1 September 2025 | 2:22AM HKT Andrew Tilton +852-2978-1802 | andrew.tilton@gs.com Goldman Sachs (Asia) L.L.C. Hui Shan +852-2978-6634 | hui.shan@gs.com Goldman Sachs (Asia) L.L.C. China: Three things in China Three quick highlights from China: n Marginally better official PMIs: The official NBS manufacturing PMI inched up to 49.4 in August from 49.3 in July, and non-manufacturing PMI also ticked up to 50.3 from 50.1. The patterns are very similar to the previous month: price sub-indices continued to improve ...

August 27, 2025 01:55 AM GMT Oil Data Digest | Europe China Oil Data Summary In this short note we summarise July supply, apparent demand and trade data for China. Apparent demand grew +5% YoY, driven by strong petchem, fuel oil and jet fuel demand. Crude imports and refinery runs both moderated from June's record levels, helping to support domestic margins. Chinese apparent oil demand maintained +5% YoY growth in July, albeit from a low 2024 baseline, averaging 16.4 mb/d. Improved demand from petchem facil ...

Index targets. We lift our end-2025e target for SHCOMP to 4,000 (from 3,700), CSI300 to 4,600 (from 4,300), and SZCOMP 13,000 (from 11,500) given the abundant liquidity. Our updated end-2025e index targets imply 5-7% upside. China 22 August 2025 Equity Research Report China Equity Strategy Equity Strategy A tale of four investment themes China buys China. Since June, Chinese stocks listed both onshore and offshore have been on the rise. We believe abundant liquidity is the key driver, from 1) deposit migrat ...

August 24, 2025 07:26 PM GMT Investor Presentation | Asia Pacific M Foundation Growth Cool, Policy Drip, Market Buoyant Related Reports: Growth Cool, Policy Drip, Market Buoyant (21 August 2025) Is the HIBOR Spike a Headwind? (20 August 2025) Morgan Stanley Asia Limited Robin Xing Chief China Economist Robin.Xing@morganstanley.com +852 2848-6511 Jenny Zheng, CFA Economist Jenny.L.Zheng@morganstanley.com +852 3963-4015 For important disclosures, refer to the Disclosure Section, located at the end of this rep ...

Summary of Key Points from the Conference Call Industry Overview - The macroeconomic indicators in July were disappointing, with most showing weakness except for trade data, influenced by adverse weather conditions [2][4] - The Chinese economy is experiencing a bifurcation, characterized by strong exports and high-tech developments alongside a weak property market and private demand [2][6] Core Insights - **GDP Growth**: Despite softening data, July GDP tracking remains close to 5% year-over-year [2] - **Anti-involution Efforts**: The government's "anti-involution" initiatives aim to reduce competition and price-cutting but are unlikely to lead to significant production cuts due to a weak labor market and banking sector challenges [2][11] - **Interest Subsidies**: Recent temporary interest subsidies for consumer loans have marginally improved market sentiment, but historical trends suggest limited impact on household credit growth during housing downturns [2][20] - **Current Account Surplus**: Forecasts indicate that China's current account surplus will average around 3.5% of GDP for 2025 and 2026, nearly double consensus expectations, driven by continued emphasis on technological advancement and manufacturing competitiveness [2][43] Economic Indicators - **July Activity Data**: Major indicators showed declines: industrial production fell 0.3%, retail sales decreased 0.9%, and fixed asset investment dropped 6.6% month-over-month [4] - **High-tech Sector Performance**: High-tech industrial production increased by 9.3% year-over-year, with significant growth in sectors like semiconductors and smart transportation equipment [5] - **Property Market Weakness**: The property market remains weak, with new starts, completions, and fixed asset investment in property falling by over 15% year-over-year [6] Additional Insights - **Consumer Behavior**: Auto sales volume increased by 6.9% year-over-year, but the value declined by 1.5%, indicating price deflation in the auto industry [10] - **Employment Sentiment**: Employment sentiment among urban households has fallen to levels seen during the Global Financial Crisis, impacting consumer borrowing [25][32] - **Fiscal Challenges**: The Chinese government faces rising fiscal burdens due to demographic changes, with a significant increase in retirees compared to new job entrants projected for 2045 [36] Conclusion - The Chinese economy is navigating a complex landscape with structural challenges in the property market and labor sector, while high-tech industries show resilience. Policymakers are likely to maintain a cautious approach to stimulus, focusing on targeted measures rather than broad fiscal interventions [3][34][36]

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **China Industrials** sector, focusing on various companies within the electric components and battery supply chain industries. Core Insights and Arguments 1. **Company Ratings and Market Performance**: - **Hongfa (600885.SS)**: Rated as "Buy" with a market cap of 37.807 billion RMB, current share price at 25.90 RMB, and a price target of 36.50 RMB indicating a potential upside of 41% [3][5] - **Putailai (603659.SS)**: Also rated "Buy", market cap of 38.591 billion RMB, current share price at 18.05 RMB, with a price target of 24.00 RMB, suggesting a 33% upside [3][6] - **Yunnan Energy (002812.SZ)**: Rated "Neutral", market cap of 28.307 billion RMB, current share price at 31.72 RMB, with a price target of 33.00 RMB, indicating only a 4% upside [3][6] 2. **Profitability Metrics**: - **Hongfa**: Projected net profit for 2025E is 1,921 million RMB, with a consensus of 1,893 million RMB, showing a 1% difference [3] - **Putailai**: Expected net profit for 2025E is 2,420 million RMB, with a consensus of 2,431 million RMB, indicating a 0% difference [3] - **CSSC (600150.SS)**: Projected net profit for 2025E is 7,305 million RMB, with a consensus of 7,173 million RMB, showing a 2% difference [3][7] 3. **Valuation Metrics**: - **P/BV Ratios**: Hongfa has a P/BV of 3.3x for 2025E, while CSSC has a P/BV of 3.0x, indicating relative valuation differences within the sector [3][5] - **ROE**: Hongfa's ROE is projected at 18% for 2025E, while CSSC's is at 14% [3][7] 4. **Comparative Analysis**: - The report includes a comparative analysis of various companies in the electric components and battery supply chain sectors, highlighting differences in P/E ratios, market caps, and growth projections [5][6][7]. 5. **Market Trends**: - The battery supply chain is experiencing limited pricing opportunities, with production schedules closely correlated with battery index performance [8][9]. Other Important but Potentially Overlooked Content - The report emphasizes the importance of understanding the macroeconomic environment and its impact on the industrial sector, particularly in the context of supply chain dynamics and pricing pressures [8][9]. - Analysts from UBS Securities Asia Limited are involved in the research, indicating a potential conflict of interest due to business relationships with covered companies [4]. This summary encapsulates the key points discussed in the conference call, providing insights into the performance and outlook of companies within the China Industrials sector.

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **Chinese economy**, particularly the impact of the **anti-involution campaign** on economic recovery and deflation issues stemming from the **property sector collapse** and overcapacity in the **green sector** [1][2][3][4]. Core Insights and Arguments - **Deflation and Economic Recovery**: China's economic recovery post-pandemic has been weak, characterized by deflation, primarily due to the collapse of the property sector, which accounted for **25% of GDP** and **38% of national fiscal revenue** [1][14]. - **Anti-Involution Campaign**: Launched in mid-2024, aimed at curbing aggressive price competition among enterprises. Recent actions include increased enforcement and price coordination meetings, leading to rising commodity prices and stock prices for certain companies [2][7]. - **Concerns Over Overcapacity**: Despite the anti-involution efforts, overcapacity in the green sector remains a significant concern. The campaign may not effectively reflate the economy due to anticipated demand shocks and lack of substantial stimulus programs [3][4][33]. - **Price Trends**: Recent spikes in commodity prices are viewed as speculative and unsustainable. PPI inflation remains negative, with forecasts of **-2.5%** for 2025 and **-0.6%** for 2026 [4][10]. - **Sector-Specific Impacts**: The solar industry has been particularly affected by price competition, with many producers incurring losses. Investment growth in the solar sector contracted by **29.1%** in 2024 [9][29]. Additional Important Insights - **Investment Trends**: Local governments have heavily invested in manufacturing sectors, particularly in EVs, batteries, and solar, leading to excessive capacity and price wars. Investment growth in lithium-ion batteries dropped from **104.6%** in 2021 to **19.1%** in 2023 [29][44]. - **Property Market Decline**: The property market continues to struggle, with contract sales of top developers dropping by **73.1%** in value from H1 2021 to H1 2025. Average home prices have fallen by around **30%** [20][47]. - **Export Challenges**: Despite a temporary rebound in exports, significant headwinds are expected due to US tariffs and a slowdown in demand. Exports to the US fell by **21.6%** y-o-y in July [54][61]. - **Social Security Enforcement**: Stricter enforcement of social security contributions is anticipated to challenge SMEs, particularly in labor-intensive sectors, potentially leading to closures or workforce reductions [55][57]. Conclusion - The anti-involution campaign, while aimed at addressing deflation and overcapacity, faces significant challenges. The lack of robust demand-side stimulus, ongoing property market issues, and potential demand shocks could hinder effective economic recovery in China [3][33][67].

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **China Economics** sector, particularly addressing the **deflationary trends** and economic growth challenges in China as of August 2025 [1][5]. Core Insights and Arguments - **Growth Slowdown**: There was a sharper-than-expected growth dip in July, with real GDP growth projected to slow to **4.5% YoY** in Q3, down from **5.2% YoY** in Q2. This slowdown is attributed to a decline in infrastructure capital expenditure by **7.3 percentage points** and a drop in durable goods sales due to weather disruptions and a pause in consumption trade-in subsidies [2][3][7]. - **Future Projections**: While a mild rebound in year-over-year growth is anticipated for August, driven by fading weather disruptions and resumed trade-in subsidies, a further slowdown is expected in September due to the payback of export front-loading and a higher fiscal spending base [3][7]. - **Policy Measures**: Incremental policy moves are expected to provide a floor for the economy. The Chinese government is implementing a measured anti-involution push and accelerating consumption support, which is seen as a constructive response to the "3D" challenges facing the economy. A supplementary budget of **Rmb0.5-1 trillion** is anticipated to mitigate the growth slowdown [4][7]. Important Data Points - **July Activity Indicators**: - Industrial Production (IP) growth was **5.7%** in July, down from **6.8%** in June. - Manufacturing sector growth decreased to **6.2%** from **7.4%** in June. - Fixed Asset Investment (FAI) showed a year-to-date growth of **1.6%**, with a year-over-year decline of **5.2%** in July [6]. - **Retail Sales**: Nominal retail sales growth was **3.7%** in July, down from **4.8%** in June, with auto sales declining by **1.5%** [6]. Other Noteworthy Content - The report emphasizes the importance of monitoring the **property sector**, which continues to face challenges, with sales down **7.2%** and new starts down **9.1%** in July [6]. - The analysis suggests that while the economic outlook remains cautious, the government's proactive measures could help stabilize the market narrative and support growth in the medium term [4][7].

Summary of the Conference Call on the China Battery Sector Industry Overview - The conference call focused on the **lithium battery sector** in China, particularly in the context of the government's **anti-involution** policies aimed at reducing excessive competition and promoting sustainable growth [1][3]. Key Points and Arguments Current State of the Lithium Battery Sector - The lithium battery supply chain shows **divergent margin profiles** between upstream and downstream segments, with the upstream LFP cathode sector under significant stress, operating at approximately **70% cash cost levels** for the past three years [2][8]. - The **battery cell sector** downstream is healthier, with around **70% of capacity** operating above breakeven levels, indicating less immediate need for policy intervention [8]. Recent Developments - There have been no formal policy announcements regarding anti-involution; however, industry associations are promoting **self-discipline** among suppliers to stabilize prices and address capacity issues [4][5]. - Meetings among battery dry separator manufacturers and LFP cathode makers are being held to discuss price stabilization and capacity expansion suspension, reflecting a proactive industry response to government initiatives [5][9]. Impacts and Outlook - The **anti-involution initiative** is expected to lead to a comprehensive price recovery across the battery supply chain, with potential mid-high teen price hikes in battery average selling prices (ASP) if supply chain margins recover [15]. - A shift from **supply surplus to supply shortage** is anticipated by 2026, which could drive significant price increases and improve the financial health of Tier 2 competitors [20]. Investment Opportunities Hunan Yuneng - Hunan Yuneng is highlighted as a **key beneficiary** of the LFP cathode upcycle, with an estimated **34% market share** in 2024. The company is expected to deliver an **EPS CAGR of ~180%** from 2024 to 2026 [16][26]. - The target price for Yuneng is set at **Rmb62.0**, with a valuation methodology based on a near-term P/E of **17.5x** and a long-term P/E of **15x** for 2030 [24][25]. Hyperstrong - Hyperstrong, a leading BESS supplier with approximately **12% market share** in 2024, is expected to benefit from the surge in BESS installations, projecting a **38% EPS CAGR** from 2024 to 2027 [18][29]. - The target price for Hyperstrong is set at **Rmb106.0**, with a long-term P/E of **12x** for 2030 [27]. Additional Insights - The **demand for LFP cathodes** is projected to grow at a **volume CAGR of 24%** from 2024 to 2026, driven by the growth in Energy Storage Systems (ESS) and increased LFP penetration in the EV market [20]. - The **competitive landscape** is expected to evolve, with Hyperstrong's market share projected to decline from **12% in 2024 to 6% in 2030**, indicating potential challenges ahead [18][29]. Conclusion - The lithium battery sector in China is at a pivotal moment, with government policies aimed at stabilizing the market and promoting sustainable growth. Companies like Hunan Yuneng and Hyperstrong are positioned to capitalize on these trends, making them attractive investment opportunities in the evolving landscape of the battery industry [1][15][29].

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **Chinese equity market**, particularly the A-share market, with insights into investor sentiment and trading activity as of August 2025 [1][2][3]. Core Insights and Arguments - **Investor Sentiment Improvement**: A-share investor sentiment has significantly improved, with the weighted Morgan Stanley A-share Sentiment Indicator (MSASI) rising by 21 percentage points to 116% and the simple MSASI increasing by 25 percentage points to 110% as of August 6, 2025 [2]. - **Increased Trading Volume**: Average daily turnover (ADT) for various segments, including ChiNext and A-shares, has seen increases of 13% (to RMB 556 billion), 12% (to RMB 1,880 billion), and 6% (to RMB 278 billion) respectively compared to the previous cycle [2]. - **Net Inflows**: Southbound trading recorded net inflows of USD 1.0 billion from August 7-13, with year-to-date and month-to-date net inflows reaching USD 114.9 billion and USD 4.5 billion respectively [3]. - **Credit Growth Trends**: Broad credit growth year-on-year edged up by 10 basis points to 9.2%, while new CNY loans turned negative for the first time in 20 years, indicating a potential slowdown in consumption and property sales [4]. - **Market Conditions**: The summer of 2025 has been quieter for China due to US/China trade uncertainties, selling pressure from IPO stock unlocking, and disappointment from the July politburo meeting [5]. Future Expectations - **Improvement in Investment Setup**: The overall setup for investing in Chinese equities is expected to improve as clarity on US/China trade negotiations, easing IPO stock selling pressure, and potential economic reforms emerge in September/October [13]. - **Earnings and Valuation Outlook**: Solid earnings delivery and less stretched valuations are anticipated to support market performance, with MSCI China trading at less than 12x forward P/E, which is significantly cheaper compared to other major equity markets [14]. - **Sector Performance**: There is a focus on the Chinese internet sector's potential to deliver better-than-expected Q2 earnings results, which could lead to upward revisions in guidance for the second half of the year [14]. Additional Important Points - **MSASI Methodology**: The MSASI is based on nine metrics that gauge onshore sentiment, including margin transactions, new investor registrations, and A-share turnover [15][16][17][18][19][20][21][22]. - **Economic Policy Support**: Incremental policy support, such as interest subsidies for consumer loans and a modest supplementary budget, may cushion the expected moderation in credit growth [4]. This summary encapsulates the key insights and expectations regarding the Chinese equity market, highlighting the improved sentiment, trading activity, and future outlook for investors.