North America Equity Research 16 December 2024 J P M O R G A N Autos Valuation Comp Sheet Priced as of December 13, 2024 Autos & Auto Parts Ryan Brinkman AC (1-212) 622-6581 ryan.j.brinkman@jpmorgan.com Rajat Gupta AC (1-212) 622-6382 rajat.gupta@jpmorgan.com Jash Patwa AC (1-212) 622-5472 jash.patwa@jpmchase.com J.P. Morgan Securities LLC nml Table Of Contents In this note, we include the latest comp sheet and valuation metrics for global automotive OEMs (page 3), auto parts suppliers (page 5), auto auctio ...

Key Points **1. Stock Connect Holdings and Flows**: * **Stock Connect holdings** have increased significantly over the years, reaching $466.73 billion since inception. * **Southbound weekly flows** have been relatively stable, averaging $2.73 billion over the past year. * **Cumulative southbound flows** have been strong, reaching $95.95 billion year-to-date. **2. Sector Analysis**: * **Communication Services** and **Consumer Discretionary** sectors have seen significant inflows, with weekly flows of $1.1 billion and $0.5 billion, respectively. * **Financials** and **Health Care** sectors have also seen notable inflows, with weekly flows of $0.8 billion and $0.2 billion, respectively. * **Industrials** and **Materials** sectors have seen moderate inflows, with weekly flows of $0.3 billion and $0.1 billion, respectively. **3. Top Holdings**: * **Tencent Holdings Ltd** remains the largest holding, with a market cap of $459 billion and a 43% stake. * **China Mobile Ltd** is the second-largest holding, with a market cap of $258 billion and a 99% stake. * **Alibaba Group Holding Ltd** is the third-largest holding, with a market cap of $140 billion and a 58% stake. **4. ETFs and Warrants**: * **ETFs** have seen significant inflows, with the top 10 ETFs having a total AUM of $319 billion. * **Warrants** have seen moderate inflows, with the total warrant market activity reaching $0.7 billion. **5. Market Cap and Performance**: * **Large cap** stocks have outperformed, with the CSI 300 index returning 16% year-to-date. * **Mid cap** stocks have returned 15%, while **small cap** stocks have returned 10%. * **Cyclical** stocks have outperformed **defensive** stocks, with the cyclical sector returning 23% year-to-date compared to 6% for the defensive sector. **6. Margin Trading and Short Selling**: * **Margin trading** has seen significant growth, with the total margin balance outstanding reaching $1.9 trillion. * **Short selling** has also seen growth, with the total short selling turnover reaching $0.4 billion. **7. Index Performance**: * The **HSI** index has returned 16% year-to-date. * The **HSCEI** index has returned 18% year-to-date. * The **A50** index has returned 19% year-to-date. **8. Valuation**: * The **PE ratio** of the **HSCEI** index is at 11.5x, which is at the 67th percentile compared to the 10-year average of 11.1x. **9. Future Outlook**: * The outlook for the Chinese equity market remains positive, with strong fundamentals and supportive macroeconomic conditions. * The market is expected to continue to see strong inflows from both domestic and international investors.

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Key Points **Industry Overview** * **Mixed Results**: The industry is experiencing mixed results in terms of earnings and cost of capital. ROIC incorporates returns from operating assets and capital allocation decisions, including acquisitions and spectrum investments. * **Competitive Pressure**: The Canadian telecom industry is facing competitive pressure and slowing growth, partly due to initiatives from the Canadian Radio-television and Telecommunications Commission (CRTC) promoting competition. * **Macroeconomic Outlook**: The macro team believes the Canadian economy will remain in excess supply, leading to softer growth in 2H24 and 2025 compared to the central bank's October projections. * **Wireless Market**: The wireless market is experiencing significant competition, with Quebecor capturing market share with lower prices and aggressive strategies. * **Fixed Broadband**: Telus and Bell Canada are expected to benefit from their continued fiber builds in the fixed broadband market. **Company-Specific** * **BCE**: BCE has underperformed the sector for several years and currently has a 11% dividend yield reflecting growth and capital structure concerns. The company's dividend payout ratio exceeds FCF generation, and the Ziply acquisition is expected to be dilutive to FCF at least until 2028. * **Rogers**: Rogers is focused on de-leveraging after the Shaw acquisition, but the challenging industry growth is occurring at an inopportune time. The company's recent structured equity financing is creative but has created some confusion among bond and equity holders. * **Telus**: Telus is well-positioned in the broadband market due to its fiber-rich network and ability to bundle mobile with other services. The company has a more balanced risk/reward profile compared to BCE and Rogers. **Valuation and Outlook** * **Valuation**: The report presents a valuation framework focusing on growth and ROIC rather than yield. It considers factors such as scale, profitability, leverage, financial policy, and shareholder return. * **Outlook**: The report expects the Canadian telecom industry to continue facing challenges, including competition, regulatory changes, and economic conditions. The outlook for BCE, Rogers, and Telus is cautious, with a focus on potential risks and opportunities.

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **Global Credit Market**, including various segments such as **Investment Grade (IG)** and **High Yield (HY)** credit across different regions including the US, Europe, and Asia. Core Insights and Arguments - **US Economy Performance**: The Atlanta Fed GDP Now estimates a growth of **+3.3% for Q4** [5] - **US IG Credit Spreads**: Current spreads are at **75 basis points (bp)**, with a 1-year average of **90 bp** and a range of **3%** [11][12] - **US HY Credit**: Current spreads are at **262 bp**, with a 1-year average of **307 bp** and a **7%** increase noted [11][12] - **European IG Credit**: Current spreads are at **98 bp**, with a 1-year average of **116 bp** [11][12] - **Asian IG Credit**: Current spreads are at **77 bp**, with a 1-year average of **90 bp** [11][12] - **Emerging Market (EM) IG**: Current spreads are at **100 bp**, with a 1-year average of **106 bp** [11][12] Additional Important Information - **Credit Performance**: The report highlights the performance of various credit segments, indicating that **US BBBs** have a current spread of **63 bp** and **US CCCs** at **519 bp** [11][12] - **Market Sentiment**: The overall sentiment in the credit market appears to be stable, with slight fluctuations in spreads indicating a cautious but optimistic outlook [11][12] - **Potential Risks**: The report suggests that investors should remain vigilant regarding potential conflicts of interest in research and market analysis, as indicated by Morgan Stanley's disclosures [2] Conclusion - The conference call provides a comprehensive overview of the current state of the global credit market, highlighting key metrics and trends that could influence investment decisions. The data presented indicates a generally positive economic outlook, with specific attention to credit spreads across various regions and sectors.

| --- | --- | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------| | Global Technology: Semiconductors Top 10 Takeaways from our Asia Tech Tour | | | We visited ~25 companies throughout the IT supply chain last week across the ma ...

Summary of the Conference Call on China's Property Market Industry Overview - The conference call focused on the **China Property** market, discussing recent trends and forecasts for the sector. Key Points and Arguments Sales and Market Trends - November sales showed resilience, with a **1.4% year-over-year increase** compared to October's **-1.4%** decline, totaling **RMB 827 billion** in sales [5][19] - December sales are expected to continue this momentum, projected at around **RMB 260 billion**, representing a **-7% year-over-year** decline but a **+7% month-over-month** increase [19] - The overall forecast for FY24 indicates a **-32% year-over-year** decline in total sales, concluding at **RMB 2.71 trillion** [19] Market Dynamics - The property market is anticipated to experience a **de-stocking cycle** from **2025 to 2027**, with sales resilient in December but potentially cooling in the first quarter of 2025 [1] - The **Real Estate Investment (REI)** is expected to decline by **-10.4%** in 2025, continuing the negative trend due to low new starts and land sales [1][5] Policy and Regulatory Environment - A proactive policy approach was noted during the December **Central Economic Work Conference**, emphasizing the need for stabilization in the property and stock markets [3] - Key measures discussed include: - Stabilizing property prices in major cities, which is contingent on inventory levels (new homes currently at **28 months** of inventory) [3] - Demand-side policy changes to stimulate domestic demand, including potential removal of housing purchase restrictions [3] - Local execution of new policies is beginning to accelerate in cities like Hangzhou and Guangzhou [4] Construction and Completion Metrics - November saw a **39% decline** in completions year-over-year, the sharpest drop of the year, while starts remained low at **-26.8% year-over-year** [5] - The **completed but unsold residential inventory** increased by **0.3% month-over-month**, totaling **376.5 million square meters** [5] Price Trends - The **National Bureau of Statistics (NBS)** reported a slight dip in property prices across all city tiers, with Tier 1 cities showing a **flat** performance and Tier 2 and 3 cities experiencing minor declines [5] - The overall residential price index showed a **-6.0% year-over-year** change, indicating ongoing price pressures in the market [5] Investment Opportunities - Despite the challenges, certain companies are highlighted as top picks for investment, including **Beike**, **CRL**, and **Greentown**, due to their potential resilience and market positioning [4] Macro Economic Context - Broader economic indicators such as new loans and total social financing (TSF) were disappointing, reflecting weak household and corporate demand [5] - Retail sales growth slowed to **3.0%** in November, down from **4.8%** in October, indicating a cooling consumer sentiment [5] Additional Important Insights - The **completion and REI decline** is expected to continue, with new starts and land sales at their lowest since 2005, suggesting further downside risks for the new home market [1][5] - The **15th Five-Year Plan** emphasizes a balanced property market, focusing on affordable housing, rental housing, and private commodity housing [3] This summary encapsulates the critical insights from the conference call regarding the current state and future outlook of the China Property market, highlighting both challenges and potential investment opportunities.

16 December 2024 | 11:34AM HKT China: 70-city average primary property prices roughly stable in November annualized, -5.8% yoy. 1. After seasonal adjustments, weighted average house prices in the primary market fell by 0.1% mom annualized in November (vs. -3.6% in October; Exhibit 1), on the back of ongoing easing policies. The number of cities that experienced sequentially higher property prices increased notably in both primary and secondary markets in November (Exhibit 3). Year-on-year change in the weig ...

Product must take into account existing public information on such security or any registered prospectus. Although information has been obtained from and is based upon sources that the Firm believes to be reliable, we do not guarantee its accuracy and it may be incomplete and condensed. Note, however, that the Firm has taken all reasonable steps to determine the accuracy and completeness of the disclosures made in the Important Disclosures section of the Product. The Firm's research department has received ...