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 ...

Portfolio Performance & Strategy - The Hi5 portfolio, initiated in August 2023 with 500,000 Canadian dollars, surpassed 1 million Canadian dollars by June of this year, achieving a compound growth rate close to 12% [1] - The core investment strategy is DCA (Dollar-Cost Averaging) plus BTD (Buy The Dip), involving consistent monthly investments regardless of market fluctuations [1] - Investing in the US stock market is a key component of the strategy, based on the belief that it will rise in the long run due to factors like oversupply of money and the influence of capitalism and vote-driven politics [1] - The strategy emphasizes that market drops and corrections, including crashes, present opportunities for accelerated wealth growth, as the market will eventually recover and reach new highs [2] Risk Management & Market Analysis - Data from JP Morgan indicates that between 1980 and 2020, 44% of companies in the Russell 3000 index experienced catastrophic losses (stock price fell >70% from peak and never recovered) [2] - During the same period, 42% of stocks in the Russell 3000 index generated negative absolute returns, and 66% underperformed the market [2] - Only 10% of stocks outperformed the market during this period, achieving cumulative returns of 500% or more [2] - Actively managed stock funds have a low survival rate, with 59% of funds from December 31, 1992, to September 30, 2022, either closing down or merging, and only 10% outperforming the S&P 500 index [2] Portfolio Rebalancing & Adjustments - The Hi5 portfolio will undergo annual rebalancing in August, involving adjusting the holdings of the 5 ETFs to maintain equal weighting [2][3] - MOAT ETF will be replaced by SPMO ETF, shifting from a fundamental-based stock selection model to a momentum-based model that selects the best-performing stocks in the S&P 500 index [2][3] - The rationale for replacing MOAT with SPMO is that SPMO has demonstrated better overall performance and a superior risk-return ratio compared to MOAT [3]

Investment Strategy - The analyst outlines two investment strategies: holding the portfolio without adjustments, and actively rotating and rebalancing based on coin performance [2] - The analyst favors the second strategy, involving swapping stronger assets into weaker or more volatile assets [3] - The analyst's strategy aims to outperform the market by rebalancing the portfolio, potentially leading to higher returns when markets recover to original buying levels [2][3] Portfolio Performance - A $100 thousand portfolio, if held without rebalancing, would return to $100 thousand when coins recover to original buying levels [2] - Through active rebalancing, a portfolio initially valued at $100 thousand grew to $212 thousand, yielding a $102 thousand profit (including ENS sell) [3][6] - The portfolio includes holdings in various altcoins such as $W, $OP, $TAO, $TIA, $SEI, $OMNI, $RPL, $REZ, and $AEVO [4] Individual Coin Performance - $OP generated a $10.5 thousand profit [3] - $TAO incurred a $2.1 thousand loss [5] - $TIA generated a $14.5 thousand profit [5] - $SEI incurred a $3 thousand loss [5] - $OMNI generated a $13.5 thousand profit [8] - $AEVO generated a $18.6 thousand profit [8] - $W generated a $300 profit [8] - $RPL generated a $200 profit [3] - $REZ generated a $30 thousand profit [6] Market Outlook - The analyst anticipates stronger rallies when markets turn risk-on, potentially driving the portfolio towards $1 million or higher [6]

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - Supply-side reform in China is evolving, focusing on mid-to-downstream sectors rather than solely on upstream sectors as in previous reforms [2] - The current reform approach is more nuanced and balanced, addressing advanced capacity rather than outdated capacity [2] - The report anticipates a slowdown in China's real GDP growth to below 4.5% in the second half of 2025 due to diminishing export momentum and fiscal easing [11] Summary by Sections Supply-Side Reform - The current supply-side reform is characterized as "new wine in an old bottle," emphasizing the importance of demand for economic reflation [2] - The targeted sectors have shifted from SOE-dominated to POE-dominated firms, indicating a change in ownership dynamics [2] Economic Growth - China's real GDP growth is projected to decline to less than 4.5% in the latter half of 2025, influenced by fading export growth and fiscal easing measures [11] - The economy is expected to remain on a slow reflation path, indicating ongoing challenges in achieving robust growth [11] Housing Market - The housing market continues to face challenges, with elevated inventory levels in lower-tier cities and a persistent decline in housing prices [21] - The National Development and Reform Commission (NDRC) is considering expanding funding channels to address housing inventory issues, which may depend on various factors including funding size and developer selection [22] Fiscal Policy - The fiscal space in China is becoming more constrained, with major tax revenues and land sales underperforming against budget expectations [38][43] - The report suggests that China needs not only new stimulus measures but also a reformed growth algorithm to address structural issues in the economy [44] Reflation Strategy - The report outlines a "5R" reflation strategy, which includes measures such as expanding fiscal deficits, monetary easing, and social welfare spending to stimulate consumption [47] - The strategy aims for a gradual and uneven progress towards economic recovery, with various policy measures expected to be implemented by the end of 2025 [47]

Core Insights - Chinese companies are successfully entering international markets by addressing specific consumer needs and preferences, leading to the emergence of world-class enterprises in various sectors [1][2][3] Group 1: Successful Case Studies - TYMO, a personal care brand, targets specific demographics such as Latinx and African descent consumers with its hair styling products, priced at $70 to $80, achieving significant sales in North America and Europe [2] - Carote, a cookware brand, capitalizes on the trend of aesthetically pleasing kitchenware, offering products in pastel colors that have become bestsellers on global platforms like Amazon [2] - Govee, a lighting brand, focuses on DIY culture by allowing users to customize their lighting setups, successfully tapping into the demand for personalized home decor in Western markets [3] Group 2: Market Entry Strategies - Companies should tailor their overseas strategies based on specific market demands rather than generalizing about entire countries, as demonstrated by a pet apparel brand that found success in Europe by catering to high-end winter clothing needs [4][5] - Understanding the target consumer group is crucial; for instance, marketing to immigrant communities in Germany can be more effective than targeting the broader German population [5] Group 3: Common Pitfalls - Misunderstanding consumer needs can lead to product failures, as seen with a product that added unnecessary features, causing consumer confusion rather than meeting their relaxation needs [6] - Companies often face challenges not just from competitors but also from local industry associations that may resist foreign entrants disrupting established markets [8] Group 4: Cultural Considerations - There is a significant cultural difference in consumer behavior between Eastern and Western markets, with Chinese companies often adopting a multifunctional approach while Western consumers prefer specialized products [7] - Effective communication and cultural understanding are essential for success in foreign markets, as relying solely on translation tools may not bridge the cultural gaps [15] Group 5: Future Trends - The "Great Wealth Transfer" is expected to create a new generation of consumers with significant purchasing power, emphasizing the need for companies to engage with younger demographics now to build long-term relationships [13][14] - Companies must adapt to changing lifestyles and consumer preferences, as the current generation values experiences and aesthetics, which can influence product development and marketing strategies [14]