Summary of Key Points from the Conference Call Industry Overview: China Economic Indicators - The NBS manufacturing PMI decreased to 49.3 in January from 50.1 in December, while the non-manufacturing PMI fell to 49.4 from 50.2, both below market expectations [1][2] - This decline reflects a trend observed in previous years, where stronger readings occur at quarter-end months, followed by decreases in the subsequent month [5] Fiscal Situation - In 2025, China's total revenues were RMB 27.3 trillion, a decline of 2.9% from 2024, while expenditures rose to RMB 40.0 trillion, an increase of 3.7% from 2024 [2] - Policymakers were overly optimistic about the property market, with actual revenue from government-managed funds showing a 7% decline compared to expectations [2] - The estimated augmented fiscal deficit for 2025 was 11.0% of GDP, projected to widen to 12.0% in 2026 [2] Investor Sentiment - Improved investor sentiment was noted during the annual macro conference in Hong Kong, with growth expectations shifting from 3-4% to 4-5% for the next five years [6][7] - Expectations for equity market performance and the RMB exchange rate have also improved, although sentiment regarding prices remains weak, with 42% of respondents expecting PPI inflation to turn positive in 2028 or later [6] Price Indices - Both input and output price sub-indices increased significantly, indicating potential inflationary pressures in the manufacturing sector [1] Long-term Outlook - The modal response for annual average growth in China over the next five years has shifted positively, reflecting a more optimistic outlook among investors [8] Additional Insights - The decline in manufacturing PMIs is consistent with residual seasonality observed over the past year, indicating cyclical patterns in economic activity [5] - The mixed December activity data and the alignment of Q4 GDP with expectations suggest a complex economic landscape that requires careful monitoring [11] This summary encapsulates the critical insights from the conference call, focusing on the economic indicators, fiscal situation, investor sentiment, and long-term outlook for China.

Market Performance - The S&P 500 Index is down -0.33%, the Dow Jones Industrials Index is down -0.35%, and the Nasdaq 100 Index is down -0.34% [1] - Stock indexes are experiencing declines, with the S&P 500 and Dow Jones reaching 1-week lows, and the Nasdaq 100 hitting a 1.5-week low [2] - Trading activity is subdued with volumes below normal due to market closures in Germany and Japan for the New Year's holiday [3] Sector Performance - Weakness in chip stocks and data storage companies is contributing to the broader market decline [2] - Mining stocks are also sliding, with gold prices falling to a 2.5-week low and silver prices dropping more than -7% [2] Economic Indicators - US weekly initial unemployment claims unexpectedly fell by -16,000 to a 1-month low of 199,000, indicating a stronger labor market than anticipated [3] - Better-than-expected Chinese economic data supports global growth prospects, with the December manufacturing PMI rising +0.9 to 50.1, and the non-manufacturing PMI increasing +0.7 to 50.2 [4] Seasonal Trends - Seasonal factors are bullish for stocks, with historical data showing the S&P 500 has risen 75% of the time in the last two weeks of December, averaging a 1.3% increase [5] - Market focus for the holiday-shortened week will be on US economic news, with expectations for the December S&P manufacturing PMI to remain at 51.8 [5] Global Market Overview - Overseas stock markets are mixed, with the Euro Stoxx 50 down -0.08% and China's Shanghai Composite up +0.09% [6]