Summary of Key Points from the Conference Call Industry Overview - The report focuses on global cross-asset markets, including equities, fixed income, currencies, and commodities, with insights from Morgan Stanley Research. Core Insights and Arguments 1. **Equity Market Forecasts**: - S&P 500 projected returns range from -20.2% (bear case) to 16.7% (bull case) with a base case return of 5.4% [3] - MSCI Europe shows a similar trend with a bear case of -21.4% and a bull case of 25.8% [3] - Emerging Markets (MSCI EM) also reflect a bear case of -26.5% and a bull case of 13.5% [3] 2. **Currency Projections**: - JPY expected to depreciate to 147 in the bear case, while the bull case sees it strengthening to 122 [3] - EUR forecasted to range from 1.16 (bear) to 1.30 (bull) [3] - BRL shows resilience with a bear case of 5.54 and a bull case of 5.20 [3] 3. **Fixed Income Returns**: - UST 10-year yield forecasted to decline to 2.85 in the bull case, with a bear case of 4.22 [3] - UKT 10-year yield expected to range from 4.53 (bear) to 3.15 (bull) [3] 4. **Commodity Market Trends**: - Brent crude oil projected to drop to 50 in the bear case, with a bull case reaching 120 [3] - Gold prices forecasted to range from 2,975 (bear) to 4,200 (bull) [3] 5. **Market Sentiment**: - ACWI momentum has reached its lowest level since April, indicating a bearish sentiment in the market [7] - Non-farm payroll growth has slowed, with a 3-month moving average of 35,000 [8] 6. **ETF Flows**: - US equities experienced outflows of $0.8 billion, while global equities saw inflows of $5.2 billion [41] - Bond markets showed inflows of $12.8 billion, indicating a shift towards fixed income [41] Additional Important Insights 1. **Market Volatility**: - The VIX index spiked sharply following the US jobs report, indicating increased market uncertainty [16] 2. **Cross-Asset Correlations**: - Current cross-asset correlations are at 43%, reflecting a slight increase from the previous month [73] - Equity and credit correlations are notably high at 71% and 82%, respectively [73] 3. **Positioning Summary**: - US equities show a net positioning of 29% among asset managers, while EM equities are at 44% [66] - Commodities like gold and copper have seen significant shifts in positioning, with gold at 33% long and copper at 13% long [66] 4. **COVA Framework**: - The correlation-valuation (COVA) scorecard identifies portfolio diversifiers, with staples and healthcare showing strong defensive characteristics [81] 5. **Extreme Market Moves**: - Copper experienced a significant decline of 20% due to new tariff details, marking it as one of the largest weekly moves [11][91] This summary encapsulates the key points from the conference call, highlighting the current state and projections of various asset classes, market sentiment, and positioning trends.

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Chinese equities market** and the flow of funds in **China/HK** equities, highlighting trends in both passive and active fund management strategies [1][10]. Core Insights and Arguments - **Equity Inflows**: Chinese equities experienced inflows of **US$2.7 billion** in July 2025, primarily driven by **US$3.9 billion** from passive funds, while active funds faced outflows of **US$1.2 billion** [1][10]. - **Southbound Flows**: Southbound stock connect inflows reached **US$17 billion** in July, totaling **US$110 billion** year-to-date (YTD), surpassing the full-year level of **US$103 billion** in 2024 [1][10]. - **Fund Underweights**: Global and Asia ex-Japan (AxJ) funds slightly reduced their underweights in China by **1.4 percentage points** and **0.3 percentage points**, respectively, while emerging market (EM) funds increased their underweight to **3.2 percentage points** [1][10]. - **Sector Performance**: Active fund managers increased their positions in **Media & Entertainment**, **Pharmaceuticals**, and **Insurance**, while reducing exposure in **Consumer Services** and **Consumer Durables & Apparel** [10]. - **Company-Specific Changes**: Notable increases in holdings were observed for **Tencent**, **Netease**, **Jiangsu Hengrui**, and **Wuxi AppTec**, while **Meituan** and **Xiaomi** saw reductions in their positions [10]. Additional Important Insights - **Domestic Fund Outflows**: Chinese domestic passive funds targeting A-shares recorded outflows of **US$6 billion** in July, up from **US$3 billion** in June [10]. - **Short Interest**: As of July 31, short positions in China/HK equities were predominantly added in **Consumer Staples**, **Financials**, and **Communication Services** [11]. - **Passive Fund Trends**: Cumulative foreign passive inflows reached **US$11 billion** YTD, exceeding the **US$7 billion** level in 2024, while cumulative foreign active outflows totaled **US$11 billion**, a decrease from **US$24 billion** in 2024 [10]. - **Fund Flow Dynamics**: The report indicates a significant correlation between foreign passive fund flows to the **CSI 300** and northbound net flows historically, suggesting a stable trend in foreign investment [12]. This summary encapsulates the key points from the conference call, providing a comprehensive overview of the current state of the Chinese equities market and fund flow dynamics.

Summary of Global Fund Flows Industry Overview - The report focuses on global fund flows, particularly in equity, fixed income, and foreign exchange (FX) markets, for the week ending July 30. Key Points Fund Flows - **Equity Funds**: - Net inflows into global equity funds were positive at $20 billion, an increase from $6 billion in the previous week [3] - G10 equity funds experienced strong inflows, especially from Western Europe excluding the UK and smaller G10 economies [3] - US equity funds had positive but modest inflows [3] - South Korea saw the largest net inflows among emerging markets, while Taiwan experienced the largest outflows [3] - Mainland China equities turned negative [3] - Financials and industrials sectors attracted the largest net inflows, indicating a preference for cyclicals over defensives [3] - **Fixed Income Funds**: - Flows into global fixed income funds slowed but remained positive at $20 billion, down from $27 billion the previous week [3] - Bank loans and mortgage-backed bond funds saw the largest net inflows as a percentage of assets under management (AUM) [3] - Investors favored short-duration bond funds over long-duration ones and net purchased inflation-protected securities [3] - In emerging markets, hard-currency bond funds outperformed local-currency bond funds [3] - Money market fund assets decreased by $12 billion [3] - **FX Flows**: - Cross-border FX flows remained strong, totaling $84.255 billion, with a consistent average of 0.16% of AUM [13] - The distribution of FX flows was even across regions, with regions reallocating away from the US showing better currency performance [3][13] Performance Metrics - **Equity and Fixed Income Trends**: - Total equity inflows for the four-week period reached $46.478 billion, with a 4-week average of 0.05% of AUM [11] - Total fixed income inflows were $84.383 billion, with a 4-week average of 0.24% of AUM [11] Regional Insights - **Emerging Markets**: - Emerging markets saw a total of $9.910 billion in inflows, with a notable preference for hard-currency bonds [11] - Specific countries like South Korea and Taiwan showed contrasting trends in fund flows [3][11] Sector Performance - **Sector Inflows**: - Financials sector led with inflows of $9.555 billion, while consumer goods and energy sectors faced outflows [11] - The industrials sector also performed well with inflows of $4.230 billion [11] Additional Observations - Investors are increasingly reallocating funds away from the US, which has implications for currency performance and investment strategies [3] - The report emphasizes the importance of considering these fund flow trends in investment decision-making [2] Conclusion - The report highlights a robust performance in equity and fixed income markets, with significant shifts in investor preferences towards certain sectors and regions. The ongoing reallocation away from the US suggests a changing landscape in global investment strategies.

Summary of Global Fund Flows Industry Overview - The report discusses global fund flows for the week ending July 23, focusing on equity and fixed income markets, highlighting trends in investor behavior across different regions and sectors. Key Points Fund Flows into Equities - Global equity funds experienced modest inflows of $6 billion, an increase from $5 billion in the previous week [1] - Mixed flows were observed across G10 countries; US and Japan equity funds faced net outflows, while Euro area equity funds saw net inflows [1] - There is a notable trend of repatriation from US assets, with foreign demand for US equities significantly slowing down, particularly in Europe and Asia [1][2] - Emerging Markets (EM) saw strong demand, particularly in South Korea, which had the highest inflows, while Taiwan experienced the largest outflows [1] Fund Flows into Fixed Income - Global fixed income funds saw robust inflows of $27 billion, up from $17 billion the previous week, with both government and corporate credit products benefiting [1] - Over the past four weeks, bank loans have attracted the strongest inflows as a percentage of Assets Under Management (AUM) [1] - Investors have begun net purchasing inflation-protected securities in the last two weeks [1] Sector-Level Insights - There is a clear preference for cyclical sectors over defensive ones since early July, with industrials and financials attracting the strongest net inflows [1] - The divergence between flows into cyclicals and defensives has become more pronounced, indicating a shift in investor sentiment [1][4] Money Market and FX Flows - Money market fund assets increased by $14 billion [1] - Cross-border foreign exchange (FX) flows were strong, with the Euro attracting significant net foreign inflows [1] - In Asia, the Singapore Dollar (SGD), Taiwan Dollar (TWD), and Hong Kong Dollar (HKD) saw the strongest foreign inflows recently [1] Summary of Fund Flow Data - Total equity inflows for the four-week period amounted to $29.084 billion, with a weekly inflow of $5.798 billion [2] - Total fixed income inflows reached $86.605 billion, with a weekly inflow of $26.965 billion [2] - Money market funds had a total of $74.716 billion in inflows, with a weekly inflow of $13.707 billion [2] Additional Observations - The report indicates a shift in investor focus towards cyclical sectors, which may present potential investment opportunities [1][4] - The slowdown in foreign demand for US equities could pose risks for US markets, particularly if the trend continues [1][6] Conclusion - The current trends in global fund flows suggest a cautious but strategic repositioning by investors, favoring cyclical sectors and fixed income products while showing hesitance towards US equities. The data indicates potential opportunities in emerging markets and cyclical sectors, while also highlighting risks associated with the US market's attractiveness to foreign investors.

Investment Rating - The report maintains an overweight stance on Japanese equities, with unchanged end-2025 share price targets of TOPIX at 2,800 and Nikkei 225 at 40,000 [2][7][26]. Core Viewpoints - The report anticipates support for Japanese stocks in the second half of 2025 from corporate reforms, fund flows, and macroeconomic factors such as Fed interest rate cuts and a potential Japan-US tariff agreement [2][14][39]. - Two main themes are identified as structural support for Japanese equities: corporate reform and fund flows [3][14][59]. Summary of Key Themes Corporate Reform - Corporate reforms are accelerating, with share buybacks announced in FY2024 nearly doubling year-on-year, indicating a strong momentum for profitability [4][15][39]. - The total shareholder return ratio for Japanese companies has risen to 60%, with 16% of TOPIX companies exceeding a total return ratio of 100% in FY2024 [41][42]. - Balance sheet normalization could potentially boost corporate value by up to 20%, with expectations for ROE to rise to the mid-9% level by FY2026 [17][42]. Fund Flows - A significant rotation of funds from overseas to Japan is expected, driven by rising interest rates and a shift in investment strategies among public pension institutions and banks [5][60]. - The report highlights a historical outflow of funds from Japan to the US, with expectations for a repatriation of capital back to Japan, providing structural support for Japanese equities [25][60]. - Fund inflows are anticipated to continue as the yen appreciates, leading to a decline in overseas securities investment by individuals [61][62]. Sector Outlook - The report recommends a barbell strategy focusing on domestic demand sectors while seeking upside in semiconductors and machinery, depending on trade agreement outcomes [29][39]. - The performance of domestic demand-driven stocks has outpaced overseas demand-driven sectors during the recovery from the US tariff shock, with software, media, and food sectors leading the market [77].

Investment Rating - The report indicates a positive investment sentiment towards global equity and fixed income funds, with significant inflows observed in the latest reporting period [4][10]. Core Insights - Global fund flows into equity funds saw a substantial increase, with net inflows of $45 billion for the week ending June 18, compared to outflows of $10 billion in the previous week. This surge was primarily driven by strong demand from US investors for US equity funds [4][10]. - Fixed income funds also experienced increased inflows, totaling $19 billion, attributed to heightened demand for aggregate-type, mortgage-backed, and government bond funds. In contrast, money market fund assets declined by $12 billion [4][10]. - Emerging markets showed positive trends, particularly with mainland China funds turning positive and Brazil continuing to attract robust inflows. Sector-wise, technology funds recorded the strongest net inflows, while financials faced the largest outflows [4][10]. Summary by Category Equity Flows - Total equity inflows amounted to $31.3 billion over the four-week period, with a significant weekly inflow of $45.4 billion on June 18. Developed markets, particularly the US, saw notable inflows, while Japan experienced outflows [10][12]. - Technology sector funds led the inflows, while financials and healthcare sectors faced significant outflows [10][12]. Fixed Income Flows - Total fixed income inflows reached $70.8 billion, with a weekly inflow of $19.2 billion. Aggregate-type and mortgage-backed funds were particularly favored, while long-duration bond funds saw outflows [10][12]. - Emerging market local bond funds attracted strong inflows, indicating a positive sentiment towards these assets [10][12]. FX Flows - Cross-border FX flows totaled $58.2 billion, with G10 currencies showing strong demand, particularly for the Korean won, which saw the largest net inflows in z-score terms [12][13]. - The report highlights subdued inflows for the US dollar, contrasting with robust inflows for other currencies like the euro and British pound [12][13].

Investment Rating - The report indicates a negative trend in global equity fund flows, with net outflows of $10 billion for the week ending June 11, contrasting with inflows of $5 billion in the previous week [3] Core Insights - There were significant net outflows from equity funds, particularly in G10 markets, while fixed income funds experienced robust inflows, particularly in emerging markets [3][9] - Emerging market local currency bond funds saw strong inflows, indicating a preference for these assets amidst the broader market trends [3][9] - The report highlights a shift in investor preference towards short-duration bond funds over long-duration options [3][9] Summary by Sections Global Fund Flows - Total equity experienced net outflows of $18.2 billion over the past four weeks, with a weekly outflow of $10 billion [9] - Fixed income funds saw inflows of $77.1 billion, with $15.1 billion in the latest week, driven by demand for credit products [9] - Money market funds had a decline of $9.1 billion in assets [9] Equity Flows - Developed markets saw significant outflows, particularly from US equities, which had outflows of $24.2 billion [9] - Emerging markets showed mixed results, with mainland China experiencing outflows of $7.2 billion, while Taiwan and Brazil saw inflows of $4.7 billion and $0.8 billion respectively [9] Fixed Income Flows - Total fixed income inflows were $77.1 billion, with $64.2 billion from developed markets [9] - Emerging market fixed income funds had inflows of $10.8 billion, with local currency bonds being particularly favored [9] FX Flows - Cross-border FX flows remained elevated at $56.4 billion, with G10 currencies attracting strong inflows [11] - The report notes that the South Korean won (KRW) saw the strongest net inflows among Asian currencies [11] Sector Flows - Consumer goods funds saw the largest net inflows, while technology funds experienced the greatest net outflows [3][9] - The report indicates a notable preference for sectors such as consumer goods and utilities, contrasting with the outflows from technology and financial sectors [9]

Investment Rating - The report does not explicitly state an overall investment rating for the industry or specific assets [4]. Core Insights - The S&P 500 experienced its best May performance since 1990, indicating strong market sentiment [9]. - US goods imports saw a significant drop of 20% in a month, marking the largest decline ever recorded [9]. - Bloomberg's Fedspeak index has reached its most dovish level in over four years, suggesting a shift in monetary policy outlook [9]. Summary by Sections Equities - S&P 500 forecasted returns range from -15.8% (bear case) to 23.1% (bull case) with a base case return of 19% [4]. - MSCI Europe shows a bear case of -22.8% and a bull case of 23.6%, with a base case return of 16% [4]. - Emerging Markets (MSCI EM) forecasted returns range from -22.1% to 20.2%, with a base case return of 16% [4]. Foreign Exchange - The JPY is forecasted to depreciate to 144 in the bear case and appreciate to 130 in the bull case, with a base case of 143 [4]. - The EUR is expected to range from 1.13 (bear) to 1.25 (bull), with a base case of 1.14 [4]. Rates - The 10-year UST yield is forecasted to range from 4.40% (bear) to 3.45% (bull), with a base case of 4.00% [4]. - UK 10-year yields are expected to range from 4.65% (bear) to 3.95% (bull), with a base case of 4.35% [4]. Credit - US Investment Grade (IG) credit spreads are forecasted to tighten from 88 bps (bear) to 90 bps (bull), with a base case of 130 bps [4]. - US High Yield (HY) spreads are expected to range from 315 bps (bear) to 335 bps (bull), with a base case of 475 bps [4]. Commodities - Brent crude oil is forecasted to range from $64 (bear) to $55 (bull), with a base case of $45 [4]. - Gold prices are expected to range from $3,278 (bear) to $3,250 (bull), with a base case of $2,760 [4]. Market Sentiment Indicator (MSI) - The MSI aggregates survey positioning, volatility, and momentum data to quantify market stress and sentiment, indicating a current negative sentiment [50][55]. Cross-Asset Positioning - In US equities, asset managers are net long at 27%, while hedge funds are net short at -7% [63]. - In commodities, positioning shows 25% net long in gold, while 7% net long in Brent [63]. Cross-Asset Correlations - The current global correlation index stands at 43%, indicating a slight increase from the previous month [72]. - Equity correlations are at 70%, while credit correlations are at 80%, reflecting strong interdependencies [72]. ETF Flows - US equities saw a net inflow of $0.7 billion over the past week, while world equities had a net inflow of $0.8 billion [37]. - Bond markets experienced a significant inflow of $15.1 billion, indicating strong demand for fixed income [37]. Volatility Monitor - The implied volatility for the S&P 500 is currently at 17.0%, reflecting market expectations of future volatility [96]. - Major equity markets show varying levels of volatility, with the Nasdaq at 21.2% [96]. Overall Market Performance - Major developed market equity indices posted gains, with TOPIX up 2.4% and NASDAQ up 2% [98]. - Commodity markets generally posted losses, with copper down 3.3% [98].

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific assets [3]. Core Insights - The S&P 500 is forecasted to reach 6,500 by Q4 2025, representing a total return of 15.6% with a volatility of 19% [3]. - The report highlights a mixed performance across global equity markets, with the DAX outperforming at +3.8% and technology sectors leading at +4.3% [101]. - The US Dollar experienced a significant decline of 4.55% in April, marking its second worst monthly performance in 15 years [9][101]. - Credit spreads tightened for US and EU high-yield bonds, while spreads widened for investment-grade indices [101]. Summary by Relevant Sections Equities - S&P 500: Current level at 5,687, forecasted to 6,500 with a return of 15.6% [3]. - MSCI Europe: Current level at 2,137, forecasted to 2,150 with a return of 3.8% [3]. - Topix: Current level at 2,688, forecasted to 2,600 with a return of -0.8% [3]. - MSCI Emerging Markets: Current level at 1,133, forecasted to 1,050 with a return of -4.6% [3]. Fixed Income - UST 10-year yield forecasted to decrease to 4.00% from 4.31%, with a total return of 6.8% [3]. - US Investment Grade (IG) credit spread at 102 bps, forecasted to tighten to 95 bps with a return of 1.5% [3]. Commodities - Brent crude oil forecasted to decrease to $57.5 from $61, with a return of -5.2% [3]. - Gold forecasted to increase to $3,500 from $3,250, with a return of 5.3% [3]. Currency - JPY forecasted to appreciate to 141 from 145, with a return of 1.0% [3]. - EUR forecasted to depreciate to 1.08 from 1.13, with a return of -6.5% [3]. Market Sentiment - The report indicates a negative sentiment in the market, with the Market Sentiment Indicator (MSI) reflecting stress and positioning data [54][58].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Chinese equities experienced a significant outflow of US$5.3 billion from foreign long-only funds in April, reversing a two-month inflow trend since February [11] - The outflow was primarily driven by passive funds, which saw outflows of US$3.7 billion, and active funds, which had outflows of US$1.6 billion [11] - Cumulative foreign passive inflows since October 2022 have reverted to levels similar to late February 2025, with April outflows reversing approximately 50% of the inflows from March 2025 [11] - Active fund managers increased their underweight positions in China, with global funds down 1.3 percentage points, AxJ funds down 2.0 percentage points, and EM funds down 3.2 percentage points [11] - Domestic passive funds targeting China A-shares recorded a massive inflow of US$27 billion in April, marking the highest monthly inflow since 2024 [11] - The Southbound Stock Connect program maintained strong momentum with US$21 billion in April, bringing the net inflow for the first four months of 2025 to US$77 billion [11] Fund Flows - In April, foreign domiciled funds saw a total outflow of US$5.3 billion, with passive funds contributing US$3.7 billion and active funds contributing US$1.6 billion [11] - The report indicates that the northbound net flow data was terminated as of August 19, 2024, and suggests using foreign passive funds flow to CSI 300 as a proxy for historical northbound net flow [13] - As of April 30, 2025, US$0.4 billion in short interest was added in China offshore/HK equities, primarily in the Energy and Industrials sectors [13] Sector and Company Positioning - Active fund managers increased their positions in Household & Personal Products while reducing their holdings in Media & Entertainment and Insurance [11] - The most added companies by active fund managers included Alibaba, BYD, Trip.com, and China Construction Bank, while Tencent and Xiaomi were the most trimmed [11] - The report highlights that the top holdings among long-only EM and China active managers include Tencent Holdings, Alibaba Group, and Meituan, with notable changes in their active weights [42]