Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The China Current Activity Indicator (CAI) decreased to +4.3% month-on-month annualized seasonally adjusted in May from +4.6% in April, indicating a slight slowdown in economic activity [7] - The weakening in CAI was primarily driven by the manufacturing sector, suggesting challenges in this area [12] - The import-implied domestic demand proxy indicates largely stable growth in recent months, reflecting resilience in domestic consumption [9] - The Financial Conditions Index (FCI) eased in May, mainly due to foreign exchange depreciation against a trade-weighted basket, which may impact liquidity conditions [27][24] - The report anticipates a faster pace of government bond issuance in the coming months, with an additional RMB1 trillion quota expected to be approved [36] Summary by Relevant Sections Economic Indicators - The CAI fell to +4.3% in May, down from +4.6% in April, indicating a deceleration in economic momentum [7] - Manufacturing and construction growth proxies both declined in May, highlighting sector-specific weaknesses [13] Domestic Demand - The import-implied domestic demand proxy suggests stable growth, indicating that domestic consumption remains resilient despite external pressures [9] Financial Conditions - The FCI eased in May, primarily driven by FX depreciation, which may affect overall economic liquidity [27][24] - The growth impact of FCI impulse is expected to turn positive from Q2 onwards, suggesting potential recovery in economic activity [12] Government Policy - The report notes a slight tightening in the domestic macro policy proxy in May, driven by a narrower fiscal deficit, which may influence future economic stimulus measures [35] - An increase in government bond issuance is projected, with expectations of an additional RMB1 trillion quota to be approved [36]

Investment Rating - The report maintains a neutral stance on the tactical USD 5y5y model despite the underperformance of energy markets, indicating a cautious approach to investment in this area [7][21]. Core Insights - The report highlights a significant underperformance of US breakevens relative to oil strength, attributed to weak CPI figures and labor market data, as well as skepticism regarding the persistence of oil price movements [3][11]. - The FOMC's dovish reaction function is expected to positively influence TIPS breakevens, with projections indicating a marginal increase in unemployment while allowing inflation to overshoot [3][7]. - The report suggests that breakevens often overshoot fundamental values during periods of oil volatility, presenting potential trading opportunities, particularly in fading large oil-driven moves [5][13][22]. Summary by Sections US Market - Breakeven rates are recommended to be long, particularly in the 5-year area, as they are perceived to be undervalued due to tariff passthrough underpricing [7][8]. - Real rates are also recommended to be long, especially in the 30-year segment, where support has returned above 2.5% [7]. Euro Area - Breakevens are viewed as slightly cheap to fair value but lack compelling support, particularly in the long end [7]. - The report suggests that steepeners across the curve may be a better expression than outright positions [7]. UK Market - The report recommends a short position on the 10-year RPI, while suggesting a long position on the long end of the curve [7][8]. - The UK inflation performance is noted as strong, but the report indicates that it may be overpriced [4].

Core Viewpoint - The forum highlighted the importance of overseas listings for Chinese companies as a means to access capital and showcase the resilience and innovation of the Chinese economy in a challenging global market [1][5]. Group 1: Forum Overview - The "Financial Transformation, Exploring New Paths" international financial forum was held in Qingdao, attracting over 200 representatives from policy institutions, multinational banks, industrial capital, and academia [1]. - The forum focused on the reform paths under the backdrop of deep adjustments in the global financial system, discussing financial openness, cross-border collaboration, and industrial upgrading [1]. Group 2: Expert Insights - Experts discussed the current state of the U.S. and domestic capital markets, emphasizing that "listed companies are designed," advocating for sustainable enterprise development [3]. - The IMF predicts that global economic growth may fall below 3% by 2025, while China is expected to maintain a growth rate above 5%, providing stability to the world economy [5]. Group 3: Strategic Initiatives - Liu Tao, Chairman of Guanghui Holdings, called for enhanced regulatory recognition, technological empowerment in risk control, and sustainable development to support cross-border financing [7][8]. - Guanghui Holdings, in collaboration with IFRA, aims to create a comprehensive service system for companies, covering strategic planning, compliance management, and investor relations [8]. Group 4: Partnerships and Collaborations - Guanghui Holdings signed strategic cooperation agreements with various asset management companies and granted operational licenses to 19 entities, marking a significant step in supporting domestic SMEs in overseas listings [10].

A critical question is whether the price change is temporary or permanent. It is easy to focus on the recent rise in oil prices, but compared to early April, oil prices are only up modestly. Relative to mid-January, oil prices are little changed and are indeed down a touch on a year-over-year basis. June 22, 2025 06:00 AM GMT Sunday Start | What's Next in Global Macro M Global Idea War and Oil This entire year has been marked with global uncertainty. The discussions of a trade war have shifted again to disc ...

Investment Rating - The report suggests a weakening demand for US equities, with a notable shift towards European stocks, but maintains that the narrative of foreign investors abandoning US stocks is overstated [10][19][67]. Core Insights - Demand for US equities is declining, benefiting European stocks, with nearly US$37 billion flowing into European equity funds year-to-date, significantly higher than previous years [8][48]. - Despite the decline in US equity demand, foreign investors have continued to net buy US stocks, indicating that the market is not experiencing a complete withdrawal of foreign capital [10][20]. - The report highlights that US investors have been reallocating from domestic equities, with net sales of approximately US$24 billion since Liberation Day, while foreign investors have added to US stocks during the same period [20][28]. Summary by Sections Equity Flows - Net flows to international funds have increased dramatically since the end of 2024, indicating a shift in investor preferences [3][60]. - Flows to US equities have slowed down since the start of the year, with approximately 40% of weeks experiencing net outflows [11][12]. Regional Focus - European equities have become the primary destination for equity fund flows, with record inflows observed [48][50]. - The report notes that while flows to US stocks have decreased, the overall allocation to US equities has followed benchmark weight changes, suggesting a more passive adjustment rather than an active reallocation [53][57]. Investor Behavior - The report emphasizes that the decline in US equity flows is not solely due to foreign selling but is largely driven by US investors reallocating their investments [20][28]. - High-quality data indicates a slowdown in foreign demand for US stocks, but net foreign buying remains positive, countering narratives of a significant withdrawal [31][35]. Future Outlook - The report anticipates that the trends of reduced demand for US equities and increased interest in European stocks are likely to persist, influenced by ongoing policy uncertainties and currency market dynamics [67][68].

June 20, 2025 05:00 AM GMT Waiting on the world to change The Fed remained on hold at the June meeting. The FOMC expects to see the effects of tariffs on inflation in the summer, as do we. Key Takeaways US Economics Weekly | North America 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 Jan-24 Mar-24 May-24 Jul-24 Sep-24 Nov-24 Jan-25 Mar-25 May-25 Jul-25 Sep-25 Nov-25 Jan-26 Mar-26 May-26 Jul-26 Sep-26 Nov-26 Core PCE (%) y/y (%) 3-month SAAR (%) MS Forecast Source: BEA, Morgan Stanley Research forecasts M ...

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The report discusses the implications of stablecoins and the internationalization of the RMB, emphasizing the long-term strategies being implemented by the People's Bank of China (PBoC) to enhance the RMB's global presence [17][21] - It highlights the increasing dominance of USD-pegged stablecoins in the market, which has led to a rise in demand for US treasuries [23][24] Summary by Sections Stablecoins and RMB Internationalization - The PBoC is focusing on enhancing financial infrastructure and services in Shanghai to facilitate RMB internationalization [18] - New financial measures include promoting offshore RMB-denominated bond issuance and optimizing cross-border trade and investment [19] Market Dynamics - The stablecoin market is experiencing significant growth, with over USD 120 billion backed by US T-bills, indicating a strong reliance on USD [24] - The total transaction volume of stablecoins has been rising, with a notable increase compared to traditional payment systems like Visa and MasterCard [22] Regulatory Developments - The Hong Kong Stablecoins Bill is set to take effect on August 1, 2025, establishing a regulatory framework for stablecoin issuers [20] - The report outlines the licensing requirements and operational standards for stablecoin issuers in both Hong Kong and the US [20] RMB's Global Position - The share of RMB in global foreign exchange reserves has decreased from 2.84% in Q1 2022 to 2.18% in Q4 2024, indicating challenges in its international acceptance [31] - The establishment of a Digital Yuan International Operations Center in Shanghai aims to expand the RMB's global reach [29]

Investment Rating - The report does not explicitly provide an investment rating for the industry discussed Core Insights - China's interest in stablecoins is driven by concerns over US legislation that could reinforce dollar dominance, with the PBoC exploring Hong Kong as a testing ground for future payment alternatives [1][2] - The development of RMB stablecoins is seen as a potential building block for cross-border RMB settlement, but significant reforms are needed for true internationalization [10][12] Summary by Sections Stablecoins and RMB Internationalization - The US GENIUS Act's passage marks a pivotal moment for stablecoins, potentially transforming USD-pegged stablecoins into synthetic dollars, which could enhance demand for US Treasuries [2] - Stablecoins are viewed as distribution channels for existing currencies rather than new currencies, extending the US dollar's reach into crypto and emerging markets [3] PBoC's Strategy - The PBoC has shifted from banning cryptocurrencies to advocating for a multi-polar global currency system, emphasizing the need for efficient digital payment alternatives [4] - Digital RMB and stablecoins are proposed as viable options for cross-border transactions, addressing weaknesses in traditional payment systems [4] RMB Stablecoins: Opportunities and Challenges - Current cross-border digital RMB transactions are limited in scale, primarily utilizing Project mBridge, with only five central banks involved [5] - The potential for RMB stablecoins is hindered by domestic usage bans, capital controls, and the dominance of USD-pegged stablecoins [5] Hong Kong's Role - Hong Kong is the first jurisdiction to pass stablecoin legislation, effective August 1, 2025, which mandates 100% high-quality reserves for stablecoins [9] - The legislation aims to promote USD and HKD pegged stablecoins initially, with plans to introduce CNH pegged stablecoins later, leveraging Hong Kong's liquidity pool [9] Long-term Outlook for RMB Internationalization - Despite efforts to enhance cross-border settlement infrastructure, the RMB's share in global reserve currencies has declined from 2.8% in early 2022 to 2.2% by the end of 2024 [11][13] - Restoring global confidence in China's growth potential is crucial for increasing RMB usage, necessitating structural reforms in the economy [12]

Core Viewpoint - The recent policies and initiatives from the Central Financial Committee aim to accelerate the construction of Shanghai as an international financial center, enhancing its competitiveness and global influence over the next five to ten years [2][4]. Group 1: Policy Initiatives - The Central Financial Committee issued an opinion outlining six major initiatives to support the development of Shanghai's international financial center, including deepening financial market construction and enhancing financial institution capabilities [2]. - Eight specific policy measures were announced by the People's Bank of China to be implemented in Shanghai, focusing on structural monetary policy innovations and enhancing financial services [6][7]. Group 2: Economic Performance - In 2024, Shanghai's financial sector is projected to achieve a value-added of 807.273 billion yuan, reflecting a year-on-year growth of 7.9%, and accounting for 15% of the city's GDP [4]. - The proportion of foreign financial institutions in Shanghai has reached 31.1%, with cross-border RMB settlement volume making up 47% of the national total, indicating a robust financial market [4]. Group 3: Global Positioning - Shanghai is positioned as a leading international financial center, with its stock exchange ranking third globally by market capitalization and its bond custody scale leading among global exchanges [8]. - The city is recognized for its significant trading volumes in various financial instruments, including being a leader in spot gold trading and having the highest trading volume for multiple commodity futures [8].

Group 1 - The eighth World Min Business Conference and the 23rd China Straits Innovation Project Achievement Trading Fair were held in Fuzhou [1] - A merger and acquisition equity investment fund project was signed between Industrial Securities, White Rabbit Group, and Tiantu Capital for Putian City Licheng White Rabbit New Consumption [1] - The Putian City Licheng White Rabbit New Consumption M&A Equity Investment Fund, initiated by Industrial Securities, has a total scale of 1 billion yuan, making it the first fund in Fujian Province (and the third in the country) controlled by industrial capital in deep cooperation with local governments and state-owned enterprises [1]