetary policy decisions [59][62] - Gold prices are projected to rise as the Fed enters a new easing cycle, although geopolitical developments will play a crucial role in price volatility [65] - Oil prices may experience short-term strength but face significant downward pressure in the medium to long term due to expected oversupply [70]

Summary of Conference Call on Chemicals Industry Industry Overview - The focus of the conference call is on the chemicals industry, particularly in relation to the proposed anti-involution policies in China aimed at addressing chronic oversupply in the petrochemical sector [1][3][8]. Key Points 1. **China's Anti-Involution Policies**: - The proposed policies are viewed as a good intention to tackle the oversupply issue in the petrochemical sector, but there are concerns regarding the execution and effectiveness of these measures [3][8]. - Analysts suggest that prohibiting new capacities is the most effective way to address the structural oversupply [3]. 2. **Market Reactions**: - Saudi petrochemical share prices have increased by 13-23% following news of the anti-involution policies, although chemical prices in China and Northeast Asia have not shown similar recovery [4][8]. - The market remains cautious, with many investors adopting a "wait and see" approach until tangible changes occur [15]. 3. **Current Supply-Demand Dynamics**: - The fundamentals of the petrochemical market remain weak, characterized by a significant supply overhang and lack of demand recovery [4][10]. - Spot prices for key chemicals such as HDPE, LDPE, and PP have remained flat compared to July, with only MEG expected to see a modest price increase of 3% [4]. 4. **Capacity Management**: - The potential closure of older capacities in China could theoretically reduce global PE/PP capacities by 3.6-5.1%, but the impact on industry utilization rates is expected to be minimal and diminish over time as new capacities come online [10]. - Local governments in China are required to submit assessments of aging petrochemical facilities, but complexities in execution may hinder effective capacity management [11]. 5. **Investor Sentiment**: - There is a mixed sentiment among investors; while some view the news as a positive step, the majority remain skeptical due to the persistent overcapacity issues [15][16]. - Corporates are cautious about over-extrapolating the potential impact of the anti-involution policies and are not incorporating these changes into their internal forecasts [8][15]. 6. **International Developments**: - Similar capacity reduction plans have been announced in Korea, where the government aims to cut 2.7-3.7 million tons of NCC capacity, representing 29% of total domestic capacity [16]. - However, new capacity additions may offset the impact of these closures, raising questions about the effectiveness of such measures [16]. Additional Insights - Companies such as Borouge, Orlen, SABIC, and Sipchem have expressed cautious optimism regarding the potential for market improvement due to capacity closures, but they also highlight the ongoing challenges posed by oversupply [17]. - The overall sentiment in the petrochemical market remains cautious, with many stakeholders awaiting concrete actions and results from the proposed policies before making significant investment decisions [15][17].

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **Chinese equity market**, which has seen a significant increase of **+42% over the past year** and **+26% year-to-date in USD** [1] Core Arguments 1. **Equity vs Rate Correlation** - There is a **bullish disconnect** between equities and rates in China, typically positively correlated through the cycle. However, at policy tipping points, equities can rally while rates remain low due to adequate policy easing. This signals the beginning of a cyclical inflection, similar to the US scenario from **2010-2012** [1] 2. **Liquidity Uplift** - China's **money supply** is rising, with **M1 growth** increasing from **0% earlier this year to over 5%** and **M2 growth** from **7% to nearly 9%**. This increase in liquidity is expected to lead to higher asset prices. Additionally, excess liquidity in China has risen from **9.1% of GDP in 3Q24 to 12.6% in 2Q25** [7] 3. **October Plenary** - The upcoming **October Plenary** will be crucial for understanding China's economic direction, particularly regarding the **15th Five-Year Plan**. Key areas of focus may include supporting consumption and improving supply/demand balance. The shift from a supply-side focus to a more balanced approach is anticipated to take years, not months [12] Additional Insights - A focus on **consumer sectors** is recommended, as companies like **Anta (9.5x EV/EBITDA)**, **Yum China (9.4x)**, **Galaxy Entertainment (8.5x)**, and **CR Beer (7.5x)** are trading at attractive multiples. This suggests potential for significant upward movement if consumption is prioritized in policy discussions [13] - The **anti-involution policy** is seen as a long-term strategy, indicating a shift in focus from supply-side growth to a more sustainable economic model [12] Conclusion - The overall sentiment remains **bullish** on the Chinese equity market, driven by favorable liquidity conditions, potential policy shifts towards consumption, and historical parallels with previous market cycles in the US. Investors are encouraged to monitor developments closely, particularly the outcomes of the October Plenary [1][7][12][13]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Inbound Travel in China - **Growth Potential**: Inbound visitation is projected to generate US$2-4 trillion in cumulative revenue over the next decade, despite uncertainties in domestic demand and trade frictions [1][3][4]. Core Insights - **Tourism Service Exports**: China's tourism service exports grew by 67% year-over-year (YoY) in the first half of 2025, significantly outpacing the 14% growth in total service exports and 6% in product exports [2][39]. - **GDP Contribution**: Inbound tourism receipts contributed 0.5% to China's GDP in 2024, up from 0.3% in 2023, but still below the ~1% level seen before COVID-19 [2]. - **Visitor Growth Factors**: Key drivers for increased inbound tourism include longer stays, a higher percentage of foreign visitors compared to those from Hong Kong and Macau, and a potential rise in business travelers [3][4]. Airline Industry Insights - **Airlines' Performance**: In the first half of 2025, international routes accounted for over 60% of the increase in China's air passenger turnover compared to the same period in 2024 [5][31]. - **Pricing Power Challenges**: Domestic demand remains depressed, delaying the expected pricing power inflection for airlines. The current high utilization rates have not translated into higher pricing elasticity [5][32][36]. - **Sustainability Concerns**: The aggressive expansion into international routes by Chinese airlines is viewed as unsustainable without generating profits, necessitating "anti-involution" efforts to avoid deflationary pressures [5][33][34]. Visitor Demographics and Trends - **Visitor Recovery**: Foreign visitation in Beijing has recovered to 90% of pre-COVID levels, with a 120% recovery for foreign tourists overall [12][61]. - **Visa-Free Entries**: Over 70% of foreign visitors entered China visa-free in 2Q25, a significant increase from approximately 50% before the relaxation of visa requirements [57][75]. Economic and Policy Factors - **Shopping as a Growth Driver**: China's potential as a shopping destination is highlighted, driven by global trade barriers and inflation pressures, making Chinese consumer goods more attractive [28][29]. - **Government Initiatives**: The Chinese government has implemented several policies to facilitate inbound travel, including visa relaxations, improved payment systems, and enhanced digital services for tourists [18][29][83]. Revenue Forecast Adjustments - **Revenue Growth Projections**: The base case for 10-year cumulative revenue remains largely unchanged, while the bull case is adjusted down by 6% compared to previous estimates [21][96]. - **CAGR Expectations**: A 19% compound annual growth rate (CAGR) for inbound revenue is deemed achievable, supported by factors such as increased visitor spending and longer stays [24][98]. Conclusion - **Outlook**: The inbound travel sector in China is positioned for significant growth, driven by favorable government policies, increased international connectivity, and evolving consumer preferences. However, challenges remain in the airline industry and overall economic conditions that could impact recovery and growth trajectories.

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Chinese economy** and its current challenges, particularly in relation to the **anti-involution push** and **social welfare initiatives** introduced by Beijing to address the "3D" challenges facing the country [1][5]. Core Insights and Arguments - **Supply-side Dynamics**: There has been an **uneven rebound in upstream prices** in July, with notable increases in specific sectors: - **Polycrystalline silicon** prices increased by approximately **30% month-to-date (MTD)** from late June. - **Lithium hydroxide** prices rose by about **8%**. - **Coal** prices saw a **4%** increase [2][20]. - **Demand-side Concerns**: The sustainability of the price rebound is contingent on **final demand**. The current recovery in upstream prices may not be sustainable without a corresponding increase in consumer demand, which has been sluggish [3][4]. - **Final Demand Trends**: - The **housing market** and **export recovery** were critical in previous cycles (2015-2018) for successful reflation. However, current indicators suggest a potential moderation in exports, particularly to the US, due to declining restocking demand [4][10]. - **Construction activity** remains weak, with demand for **rebar** and **cement** below 2024 levels, indicating ongoing challenges in the housing market and local government financing [7][24]. - **Social Dynamics Indicator**: Recent surveys indicate a decline in sentiment among depositors, with perceptions of the employment situation reaching a record low. This reflects broader economic challenges and aligns with the recent policy shifts aimed at addressing these issues [7][26]. Additional Important Insights - The **July Politburo meeting** emphasized "high quality" urban renewal as a strategy to mitigate the housing market downturn, suggesting limited infrastructure investment support in the absence of decisive stimulus [7]. - The **Social Dynamics Indicator** has shown renewed challenges in Q2 2025, closely tracking with policy moves such as anti-involution initiatives and expanded social welfare [7][26]. - The report highlights that while upstream sectors may experience price increases due to supply constraints, midstream sectors like **petrochemicals** and **construction materials** have shown muted pricing improvements, indicating a lag in demand recovery [3][4]. This summary encapsulates the key points from the conference call, providing a comprehensive overview of the current state of the Chinese economy and its implications for various sectors.