Written by Erika LAU Tsz Yee, 10/03/2025
This research report provides an in-depth analysis of the current state of AI development, focusing on the available AI models, their applications in consumer and industrial sectors, and the key companies benefiting from the AI boom. The report compares AI models in mainland China with those globally, explores the market size and growth potential of AI applications in various industries, and highlights the adoption of AI by state telecommunications and other sectors.
The market for AI models is rapidly evolving, with significant advancements in both closed-source and open-source models. Closed-source models, such as GPT-3 by OpenAI and T5 by Google, are known for their robust performance and extensive applications in natural language processing (NLP) tasks. These models are characterized by their large parameter sizes and sophisticated architectures, enabling them to generate coherent and contextually relevant text. In contrast, open-source models like LLaMA by Meta (formerly Facebook) have gained prominence for their flexibility and community-driven development. LLaMA, with its versions ranging from 8B to 70B parameters, offers strong performance comparable to closed-source models. The open-source nature of these models allows for customization and optimization by developers worldwide, fostering innovation and reducing barriers to entry for AI applications.
China has made significant strides in developing its own AI models, with domestic models such as DeepSeek emerging as strong contenders. DeepSeek has demonstrated remarkable performance, particularly in language understanding and generation tasks, and has been adopted by major tech companies like Tencent, Alibaba, and Huawei. These models are often tailored to better understand and generate content in Chinese, addressing the unique linguistic and cultural nuances of the Chinese market. Advantages of Chinese Models: • Localized Understanding: Chinese models are optimized for the Chinese language, providing more accurate and contextually relevant responses. • Cost-Effectiveness: Open-source models like DeepSeek offer a cost-effective alternative to expensive closed-source models, making AI more accessible to a broader range of developers and businesses. • Customization: The open-source nature allows for extensive customization, enabling developers to tailor models to specific industry needs. Disadvantages of Chinese Models: • Global Reach: While Chinese models excel in domestic applications, they may face challenges in achieving global market penetration due to language and cultural barriers. • Resource Intensity: Training and deploying large models require substantial computational resources, which can be a limiting factor for smaller organizations.
AI glasses are emerging as a transformative technology, offering hands-free, real-time information and assistance. Companies like Ray-Ban and Huawei have already launched AI-enabled glasses that provide features such as voice commands, navigation, and translation. The market for AI glasses is projected to grow significantly, driven by advancements in display technology and miniaturization of components. Market Size and Growth Potential: • Current Market Size: The global AI glasses market is estimated to be around $1 billion, with a significant portion of sales coming from early adopters in tech-savvy regions. • Growth Potential: The market is expected to grow at a CAGR of over 30% in the next five years, driven by increasing consumer demand for wearable technology and the integration of AI features.
Autonomous driving technology is advancing rapidly, with companies like Tesla, Baidu, and Huawei leading the way. These companies are leveraging AI to develop advanced driver-assistance systems (ADAS) and fully autonomous vehicles. The adoption of AI in autonomous driving enhances safety, efficiency, and convenience on the road. Market Size and Growth Potential: • Current Market Size: The global autonomous driving market is estimated to be around $50 billion, with significant investments from both tech companies and traditional automakers. • Growth Potential: The market is expected to grow at a CAGR of over 20% in the next decade, driven by regulatory support, technological advancements, and increasing consumer acceptance.
AI is increasingly integrated into smartphones, enhancing features such as voice assistants, camera performance, and battery optimization. Companies like Apple and Samsung are at the forefront of incorporating AI into their devices, providing users with a more personalized and intelligent experience. Market Size and Growth Potential: • Current Market Size: The global smartphone market is estimated to be around $400 billion, with AI-enabled features becoming a standard offering. • Growth Potential: The market is expected to grow at a CAGR of around 5% in the next five years, driven by the continuous integration of AI and the launch of new, innovative features.
AI is also making its way into PCs, with companies like Lenovo and HP developing AI-enabled laptops and desktops. These devices offer enhanced performance, security, and user experience through AI-driven features such as noise cancellation, predictive typing, and system optimization. Market Size and Growth Potential: • Current Market Size: The global PC market is estimated to be around $200 billion, with AI-enabled PCs capturing a growing share. • Growth Potential: The market is expected to grow at a CAGR of around 10% in the next five years, driven by the increasing demand for intelligent computing devices.
AI toys are becoming popular among children and adults alike, offering interactive and educational experiences. Companies like Mattel and Hasbro are integrating AI into their toys, providing features such as voice interaction, personalized learning, and storytelling. Market Size and Growth Potential: • Current Market Size: The global AI toy market is estimated to be around $5 billion, with a growing number of startups and established companies entering the space. • Growth Potential: The market is expected to grow at a CAGR of over 25% in the next five years, driven by advancements in AI technology and increasing consumer interest in interactive toys.
State-owned telecommunications companies in China, such as China Telecom, China Mobile, and China Unicom, are actively adopting AI to enhance their services and operations. AI is used in network optimization, customer service, and data analysis, improving efficiency and user experience. Adoption and Impact: • Network Optimization: AI algorithms optimize network traffic, reducing congestion and improving service quality. • Customer Service: AI-powered chatbots and virtual assistants provide 24/7 customer support, enhancing user satisfaction. • Data Analysis: AI-driven analytics help in predicting market trends and optimizing marketing strategies.
AI is also being adopted in various other sectors, including finance, healthcare, and manufacturing. In finance, AI is used for fraud detection, risk assessment, and personalized financial advice. In healthcare, AI assists in diagnostics, patient monitoring, and drug discovery. In manufacturing, AI optimizes production processes, quality control, and supply chain management. Adoption and Impact: • Finance: AI algorithms detect fraudulent transactions in real-time, reducing financial losses and improving security. • Healthcare: AI-powered diagnostic tools provide accurate and timely diagnoses, improving patient outcomes. • Manufacturing: AI-driven automation and predictive maintenance reduce downtime and improve production efficiency.
• Baidu (百度, 09888.HK): A leading Chinese tech company known for its search engine and AI capabilities. Baidu has made significant investments in AI research and development, particularly in autonomous driving and natural language processing. • Alibaba (阿里巴巴, 9988.HK): A global e-commerce giant that has integrated AI into its platform for personalized shopping experiences, supply chain optimization, and customer service. • Tencent (腾讯, 0700.HK): A major player in the tech industry with a focus on social media, gaming, and AI. Tencent has developed AI applications in areas such as gaming, social networking, and healthcare.
• Huawei (华为): A leading global provider of information and communications technology (ICT) infrastructure and smart devices. Huawei has developed AI-enabled smartphones, PCs, and networking equipment. • Lenovo (联想, 0992.HK): A multinational technology company known for its PCs and smart devices. Lenovo has integrated AI into its products to enhance performance and user experience.
• DeepSeek: An AI model developed by a Chinese company that has gained significant attention for its performance and cost-effectiveness. DeepSeek has been adopted by various industries for its robust language understanding and generation capabilities. • SenseTime (商汤科技, 0020.HK): A leading AI company specializing in computer vision and deep learning. SenseTime has developed AI applications in areas such as facial recognition, video analysis, and autonomous driving.
The current landscape of AI development is marked by rapid advancements and widespread adoption across various sectors. Chinese AI models are making significant strides, offering localized solutions and cost-effective alternatives to global models. The integration of AI in consumer products such as AI glasses, autonomous vehicles, smartphones, PCs, and toys is driving market growth and enhancing user experiences. On the industrial and commercial front, AI is being leveraged by state telecommunications and other sectors to optimize operations and improve services. Key companies such as Baidu
Source: Huaxi Security. (2025, March 5). DeepSeek: Initiating the ‘Android Moment’ of AI.
Written by LU Zhiyuan David, 17/02/2025
The semiconductor industry is one of the most vital sectors in today’s technology landscape, driving advancements in artificial intelligence (AI), cloud computing, telecommunications, and consumer electronics. Since the Second World War, this industry has undergone significant transformations due to technological advancements, economic shifts, and geopolitical influences. At present, semiconductor firms are at the forefront of global innovation, with Nvidia, TSMC, Intel, AMD, and Qualcomm among the most dominant players in this space.
This report provides a detailed analysis of the semiconductor market, covering its historical development, market structure, and investment potential. With semiconductor revenues expected to reach $1 trillion by 2030, investors must navigate challenges such as supply chain disruptions, geopolitical tensions, and emerging technologies. Understanding the strengths, weaknesses, and strategic positioning of leading semiconductor firms is crucial for making informed investment decisions in this rapidly growing industry.
The semiconductor industry serves as the backbone of the digital economy, impacting various industries, including AI, autonomous vehicles, and high-performance computing. The increasing demand for higher performance, lower power consumption, and smaller chip sizes has led to significant investment in research and development (R&D) and advanced manufacturing technologies.
However, several challenges threaten the stability of the industry. Geopolitical tensions between the U.S. and China, supply chain vulnerabilities, and rising production costs have created uncertainties for investors. Additionally, fierce competition among semiconductor firms has reshaped the industry's landscape, forcing companies to develop innovative strategies to maintain their market positions.
This paper explores the historical background of the semiconductor industry, evaluates key industry participants, and assesses existing opportunities and challenges. This report aims to provide valuable insights for investors looking to capitalize on this sector's growth by analyzing financial performance, market standing, and future growth potential.
The origins of the semiconductor industry date back to the invention of the transistor in 1947 by Bell Labs, which laid the foundation for the development of integrated circuits (ICs) in the 1950s and microprocessors in the 1970s. Intel, founded in 1968, was among the companies that revolutionized the microprocessor industry, supplying chips that powered early personal computers. During the 1980s and 1990s, the industry witnessed a major structural shift with the emergence of Taiwan Semiconductor Manufacturing Company (TSMC). TSMC introduced the foundry business model, allowing companies to design advanced chips without owning fabrication plants. This model enabled companies like AMD, Qualcomm, and Nvidia to focus on chip design and innovation while outsourcing manufacturing to specialized foundries.
The semiconductor industry experienced rapid growth in the 2000s and 2010s, driven by cloud computing, artificial intelligence (AI), mobile devices, and high-performance computing (HPC). Nvidia transitioned from a gaming GPU manufacturer to a leader in AI computing, with its GPUs playing a crucial role in training deep learning models.
Meanwhile, TSMC’s advancements in 5nm and 3nm process nodes reinforced its position as the world’s top semiconductor foundry, supplying chips for Apple, AMD, and Nvidia.
As of 2022, the global semiconductor market was valued at approximately $600 billion, with projections indicating growth to $1 trillion by 2030. This expansion is fueled by the increasing adoption of AI, 5G, and HPC. However, risks such as supply chain disruptions, geopolitical tensions, and regulatory constraints remain critical concerns for investors.
Nvidia has expanded beyond gaming GPUs to become a dominant player in AI computing and data center infrastructure. Its A100 and H100 GPUs are widely used in AI training, cloud computing, and autonomous vehicles, making Nvidia a vital provider of AI hardware.
With a market share exceeding 80% in the discrete GPU segment, Nvidia remains the leading supplier of AI acceleration hardware. In 2023, the company reported a 126% year-over-year revenue increase, driven by soaring demand for AI chips. However, Nvidia faces strong competition from AMD’s AI chip offerings and Intel’s AI accelerator initiatives. Additionally, U.S. export restrictions on advanced AI chips may restrict Nvidia’s ability to sell high-end GPUs to China, potentially impacting its global revenue.
TSMC is the largest contract semiconductor manufacturer in the world, producing chips for leading technology companies. The company holds over 55% of the global foundry market and is widely regarded as the most advanced semiconductor manufacturer, specializing in 3nm, 5nm, and 7nm process nodes.
Apple alone accounts for approximately 25-30% of TSMC’s revenue, while Nvidia and AMD also rely heavily on TSMC for chip production. To mitigate geopolitical risks, TSMC is investing $40 billion in new fabrication plants in Arizona to enhance supply chain resilience and reduce dependence on Taiwan. However, rising production costs and ongoing political tensions in Taiwan pose potential long-term risks to TSMC’s stability.
Intel, once the undisputed leader in semiconductor innovation, has faced setbacks due to production delays and heightened competition. However, the company is investing in Intel Foundry Services (IFS) and next-generation processors to regain its market position.
AMD has strengthened its presence in both the CPU and GPU markets, competing directly with Intel and Nvidia. Its Ryzen CPUs and Radeon GPUs have gained significant market share, while its acquisition of Xilinx has expanded AMD’s role in AI and adaptive computing, particularly in data centers and embedded systems.
Qualcomm, a dominant player in mobile chipsets, is diversifying its business beyond smartphones by expanding into 5G, AI computing, and automotive semiconductors, positioning itself for growth in emerging markets.
Geopolitical events highly influence the semiconductor industry. The ongoing U.S.-China trade war has resulted in export restrictions on advanced semiconductor technologies, disrupting supply chains and limiting market access for certain firms. Taiwan remains a critical risk, as TSMC’s technological dominance makes it a strategic asset in global semiconductor production. Any escalation of tensions in the region could severely impact the industry’s supply chain and production capacity.
The 2021 global semiconductor shortage exposed weaknesses in the industry’s supply chain, leading to increased prices and production delays across multiple sectors. Rising raw material costs, manufacturing expenses, and geopolitical uncertainties continue to challenge semiconductor companies. In response, firms are expanding their manufacturing operations in the U.S., Japan, and Europe to reduce dependence on a single region.
As data centers and AI applications demand higher power consumption, semiconductor firms are prioritizing the development of energy-efficient chip architectures. AI accelerators, neuromorphic computing, and advanced power management technologies are becoming key areas of investment as companies seek to optimize performance while reducing energy consumption.
The semiconductor industry remains one of the most dynamic and rapidly growing sectors, with Nvidia, TSMC, Intel, AMD, and Qualcomm playing a leading role in shaping the market. While AI, 5G, and cloud computing present significant investment opportunities, geopolitical tensions, supply chain disruptions, and increasing competition must be carefully managed.
For investors, companies with strong technological leadership, well-established supply chain strategies, and diversified revenue streams offer the best long-term potential. As the semiconductor industry transitions toward next-generation computing and energy-efficient technologies, strategic investments in leading semiconductor firms will be crucial for capitalizing on future growth opportunities.
Written by Dacian DENG Shen, 16/02/2025
Since World War II, oil prices have been influenced by a complex interplay of geopolitical events, economic cycles, and shifts in supply and demand. Understanding these factors is crucial for investors and policymakers navigating the evolving energy landscape.
After WWII, oil prices remained relatively stable due to the rapid industrialisation of Western economies. The establishment of OPEC in 1960 marked a turning point, as it began to exert more control over oil production and pricing. The 1973 Yom Kippur War led to an oil embargo by Arab nations, causing prices to quadruple. The Iranian Revolution 1979 further destabilised oil supplies, driving prices up to approximately $97 per barrel by 1980.
The early 1980s saw a brief price decline due to economic recession and increased production from non-OPEC countries. The Gulf War 1990 caused another spike, but prices stabilised in the late 1990s due to increased production and a global economic slowdown. In the early 2000s, prices rose significantly, driven by demand from emerging economies like China and India, peaking at over $140 per barrel in mid-2008 before the financial crisis led to a sharp decline. The U.S. shale boom increased global oil supply, leading to a price collapse, with Brent crude falling below $30 per barrel in early 2016.
The U.S. and Saudi Arabia agreed to settle oil trades in U.S. dollars in 1974, creating a petrodollar system that strengthened the dollar's role as a global reserve currency. The collapse of the Bretton Woods system and the subsequent dollar devaluation played a crucial role in the surge in oil prices in the 1970s. The establishment of the petrodollar system further linked the dollar's value to the oil market. A weaker dollar means more dollars are needed to purchase the same amount of oil; hence, the price increases.
Historically, wars, sanctions, and political instability in oil-producing regions have caused significant price spikes. The Gulf War and tensions between Russia and Ukraine have influenced global oil markets. The oil market is often overly sensitive to potential war or production cut news, with rumours sometimes leading to price increases. This phenomenon is partly due to the mental inertia caused by the repetition of historical events, leading to market speculation. Traders and investors often predict the future based on past experiences, reacting quickly to similar situations and exacerbating market volatility. Anticipation of conflict can lead traders to speculate on price increases, further driving up costs even before any actual disruption occurs.
Conflicts often lead to physical disruptions in oil production or transportation routes. Increased trade barriers, sanctions, or physical disruptions to production and transportation infrastructure can lead to shortages and costs. The concept of a "war premium" embedded in oil prices due to geopolitical tensions is well-documented. For instance, estimates suggest a war premium of about $25 per barrel was present even before recent escalations involving Iran and Israel
In the long term, the use of new energy sources may undermine the dominance of oil. With increasing environmental awareness and technological advancements, more countries and companies are increasing investment in renewable energy. The widespread use of clean energy sources such as solar, wind, and hydropower will gradually reduce dependence on traditional fossil fuels. The increasing popularity of electric vehicles will also reduce the gasoline demand, further weakening oil's dominance in the energy market.
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Written by Alexander ANTONIOU, 10/02/2025
Emerging markets have not seen the same attention of the BRICS era since the global financial crisis, highlighted by a lagging Chinese economy and US dollar strength. Nonetheless, India stands out as an exceptional outlier from pessimistic investor outlook surrounding emerging markets. India has outperformed US equities since 2019, with the benchmark Nifty 50 index having doubled over the past five years.
India’s economy has outperformed the global economy and emerging markets, boasting GDP growth over 6% over the past 45 years, whilst set to overtake Germany and Japan to become the third-largest economy by 2030. Despite stellar growth, high shares of Indians still face unemployment, stagnant wages, and widening income inequality. Some investors fear that a speculative bubble surrounding Indian equities has formed, fuelled by tens of millions of first-time domestic investors piling into stocks and mutual funds.
India remains a good investment opportunity with diversification across various expanding sectors and growing IPOs. Many investors are sceptical as high valuations in the Indian equity market require strong judgement and careful management; stock picking remains key.
Infrastructure investment has been on the forefront of the government’s economic strategy through initiatives such as ‘Make in India’. This initiative aims to boost domestic manufacturing through infrastructure development and industrialisation, creating demand for machinery, construction materials, and technological solutions. The Union Budget 2025 is expected to increase infrastructure’s allocation to ₹18 lakh crore from ₹11.11 lakh crore in 2024.
India’s healthcare sector is evolving with rising incomes and improved health awareness in liaise with pandemic efforts to elevate the healthcare landscape of a growing population. Investors expect a structural increase in domestic healthcare from both government and the private sector; schemes like Ayushman Bharat Yojana (aka Modicare) aim to increase access to healthcare through free health insurance for lower income households.
Renewable energy is prominent in India, with a goal of achieving net zero by 2070. In 2024, India’s renewable energy capacity reached 205GW, putting it on track to make its 500GW target for 2030; this target constitutes meeting 50% of India’s electricity needs from non-fossil fuel sources by 2030. Solar energy is experiencing growth of 36.5% CAGR. A new government report announced a push for increased investment in EVs, offshore wind, and green hydrogen, to meet further clean energy goals.
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Written by Justin CHUNG Lok Yin, 29/01/2025
On 20 January 2025, Donald Trump returned to the White House. The perceived arrogant leader signed over 20 executive orders and actions on his Inauguration Day ‒ more than any previous US president. Trump has announced many changes so far. Many keywords and aspects can ring the bell of investors’ minds – Tariffs, AI, crypto, Staff, Greenland, Panama Canel, China, wars, taxes, expenditures, immigrants, and more. These all added complexities to the current global markets. Due to space and word limitations, this weekly update will focus on two of the most-discussed areas of the Trump administration: Trade Policy and AI.
Trump has been known for his aggressiveness in imposing tariffs. In the election period, he claimed to increase tariffs on China heavily upon his presidency. Trump's tariffs externally act as bargaining chips with nations and internally offset the cost incurred by the tax-cut policy. The market has been concerned about the consequent deterioration of international relationships resulting in trade wars and potential re-inflation as import products become more expensive upon the tariff rise.
Instead of aiming at China as in the campaign last year, Trump began by pivoting to Canada, Mexico and Colombia, which was a pretty surprising approach. Trump first announced plans for 25% tariffs on Canada and Mexico. As for China, on 22 January, Trump proposed a 10% tariff on Chinese goods. China and Hong Kong stock markets fell sharply. The Hong Kong market ended six consecutive rallies, and the Hang Seng Index (HSI) fell below 20,000 points. However, this tariff is significantly lower than the 60% suggested in his election campaign. Trump’s claim two days later confirmed his “temporary leniency” over China, as he said he “would rather not raise tariffs in China”. This brought HSI back up to 20,000 points. On the other hand, weaker than expected, a 2.5% tariff on goods from the Eurozone was also mentioned. European luxury goods stocks performed strongly. For instance, since 20 January, LVMH advanced 10% and Hermès climbed 6.5%. Unexpected tariff leniency resulted in the correction of The Dollar Index by up to 1% since his Inauguration Day. Some suggested that Trump may have switched to a more gradual approach in handling tariffs.
To Trump, tariffs are now viewed as bargaining chips. The aforementioned 10% tariff threat was indeed in response to China's role as a major supplier of fentanyl raw materials, as well as to push China to approve a potential US deal with TikTok. Trump also coerced Colombia to accept deportees using the same tariff tactic. As concerns evolve and change across time, Trump’s claims – but not concrete actions – on tariffs could show little implication for the medium- to long-term economy. PIMCO’s head of US public policy Libby Cantrill opined that the market should not "extrapolate too much” from the initial delays on Trump tariffs. Given that Trump’s style is often more ideological and exaggerated, investors are already prudently observing the new administration’s moves and distinguishing factors from noises.
On 21 January, Trump announced a $500 billion (€480 billion) investment in artificial intelligence infrastructure in the US. Unsurprisingly, many tech giants saw impressive gains on 22 January. Nvidia surged more than 4%, pushing its market capitalisation to $3.6 trillion, surpassing Apple once again. Microsoft also saw a rise of around 4%, while Arm experienced a jump of nearly 16%. Foreign players also rose. Siemens Energy shares soared more than 10% this week following the announcement. The German energy company anticipates a “massive tailwind” as it manufactures equipment ranging from gas and wind turbines to power network components. On top of the technology sector, Trump urged banks to loosen regulations and collaborate with tech giants to invest billions in developing AI technology. The Financial Select Sector Index rose 6.32% YTD as of 29 January.
Although the technology sector was significantly suppressed as the Chinese AI model Deepseek advanced in the final week of January, Trump affirmed that the US is in a position to compete and regarded Deepseek as a “wake-up call”. Market views his response as the beginning of a competitive yet flourishing AI era, expecting strong demand in the technology sector in the medium to long horizons.
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Written by Hong Yee Ching Robin, 26/01/2025
Gold notched its best annual performance in over a decade last year. The prices rose about 26% in 2024, driven by central bank as well as retail investor purchases. Gold has always been the yellow metal that act as a hedge against risk. JPMorgan analysts also expect gold prices to rise, especially if U.S. policies become “more disruptive” in the form of increased tariffs, elevated trade tensions and higher risks to economic growth. Besides the geopolitical uncertainty that will occur in the foreseeable future, the high interest rates that central banks in most of the countries are maintaining.
Geopolitical uncertainty: Flows of cash are expected to remain the same and buy Gold as the alternative assets for Central Banks and retail investors. This is due to the unstable border between Russia and Ukraine, Israel and Palestine, and the economic and political tension between the US and China. Tom Mulqueen, metals strategist at Citi Global Markets also stated that they consider “the gold bull market has taken a pause following U.S. presidential elections but should resume in 2025 underpinned by further deterioration in the U.S. labor market, still-high interest rates weighing on growth, and higher ETF demand”.
Central Banks: Central banks, which slowed gold purchases in late 2024, might also return as buyers if prices correct significantly. The World Gold Council survey also revealed in the second half of 2024 that Central Banks are likely to purchase more Gold in the next 12 months. This should further bolster demand for the precious metal. Interest rates are also expected to cut at a slow pace, where lower interest rates is another factor expected to bolster gold prices next year. This should reduce the opportunity cost of holding gold, which is non-interest-bearing.
It is possible that there will be a slightly deeper correction before the price actually breaches the current all time high resting around the 2790 handle. Despite short-term challenges, UBS remains bullish on gold for the next 12 months, projecting prices to reach $2,900/oz by the end of 2025.
Source: https://www.cnbc.com/2025/01/06/gold-copper-oil-price-outlook-2025.html
Written by Charles SHI Qiyuan, 12/01/2025
In the first quarter of 2024, major central banks maintained high interest rates to manage inflation and prevent economic recession. After two years of multiple interest rate hikes, both the Federal Reserve and the European Central Bank adopted a more cautious approach to rate hikes, signaling the possibility of pausing or gradually lowering rates. The Federal Reserve decided to keep the federal funds rate steady at 5.25%-5.5%, emphasizing the slowdown in economic growth amid inflationary pressures and the uncertainty in financial markets. Although inflation in the Eurozone showed signs of easing, the ECB's expectations for rate cuts were not strong. The Bank of England maintained its rate at 5.25%. Meanwhile, China’s economy showed a stronger-than-expected recovery post-pandemic, with manufacturing and consumer spending picking up, which positively impacted GDP growth expectations.
With interest rates remaining stable, the bond market maintained relatively steady yields in the short term. Due to the delayed expectations of rate cuts and the generally cautious sentiment in the market, fixed-income assets became more attractive compared to equities. This drove some investors to shift towards long-term bonds in search of higher fixed returns.
In June, the European Central Bank reduced its three key policy rates by 25 basis points, marking its first rate cut of the year. The main refinancing rate was lowered to 4.25%, the marginal lending rate to 4.50%, and the deposit rate to 3.75%. The move aimed to support economic recovery by reducing borrowing costs and alleviating growth pressures, thereby bolstering market confidence. As a result, Eurozone government bond prices generally rose, and yields declined. The yield on the 10-year German Bund even briefly fell to 2.2%. Investors, seeking to lock in higher returns, shifted towards longer-dated bonds, increasing demand and prices for long-term debt.
At the same time, concerns arose regarding the U.S. government’s debt limit, as negotiations in Congress to raise the borrowing cap remained unresolved. This uncertainty led to heightened market caution, with short-term U.S. Treasury yields rising as investors sought higher returns to offset perceived risks (with one-month Treasury yields briefly surpassing 8%). The uncertainty contributed to increased volatility in equity markets and a shift toward safe-haven assets like gold. Within the bond market, investor preference leaned toward ultra-short-term U.S. Treasuries, while other segments saw more muted activity. After an agreement was reached to raise the debt ceiling, an accelerated pace of Treasury issuance led to a temporary increase in supply, applying downward pressure on bond prices.
On August 5th, global stock markets experienced a sharp decline, with major markets in Europe, the U.S., and Japan triggering multiple circuit breakers. This event, referred to by some as a "Black Monday," led investors to seek safe-haven assets, resulting in significant capital inflows into the bond market. The shift in risk sentiment increased demand for bonds, pushing prices higher and yields lower. For instance, the yield on the 10-year U.S. Treasury bond fell by two basis points to 3.78%, while Germany’s yield dropped by nine basis points to 2.13%. While stock market volatility can enhance the relative attractiveness of bonds, heightened uncertainty may also reduce market liquidity, contributing to price fluctuations.
In September, the Federal Reserve cut interest rates by 50 basis points, triggering short-term volatility in the U.S. Treasury market. The short end of the yield curve declined notably as some investors shifted from short-term to long-term U.S. Treasuries, driving up their prices. Meanwhile, lower borrowing costs for corporations and governments supported economic activity, leading to adjustments in global asset allocations as capital flowed into the U.S. Treasury market. The ECB and the Bank of England also implemented rate cuts in September, contributing to a general decline in bond yields and an increase in bond prices. The reduction in financing costs enhanced the appeal of Eurozone bonds within global asset portfolios, helping to stabilize market sentiment.
In October, the U.S. Treasury market experienced notable adjustments as the seven largest foreign holders of U.S. debt collectively reduced their holdings, following five consecutive months of increases. This shift marked a transition from accumulation to a more cautious approach, with some investors trimming their positions. Notably, China reduced its holdings by $11.9 billion to $760.1 billion, the lowest level since February 2009, while Japan also decreased its holdings by $20.6 billion. These moves reflected evolving investor sentiment toward U.S. Treasuries, influenced by a combination of domestic and international economic and policy factors. The large-scale sell-off contributed to a decline in bond prices, driving yields higher. This, in turn, increased government borrowing costs, potentially affecting broader economic conditions, including employment trends. Additionally, shifts in demand for U.S. Treasuries contributed to market volatility and added to investor caution.
In November, China issued $2 billion in sovereign bonds in Riyadh, Saudi Arabia, comprising a $1.25 billion 3-year tranche and a $750 million 5-year tranche, with coupon rates of 4.284% and 4.340%, respectively. This issuance expanded the supply of offshore U.S. dollar-denominated sovereign bonds and supported the development of China’s offshore bond markets in both primary and secondary markets. The offering achieved the lowest spread in the U.S. dollar bond market to date, providing a pricing benchmark for Chinese institutions seeking U.S. dollar financing. Additionally, it contributed to the development of the offshore U.S. dollar bond yield curve, serving as a reference for similar issuances. The total subscription amount reached $39.73 billion—19.9 times the issuance size—highlighting strong investor demand and the role of Chinese sovereign bonds in global market diversification.
Written by Sarah LEONG Si Ian, 29/12/2024
In 2024, the market performed more optimistically than expected, where there were concerns of recession, inflation, the US election and some more geopolitical incidents. This has been reflected in a growth of 13% of S&P 500 earnings, whereas prices of private credits grew by 11%.
In March, the Bank of Japan (BOJ) announced an increase in the interest rate to a range between 0% to 0.1%, marking the end of the era of negative interest rate in Japan for 17 years. In late July, the BOJ again announced a 0.25% increase in its interest rate, which caused a serious downturn in the stock market afterwards in August. While the BOJ has been hiking its interest rate, the Fed has announced its first interest rate cut in September since pandemic recovery, causing a drop in the Federal Funds Rate by 50 basis points to a range of 4.75% to 5.00%.
Following Trump’s Election in November, US indexes have reached a record high. The Dow surged by 3.6%, adding over 1,500 points, while the S&P 500 and Nasdaq Composite rose by 2.5% and 3%, respectively. Several market sectors are expecting deregulation from Trump’s government. Tesla, with its CEO Elon Musk being the supporter of Trump, has recorded a 15% rise in its stock price after the election.
Artificial Intelligence (AI) has remained highly potential. This can be reviewed by up to a 33% jump in NASDAQ and high increases in other US indexes. Nvidia, a chipmaker, has benefited the most from the recent AI trend and twice officially become the world’s most valuable publicly traded company in 2024. On the other hand, crypto is another era with high growth following the launch of spot bitcoin exchange-traded funds in January 2024. Further growth is seen after Trump’s election in November, which was financially supported by the crypto industry.
Sources: https://www.cnbc.com/2024/12/25/ai-crypto-top-tech-stocks-applovin-microstrategy-palantir-nvidia.html https://www.jpmorgan.com/insights/markets/top-market-takeaways/tmt-past-present-future-heres-where-we-stand https://www.vantagemarkets.com/en/academy/markets-events-2024/
Written by Erika Lau, 8/11/2024
Donald Trump has proposed increasing tariffs on imports, suggesting rates of up to 60% for China and 10% for other countries. Higher tariffs could lead to increased costs for consumers, potentially exacerbating trade deficits and contributing to inflation and deglobalization trends.
Trump plans to boost the production of U.S. fossil fuels, emphasizing increased drilling activities from day one. He aims to open new areas for oil exploration, arguing that this would lower energy costs. However, analysts express skepticism about the feasibility and long-term impact of these measures.
Electric Vehicle Tariffs: Increased tariffs could affect electric vehicle (EV) exports from China. Domestic automakers like General Motors (GM), Ford (F), and Stellantis (STLAM) may benefit from reduced competition, with shares of GM and Ford recently rising by 2.5% and 5.6%, respectively. Regulatory Changes: Companies like Toyota could gain if EV regulations are reduced or eliminated, given their focus on hybrid vehicles over all-electric models. Tesla's Market Performance: Shares of Tesla soared by 15%, reaching a new 52-week high, partly influenced by CEO Elon Musk's active engagement in key markets.
Trump's policies may lead to reduced investment in renewable energy within the U.S. Companies like Plug Power (PLUG) and Sunrun (RUN) experienced significant stock declines of 22% and 30%, respectively. In Europe, renewable energy firms such as Orsted (ORSTED) and Nordex (NDX1) also saw their shares fall by 13% and 8%.
There is debate over whether Trump would continue supporting the "Chips and Science Act," which he previously criticized. Experts believe he may uphold the act due to bipartisan support for domestic semiconductor manufacturing. The legislation, launched in 2022, has already facilitated significant investments from companies like TSMC and Samsung, offering them $6.6 billion and $6.4 billion, respectively, to build factories in the U.S. Past policies have affected companies like Huawei, ZTE (000063.SZ), and SMIC (0981.HK), which faced challenges due to trade restrictions. Continued policies could impact China's ability to hire overseas talent and acquire semiconductor equipment, as evidenced by a one-third increase in China's imports of semiconductor equipment to $24.12 billion in the first nine months of this year.
Trump Media & Technology Group (TMTG): The stock hit a two-week low after initial excitement faded. It peaked at $51 on October 29 but retracted to $27 by November 8, as investors reassessed its fundamentals. Bitcoin: Bitcoin reached new highs at $76,167, up 10% over the past five days, amid speculation about potential crypto-friendly regulations.
The market is expected to experience increased volatility in response to these policy proposals. Investors should pay close attention to news and potential headwinds arising from new policies and statements, adjusting their strategies accordingly.
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Written by Kevin Xia, 19/3/2024
On the secondary market, Nvidia has been making significant strides in the tech industry, particularly in the realm of artificial intelligence (AI). The company's GPU Technology Conference (GTC) 2024 has begun, and investors are anticipating details on the GPUs based on its next-generation architecture, Blackwell. The stock's recent performance has made this year's GTC even more anticipated among investors. Analysts predict a moderate buy rating for Nvidia with an average twelve-month price prediction of $829.66.
Apart from Nvidia, there are two upcoming IPOs that also caught a lot of attention. SHEIN, the fast-fashion giant, has confidentially filed to go public in the U.S. The company was last valued at $66 billion and could be ready to start trading on the public markets as soon as 2024 Q2. However, SHEIN faces challenges related to labor practices and its environmental impact.
On the other hand, Reddit is closing in on a stock offering that could rank among the biggest U.S. IPOs so far this year. The social media company has set a price range of $31 to $34 a share. Despite revenue growth, Reddit faces profitability challenges and aims to boost ads. Disclaimer: Investors should consider these factors and their own risk tolerance when evaluating these investment opportunities. As always, it's recommended to conduct thorough research or consult with a financial advisor before making investment decisions.
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Written by Erika Lau, 12/3/2024
Founded in 2017, Yatsen Holding Limited (NYSE: YSG) is a leading China-based beauty group. It operates various skincare and color cosmetics brands, including Galénic, DR.WU, Eve Lom, and Perfect Diary. Yatsen focuses on providing high-quality beauty products to consumers in China and internationally.
As of March 7th, 6:52 pm GMT, the stock price of YSG is $0.51 USD, reflecting a month-on-month decline of 18.9% and a year-on-year decline of 31.8%. Yatsen has experienced both growth and challenges in its financial performance. In the fourth quarter of 2023, the company reported a 6.7% increase in total net revenues compared to the prior year period.
However, the company’s total net revenues for the full year of 2023 decreased by 7.9% compared to the previous year, indicating a potential slowdown in growth. Yatsen also reported a net loss of RMB 750.2 million (US$105.7 million) for the full year of 2023, which decreased by 8.7% compared to the prior year period. This was primarily due to significantly increased marketing expenses while sales volume remained weak. Additionally, in the fourth quarter of 2023, the company recorded a goodwill impairment, indicating that the carrying value of the Eve Lom reporting unit exceeded its fair value. This impairment was primarily attributed to weaker operating results than expected at the time of acquisition. Such impairments can negatively impact investor confidence and lead to a decline in the stock price.
In terms of past deals, Yatsen has focused on brand acquisition and geographical expansion. In 2020, the company acquired the beauty brand Little Ondine and the French skincare player Galenic. In 2021, it acquired the British premium skincare brand Eve Lom. In 2023, Yatsen’s jointly built factory with Cosmax Inc., a major cosmetics manufacturer in South Korea, began operations in Guangzhou, China. Looking ahead, Yatsen aims to pursue sustainable growth through ongoing innovation across its brands. The company’s strategic plan includes brand repositioning, new product launches, and a focus on enhancing research and development capabilities. With the newly built factory, Yatsen is transitioning from an OEM to an ODM business model, which is expected to improve quality control and potentially lead to an increase in sales volume in future reporting periods.
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Written by Jonathan Chen, 14/6/2024
U.S. Equities and AI: The technology sector, particularly companies involved in artificial intelligence (AI), remains a strong investment theme. The market has shown robust earnings growth expectations, with the tech sector expected to account for a significant portion of this growth. Companies like Nvidia, which has seen significant gains, are at the forefront. This trend is expected to continue as AI adoption broadens across various sectors
Consumer Staples: In an environment of persistent inflation, consumer staples stocks are seen as relatively resilient. These companies, which sell essential goods like food and basic consumer products, tend to perform well even when consumers cut back on non-essential purchases. Some of the top-performing consumer staples stocks include Costco, Walmart, and Procter & Gamble
Interest Rates and Fixed Income: Central banks, including the Federal Reserve, have signaled potential rate cuts in the near future. This pivot could provide a favorable environment for bonds, particularly short-term bonds, as interest rates gradually decline. Investors may want to consider diversifying their fixed-income portfolios to include a mix of short- and intermediate-term bonds to mitigate reinvestment risk and capitalize on the potential for lower yields
Geographical Diversification: Beyond the U.S., Japan's stock market is gaining attention due to solid corporate earnings, favorable monetary policy, and economic reforms. Emerging markets like India and Mexico also present opportunities due to their growth potential and strategic positioning in global supply chains
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