J P M O R G A N Asia Pacific Credit Research 10 February 2025 China TMT Transfer of coverage As we reallocate our coverage resources, we transfer coverage of Alibaba Group Holding Limited, Baidu.com, JD.com, Meituan, Lenovo, Weibo, and Xiaomi and all their bonds to Alvin Au. Asia Corporate Research Alvin Au AC (852) 2800-8533 alvin.au@jpmorgan.com Soo Chong Lim (852) 2800-7387 soochong.lim@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited See page 2 for analyst certification and important disclosur ...

Equity Research China Technology 10 February 2025 China Technology CBO - China Brief Overnight - 2/10/2025 China vows measures to boost consumption and foreign investment, and solve structural issues in industries; Shanghai offers RMB 500mn consumption vouchers from March to June; BYD introduces three new DiPilot ADAS systems, and will integrate DeepSeek R1 into its smart vehicles. Our daily product rounds up key stories from the Chinese language media overnight, focusing on developments in the technology s ...

Summary of Key Points from the Conference Call Industry or Company Involved - The discussion revolves around the potential implementation of "reciprocal tariffs" by the Trump administration, impacting various industries reliant on imports and exports, particularly the automotive and steel industries. Core Points and Arguments 1. **Announcement of Reciprocal Tariffs**: President Trump plans to announce reciprocal tariffs, which would raise US tariffs on imports to match the tariffs imposed by exporting countries on US products. This could lead to an estimated increase of around 2 percentage points (pp) in the US weighted average tariff rate if applied at the product-specific level [3][6][9]. 2. **Non-Tariff Barriers (NTBs)**: There is a risk that the administration may attempt to equalize non-tariff barriers, which are harder to quantify but could lead to a greater increase in tariffs. The inclusion of value-added taxes (VATs) in the calculation could raise the average effective tariff rate by an additional 10 pp [3][6][25]. 3. **Legal Authority for Tariffs**: The legal authority for imposing these tariffs is uncertain. The administration may rely on the International Emergency Economic Powers Act (IEEPA) or a rarely used law allowing up to 50% tariffs in response to discriminatory trade practices [3][19][20]. 4. **Impact on Trade Policy Uncertainty**: While reciprocal tariffs pose risks, they may also reduce trade policy uncertainty once announced. This policy could be seen as an alternative to broader universal tariffs previously discussed by Trump [3][23][24]. 5. **Changes to Existing Tariffs**: On February 10, Trump announced the rescinding of prior exclusions to the 2018 tariffs on steel (25%) and aluminum (10%), raising the aluminum tariff to 25%. This change affects approximately $50 billion worth of imports and is expected to raise the US average effective tariff rate by around 0.4 pp [4][26]. Other Important but Possibly Overlooked Content 1. **Country-Level vs. Product-Level Reciprocity**: The administration might adopt a simpler country-level approach, increasing tariffs on all goods from a country by the average tariff that country applies to US imports, which could raise the average US effective tariff rate by less than 1 pp [8][9]. 2. **Potential for Future Tariff Announcements**: The current announcement may not be the last, as the administration is likely to continue making tariff announcements throughout the presidential term [3][25]. 3. **Impact on Trading Partners**: Some countries could face tariff increases of over 10 pp, but many account for a small share of US imports. The majority of US imports may not face additional tariffs under a reciprocal tariff plan [11][12][17]. 4. **VAT Considerations**: The discussion highlights that VATs are similar to sales taxes and should not be included in the reciprocal tariff calculations. However, Trump's past criticisms of VATs raise concerns about their potential inclusion [12][25]. This summary encapsulates the key points discussed in the conference call regarding the implications of reciprocal tariffs and their potential impact on various industries and trade relationships.

J P M O R G A N Asia Pacific Equity Research 10 February 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. China Renewables NDRC's push on 100% RE power market sales drives mixed implications: Negative for ESS; Neutral for off- shore wind; Positive for RE ...

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the advancements in the Chinese AI industry, particularly focusing on Bytedance and Alibaba's AI models, including Bytedance's Goku and Alibaba's Qwen2.5 family [1][2][7]. Bytedance's Goku Model - Bytedance, in collaboration with the University of Hong Kong, launched a flow-based video generation model named Goku, which has achieved benchmark scores surpassing global competitors like OpenAI's Sora [1]. - Goku offers functionalities such as activating still images and synchronizing motion with audio, with advertising video creation costs expected to be 100 times lower than existing methods, achieving this at only 1% of the current costs [1]. - The cost efficiency is attributed to innovations in model architecture, data curation, and training techniques that lower computing costs [1]. Alibaba's Qwen2.5 Model - Alibaba's Qwen2.5 family is gaining traction, with its Qwen2.5-Max model showing strong performance on Huggingface's Open LLM Leaderboard [7]. - The recent outperformance of Alibaba's share price is linked to the success of its Qwen2.5 model launches, highlighting the value of Alibaba Cloud as a leading cloud service provider in China [7]. - Alibaba's upcoming financial results are anticipated to show a 7% growth in group revenue, with a focus on improved performance in its eCommerce and cloud segments [8]. Market Dynamics and Competitive Landscape - The report notes a shift towards open-source AI models, which are becoming increasingly competitive against closed-source models, supported by global cloud service providers [2]. - There is a noted rise in competition between well-capitalized internet giants and startups in the AI model space, driven by lower barriers to entry and cost optimization strategies [2]. - Geopolitical uncertainties regarding chip access and market scrutiny on Chinese cloud players remain significant risks, yet long-term demand for AI computing is expected to grow as training and inference costs decrease [2]. Financial Forecasts for Alibaba - Forecasts for Alibaba's financial performance indicate a group revenue of Rmb1,003,198 million for FY25, with a projected EBITA of Rmb165,873 million [13]. - The revenue growth is expected to be driven by various segments, including a 10% growth in cloud revenue for the Dec 2024 and Mar 2025 quarters [8][13]. - The report highlights potential risks to Alibaba's growth, including lower-than-expected GMV growth and slower monetization in the retail sector [16]. Conclusion - The advancements in AI models by Bytedance and Alibaba reflect a competitive landscape in the Chinese internet sector, with significant implications for market dynamics and investment opportunities [1][2][7][8].

February 10, 2025 06:14 AM GMT JD Sports | Europe 10 Questions For Management What's new? In this note, we dig into ten key areas of questions those meeting with JD Sports management might find interesting to ask based on current topical investor debates. Given the detailed context and background included in our questions, this note also serves as a useful refresher of JD's overall strategy. As a reminder, as outlined in our recent note - Lowering Estimates; Stay Equal- Weight - we expect JD to face a numbe ...

Summary of the Conference Call on China's Property Sector Industry Overview - The report focuses on the **Chinese property sector** and its recent developments following a policy pivot in September 2024 aimed at stabilization [3][4]. Key Points and Arguments 1. **Recent Improvements**: Since the policy shift in September 2024, the property sector has shown signs of recovery, particularly in home sales in large cities, with secondary home prices stabilizing in some areas [3][4][6]. 2. **Policy Easing Effectiveness**: The current policy easing is deemed more effective than previous efforts, attributed to significant price corrections, supportive monetary and fiscal policies, and the release of pent-up demand from consumers who had previously delayed purchases [3][17]. 3. **Structural Divergences**: There are ongoing structural divergences within the property sector, such as: - Home sales outperforming construction activities - Large cities outperforming smaller cities - Secondary market transactions outperforming primary market sales - Sales of completed new homes outperforming presales [3][18]. 4. **Core to Stabilization**: Stabilizing home prices is crucial for policymakers to address the property downturn. A significant reduction in housing inventory, higher rental yields, and improved financing conditions are necessary for sustainable stabilization [3][34]. 5. **Housing Inventory and Rental Yields**: Despite recent improvements in home sales, housing inventory remains high, particularly in lower-tier cities. The report estimates that reducing inventory to 2018 levels would require approximately RMB6 trillion [35]. Rental yields in large cities have gradually improved, approaching the yields of 30-year Chinese government bonds [36]. 6. **Future Expectations**: The property sector is expected to continue weighing on China's GDP growth, with an estimated drag of 1.9 percentage points in 2025, slightly less than the 2.0 percentage points in 2024. A narrowing of this drag is anticipated starting in 2026 [38][41]. Additional Important Insights - **Market Dynamics**: The report highlights that secondary home transactions accounted for 44% of nationwide home sales in 2024, a significant increase from 19% in 2021, indicating a shift in buyer preferences due to concerns over developers' ability to deliver new homes [27]. - **Construction Weakness**: Despite improvements in home sales, construction-related metrics such as new homes under construction and property investment have continued to weaken [6][21]. - **Policy Measures**: The report outlines various policy measures implemented since 2022, including reductions in downpayment ratios and mortgage rates, aimed at stimulating housing transactions [5][17]. This summary encapsulates the critical insights and data from the conference call regarding the current state and future outlook of the Chinese property sector.

Equity Research China Technology 10 February 2025 China Technology Highlights from Recent China Trip 4Q ecommerce sales solid driven by govt subsidies; Rapid progress seen in autonomous driving but debates around robotaxi; Encouraging outlook for 2025 with consumption subsidies extended. We are hosting a call to go thru highlights today (2/10). Please reach out to your sales to register BABA (OW) and JD (OW) had solid 4Q ecommerce growth: We highlight that NBS data showed that in 4Q ecommerce product sales ...

10 Feb 2025 09:54:39 ET │ 13 pages US Semiconductors, Communications Equipment and Hardware V i e w p o i n t | US Tariff Update: Uncertainty & Management Optimism CITI'S TAKE In this report we summarize tariff commentary from US hardware companies from week 1 of earnings, recap Citi's US equity strategist and global tech team's initial thoughts on US tariff policy implications. Updated Thoughts — Uncertainty continues to surround US tariff measures as the 25% tariff on imports from Mexico and Canada is sus ...

Summary of Key Points from the Conference Call Company Overview - **Company Mentioned**: Replit - **Industry**: U.S. Software Core Insights and Arguments - **Replit's Platform**: Replit is a software development platform that recently launched a software creation agent for iOS and Android, enabling users to build and deploy apps using natural language chat functions [2] - **Replit Agent**: The agent, introduced in September 2024, automates the configuration of the development environment, installation of dependencies, and execution of code [4] - **Pricing Plans**: - Free starter plan with limited access to Replit Agent and 3 public apps - Core plan priced at $15/month (billed annually), offering full access to Replit Agent, $25 of monthly credits (~100 Agent checkpoints), unlimited public and private apps, and access to Claude Sonnet 3.5 and OpenAI GPT-4o [4] - **User Base**: Replit has over 30 million users, including enterprises, freelancers, and students, and is ranked 2 in Developer Tools on the Apple App Store [4] - **Market Position**: Replit's mobile solution is noted as the first of its kind in the low/no-code space, with competitors like Windsurf and Bolt.new emerging recently [4] Additional Relevant Industry News - **Databricks Acquisition**: Databricks acquired BladeBridge, an AI-powered data migration startup, to enhance its SQL analytics product, claiming its migration approach is at least twice as fast as traditional methods [5] - **Amazon's Cloud Revenue**: Amazon's stock dropped due to lower-than-expected cloud revenue, despite plans to increase capital spending to $100 billion in fiscal 2025, primarily for AWS and AI services [6] - **Mistral's Launch**: French AI startup Mistral launched a mobile app, Le Chat, targeting enterprise users who prefer more control over their data compared to existing solutions like OpenAI's GPT-4 [8] - **Workday Layoffs**: Workday announced the elimination of approximately 1,750 positions (8.5% of its workforce) while continuing to hire in strategic areas [8] - **GenAI Cost Expectations**: A survey indicated that 90% of companies expect IT costs to rise due to GenAI deployments, with 70% anticipating a return on investment within three years [8] - **Salesforce Layoffs**: Salesforce is reportedly laying off over 1,000 workers, following previous rounds of layoffs, as it aims to improve profitability [8] Important but Overlooked Content - **Replit's Competitive Edge**: The introduction of Replit's mobile app creation capabilities positions it uniquely in the market, potentially attracting a diverse user base from various sectors [4] - **Investment in AI**: The overall trend in the software industry indicates a significant shift towards AI integration, with companies like Amazon and Databricks increasing their investments to enhance their service offerings [5][6] - **Workforce Adjustments**: The ongoing layoffs across major companies like Workday and Salesforce reflect a broader trend of workforce optimization in the tech industry, likely in response to economic pressures and the need for innovation [8]