China Expressway Equities Potential opportunity in 4Q25 Opportunity in 4Q25: Sector share prices changes have ranged from -16% to +1% since July, versus HSI +9%. The sell-off continued after 1H25 results, due to 1) soft toll growth; 2) investors' risk-on sentiment; 3) company-specific risks: major shareholder sell-off for Anhui Exp and 2025 earnings downward revision risks for Jiangsu Exp (also see China Expressway, 20 June 2025). We now see opportunity in 4Q25, as dividend yields are returning to an attrac ...

Market Overview - The S&P 500 Index has increased approximately 3.7% in September, leading to a year-to-date gain of 13% [1] - The Federal Reserve has implemented its first rate cut of 2025 in September, with expectations for two additional cuts this year [1] Economic Forecast - The U.S. economy is projected to grow by 1.9% in 2023 and 1.8% in 2026, slightly above previous estimates but still below recent trends [4] - Stronger-than-expected economic activity in Q3 is attributed to tech investment, with private sector activity and defense spending anticipated to be stronger than earlier forecasts [4] Consumer and Corporate Sentiment - Consumer confidence remains weak due to job security concerns and inflation, while corporations face uncertainty from changing trade policies [5] - Rising debt burdens and stringent immigration policies are adding pressure on consumers, impacting overall sentiment [5] Investment Strategy - A conservative investment approach is recommended for the upcoming quarter due to market fragility and potential for negative developments to unsettle markets [6] - Preserving capital and cushioning against volatility is essential for navigating this uncertain period [7] Defensive Investment Options - Increasing exposure to consumer staple ETFs can provide stability and balance in portfolios, with suggested funds including Consumer Staples Select Sector SPDR Fund (XLP), Vanguard Consumer Staples ETF (VDC), and iShares U.S. Consumer Staples ETF (IYK) [9] - Dividend-paying securities are highlighted as reliable income sources during market volatility, with recommended ETFs such as Vanguard Dividend Appreciation ETF (VIG), Schwab US Dividend Equity ETF (SCHD), and Vanguard High Dividend Yield Index ETF (VYM) [11][12] - Quality and value funds, along with volatility ETFs like iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX), are suggested for investors seeking defensive options [13]

2 September 2025 | 3:09PM HKT China Industrial Tech 2Q25 wrap: Buoyant outlook in AIDC supply chain; downside surprise from PA; 3 rating changes Our coverage companies all reported 1H25/2Q25 results which look in-line overall while we see the most buoyant 2H25-2026E or even 2027E outlook in the AIDC supply chain (Envicool/Kstar/Kehua/Jianghai/Sungrow/Han's Laser) and the biggest downside surprise coming from process automation players (Baosight 2Q25 revenue/net profit -35%/-63% vs. GSe; and Supcon 2Q25 reve ...

Core Insights - The utility sector has experienced its strongest performance in over 15 years, achieving a seventh consecutive month of gains, driven by short-term demand and structural tailwinds [1][3]. Performance of Utility ETFs - Reaves Utilities ETF (UTES) led the sector with an 8.6% increase in July, followed by Invesco Dorsey Wright Utilities Momentum ETF (PUI) at 6.8%, Invesco S&P 500 Equal Weight Utilities ETF (RSPU) at 6%, and both First Trust Utilities AlphaDEX Fund (FXU) and Fidelity MSCI Utilities Index ETF (FUTY) at 5.4% each [2]. Factors Driving Growth - Surging power demand due to extreme heat in the U.S. has increased residential power consumption, alongside a significant rise in electricity usage from AI training, data centers, and electric vehicle charging. Electricity demand is projected to grow by approximately 55% from 2020 to 2040, compared to just 9% in the previous two decades [3]. - Utilities serving major tech clients like Amazon, Microsoft, and Meta are entering infrastructure deals funded by these companies, with American Electric Power (AEP) expecting 28% earnings growth by 2028 and Entergy projecting 13% annual industrial sales growth [4]. Rate Increase Requests - Utilities have submitted around $29 billion in rate increase requests for the first half of 2025, nearly double the amount from the previous year, driven by rising wholesale costs and the need for infrastructure investments [5]. Defensive Investment Appeal - Investors are shifting towards utilities as a defensive investment amid market uncertainty, attracted by consistent dividend payouts and regulatory oversight that ensures predictable earnings [6]. Industry Fundamentals - The utility sector benefits from a growing population, increasing demand for essential services like water, gas, and electricity, and the rising adoption of electric vehicles, which will further boost electricity demand [7]. ETFs Overview - **Reaves Utilities ETF (UTES)**: Actively managed ETF with $740.7 million AUM, charges 49 bps in fees, and holds 22 stocks [8]. - **Invesco Dorsey Wright Utilities Momentum ETF (PUI)**: Focuses on 34 companies with relative strength, has $75 million AUM, and charges 60 bps in fees [9]. - **Invesco S&P 500 Equal Weight Utilities ETF (RSPU)**: Offers exposure to 33 equal-weighted companies, has $447.7 million AUM, and charges 40 bps in fees [10]. - **First Trust Utilities AlphaDEX Fund (FXU)**: Holds 40 stocks with $1.7 billion AUM, charges 63 bps in fees [11]. - **Fidelity MSCI Utilities Index ETF (FUTY)**: Tracks 67 utility stocks with $2 billion AUM and charges 0.08% in fees [12].

Core Insights - The current global trade environment is marked by rising tariffs and tensions, prompting investors to seek stability in defensive sectors that are less impacted by economic fluctuations [1][2] - Large-cap biotech companies with a strong domestic focus, such as Gilead Sciences, Amgen, and AbbVie, are gaining attention as potential defensive investments due to their reliance on the U.S. market [2][3] Biotech Companies Overview - Gilead Sciences derives approximately 70.0% of its Q1 2025 product revenue from the U.S., Amgen generates about 74.7% of its Q4 2024 product sales domestically, and AbbVie obtains roughly 74.8% of its Q1 2025 net revenue from the United States [3][4] - The significant concentration of domestic sales provides a buffer against retaliatory tariffs and economic downturns, as demand for essential medicines tends to be inelastic [4][5] Financial Performance and Stability - Gilead Sciences has a market capitalization of around $132.66 billion, with a year-to-date stock gain of 15.3% and a low Beta of approximately 0.32, indicating defensive characteristics [11][13] - Amgen, valued at approximately $156.41 billion, reported a positive year-to-date performance of +11.6% and a Beta of 0.59, suggesting lower volatility [15][16] - AbbVie has a market capitalization of roughly $345.22 billion, achieving a 9.8% operational revenue increase in Q1 2025, with a forward P/E ratio of about 15.85 [18][19] Policy Environment - Recent U.S. government policy shifts are creating a supportive environment for domestic biotech companies, focusing on onshoring and reshoring manufacturing to enhance supply chain resilience [6][8] - Strategies include financial incentives, direct government investments, and prioritizing domestically produced medicines through 'Buy American' initiatives [7][8] Investment Appeal - The combination of strong cash flows, healthy dividends, and low Beta scores makes U.S.-focused biotech companies appealing during uncertain times [21][20] - Analysts have a Moderate Buy consensus on Gilead and AbbVie, while Amgen is rated as a Hold, reflecting confidence in their defensive qualities amidst market volatility [11][19][15]

Core Viewpoint - The article discusses the search for defensive investment opportunities to enhance portfolio stability in a challenging economic environment, particularly focusing on income-generating strategies favored by a Generation X investor [1]. Group 1: Investment Strategy - The investor profile described is a Generation X individual who is over-educated and under-funded, seeking ways to increase income [1]. - The investment approach leans towards conservative, income-generating strategies typically associated with older investors, while also recognizing the value of growth strategies favored by younger investors [1].