24 February 2025 Asia Quantitative Strategy China Quant Strategy: The rally has more legs Rupal Agarwal +65 6230 2358 rupal.agarwal@bernsteinsg.com In all recent conversations with GEM/Asian fund managers, there have been 2 pertinent questions- When would India market start recovering and does China rally have legs? We re-iterated our near-term cautious view on India recently - India Quant Strategy: Is it time to add more risk?. In this report we address the China question. We turned positive on China in Se ...

24 February 2025 Qingyuan Lin, Ph.D. +852 2918 5759 qingyuan.lin@bernsteinsg.com Arpad von Nemes +1 212 969 1518 arpad.vonnemes@bernsteinsg.com Zheng Cui +852 2123 2694 zheng.cui@bernsteinsg.com We lift our 2025 WFE to $108bn (flat YoY) from $107bn, and lower 2026 WFE to $115bn (+8% YoY) from $116bn. 2024 final WFE number fell close to our previous forecast at $108bn (+10% YoY), reflecting strong China spending. Our 2025 WFE forecast is lifted by $1bn, to reflect strong foundry spending as well as some bett ...

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the implications of the USTR's proposals for additional fees on port calls for Chinese-built ships, affecting the global shipping and shipbuilding industry [1][2]. Core Insights and Arguments - **USTR Proposals**: The USTR proposed additional fees ranging from USD0.5 million to USD1.5 million per port call for all Chinese carriers and any carrier with a share of Chinese-built ships in their fleet or orderbook [2]. - **Impact on Sub-Sectors**: The dry bulk sector is expected to be the most affected, accounting for 28% of US seaborne trade, with over 40% of port calls by Chinese-built ships. Tankers and containers follow, with 35% and 20% of trade respectively [3]. - **Cost Implications**: The additional costs could represent 25-117% of voyage revenues for Chinese carriers and 14-67% for others, depending on whether fees stack or are capped [4]. - **Negative Outlook for Chinese Carriers**: Higher costs are likely to be passed on to customers, significantly impacting Chinese carriers, which hold 58% of the orderbook. Near-term headwinds for new orders are anticipated until further clarity is provided [5]. - **Stock Implications**: Companies like OOIL and CSH-H/A are expected to face headwinds, while SITC is seen as immune due to its intra-Asia operations. Maersk and HLAG are vulnerable due to their high exposure to Chinese shipyards [6]. Additional Important Content - **Service Fee Structure**: The proposed service fees vary based on the percentage of Chinese-built vessels in a carrier's fleet, with fees up to USD1 million for those with over 50% of their fleet comprised of Chinese-built vessels [11]. - **Timeline of USTR Actions**: A timeline of events leading to the USTR's proposals highlights the ongoing scrutiny of China's dominance in the maritime sector, with significant actions dating back to March 2024 [12]. - **Seaborne Trade Statistics**: The report provides detailed statistics on US seaborne trade by cargo type, indicating that dry bulk and crude tankers are particularly vulnerable to the proposed fees [25]. - **Company-Specific Exposure**: A detailed analysis of various companies reveals their exposure to US port calls and Chinese-built ships, with COSCO Shipping facing the most significant negative impact due to its high reliance on Chinese-built vessels [23]. Conclusion - The USTR's proposals are poised to create significant disruptions in the global shipping and shipbuilding sectors, particularly affecting Chinese carriers and shipbuilders. The financial implications for various companies will vary based on their exposure to Chinese-built vessels and US port calls, necessitating a careful reassessment of investment strategies in this sector.

24 February 2025 | 8:29PM EST Global: GS Economic Indicators Update: Inflation Softens in the Euro Area, Remains Firm in the UK Please find an update of our proprietary global economic indicators below. The data behind these exhibits can be downloaded here. Interactive charts can be found on our living page here. Chart of the Week Exhibit 1: January Sequential Trimmed Core CPI Dipped Below 2% in the Euro Area but Remained Firm in the UK Our trimmed core inflation measure trims the one third most extreme pri ...

25 February 2025 China Semiconductors China Semicap: Revised up logic but revised down DRAM Qingyuan Lin, Ph.D. +852 2918 5759 qingyuan.lin@bernsteinsg.com Stacy A. Rasgon, Ph.D. +1 212 756 4403 stacy.rasgon@bernsteinsg.com Sara Russo +44 207 544 1792 sara.russo@bernsteinsg.com David Dai, CFA +852 2918 5704 david.dai@bernsteinsg.com Zheng Cui +852 2123 2694 zheng.cui@bernsteinsg.com Arpad von Nemes +1 212 969 1518 arpad.vonnemes@bernsteinsg.com Juho Hwang +852 2123 2632 juho.hwang@bernsteinsg.com Xuan Ji +8 ...

China Construction Materials Equities View HSBC Global Research at: What if... China's housing market has bottomed? Divergent decline across construction materials: Demand for construction materials, cement, steel and glass is closely linked to real estate, with glass demand most correlated to housing completions, followed by cement and steel, which are tied to housing new starts. Construction materials production trends (a proxy for demand) 2021-24 (exhibit 2) show cement production is down the most, -23%, ...

Summary of J.P. Morgan's China Metals Activity Tracker (24 February 2025) Industry Overview - **Industry**: Metals, specifically focusing on copper, iron ore, aluminium, and zinc in China - **Key Trends**: Recent acceleration in China's metals activity post-Lunar New Year, with significant increases in steel demand and inventory trends indicating tight physical markets Core Insights 1. **Copper and Iron Ore Prices**: Copper and iron ore prices have reached four-month highs, with copper prices at approximately $9,500 per ton, reflecting a 5% increase over the last two weeks [2][4][18] 2. **Steel Demand Surge**: Steel demand in China increased by 20% week-over-week, with rebar demand soaring by 164% week-over-week, indicating a rebound in construction activity [3][17] 3. **Inventory Levels**: - Copper inventories in China are at their lowest in five years, approximately 300,000 tons, equating to just eight days of consumption [18][27] - Aluminium inventories also remain low, around 845,000 tons, the lowest in over eight years [21][33] - Iron ore inventories at Chinese ports decreased by 2 million tons last week, now tracking at 159.31 million tons, which is only 13 million tons higher year-over-year [5][27] 4. **Market Conditions**: The physical markets for metals are tight, with steel inventories at their lowest levels for this time of year in over five years, indicating strong demand against limited supply [3][17] Price Forecasts - **Future Price Expectations**: J.P. Morgan forecasts copper prices to rise to $10,400 per ton by Q4 2025, and aluminium prices to reach approximately $2,763 per ton in 2025 [22][21] - **Impact of NPC Meeting**: The upcoming National People's Congress (NPC) meeting on March 5 is anticipated to trigger new economic policy support, potentially boosting metals demand and prices in the following weeks [4][20] Additional Observations 1. **Iron Ore Supply Disruptions**: Severe cyclone-related disruptions in Western Australia have led to a 39% week-over-week decline in Australian iron ore shipments [5] 2. **Global Shipment Trends**: Global iron ore shipments fell by 28% week-over-week and are down 45% year-over-year, indicating significant supply chain challenges [5][8] 3. **Steel Production Rates**: China's steel production is running at an annualized rate of 989 million tons, the fastest start to a year since 2021, reflecting strong recovery in the sector [5][14] Conclusion - The current trends in China's metals market indicate a robust recovery in demand, particularly in steel and copper, driven by post-Lunar New Year activity and anticipated fiscal stimulus. However, supply chain disruptions and low inventory levels suggest potential volatility in prices moving forward.

25 February 2025 | 11:49PM HKT EHang (EH): Hefei eVTOL factory announced; JAC Motors and Guoxian as partners; Buy EHang announced a strategic cooperation framework agreement with JAC Motors and Guoxian Holdings (Link) with the focus on establishing a JV for the construction of an eVTOL manufacturing base in Hefei. JAC will leverage its car OEM expertise to scale up the eVTOL production as EHang's partner, and Guoxian will help integrate resources and facilitate policy support. We are positive on the company ...

Summary of the Conference Call on China Property Sector Industry Overview - The conference call focuses on the China property sector, specifically discussing the ongoing default cycle that began in early 2021 and has lasted over four years [1][2]. Key Points and Arguments 1. **Default Cycle Duration**: The China property sector is nearing the end of a prolonged default cycle that started in early 2021, with 44 high-yield property issuers defaulting on their offshore USD bonds [1][8]. 2. **Magnitude of Defaults**: The total amount of defaults in the China property sector has reached approximately USD 127 billion, marking the largest default wave in the Asia high-yield credit market [12]. 3. **Recovery Rates**: The credit market is currently pricing an expected recovery rate of only 7.2% for distressed or defaulted China high-yield property bonds, significantly lower than the typical recovery rate of around 30% for Asia senior unsecured USD corporate bonds [31]. 4. **Sector's Market Share**: The China property sector's influence has diminished, now representing only 2% of Asia credit, 3% of Asia corporates, and 11% of Asia high-yield, down from 50% of Asia high-yield at its peak in 2021 [20][22]. 5. **Debt Restructuring**: Only six defaulted China property issuers are actively engaged in debt workouts, with 40% facing winding-up orders or petitions [25][26]. 6. **Contracted Sales**: Improvement in contracted sales is deemed crucial for the recovery of the China property sector, with expectations of a 10% drop in primary sales volume in 2025 [43][44][47]. 7. **Market Performance**: The physical property market is expected to bottom out in the fourth quarter of 2025, but the recovery path is anticipated to be slow and challenging [10][43]. Additional Important Insights - **Default Rate Trends**: The default rate for China high-yield property peaked at nearly 60%, but has shown signs of slowing down in recent months [16]. - **Issuer Performance**: A screening of performing China high-yield property credits identified seven issuers whose bonds are trading above distress levels [50]. - **Vanke's Position**: Vanke is highlighted as being at a crossroads, with its bonds trading around 65 cents, indicating low confidence from the credit market [39][41]. This summary encapsulates the critical insights from the conference call regarding the current state and future outlook of the China property sector, emphasizing the challenges and potential recovery pathways.

February 25, 2025 03:05 PM GMT India Equity Strategy | Asia Pacific M Idea Why FPI Flows Matter FPIs have made solid returns in India: Our work shows trailing US$ IRR of 10% – but in recent years, FPIs have struggled to beat MSCI India, underperforming since 2022. The positive long-term returns should be an important factor in flow reversal. The market is likely forming a trough: Our view is that share prices ultimately depend on growth, not on flows (flows are always net zero). Since we think growth is lik ...