Investment Rating - Industry View for Semiconductor Capital Equipment: Attractive [1] - North America Industry View: Cautious [1] Core Insights - Investor expectations for new semiconductor export controls are anticipated, with potential announcements expected soon, following a historical pattern [1] - NVIDIA's roadmap changes are not expected to significantly impact revenue trends, which remain strong, with a focus on products that align with customer demand [2] - August Semiconductor Industry Association (SIA) billings data exceeded expectations, with sales up 15.4% month-over-month, surpassing the estimate of 11.2% growth [2] Summary by Sections Export Controls and Market Sentiment - New export controls for semiconductor capital equipment and computing are likely to be announced soon, with historical precedence for such announcements [1] - Messaging from the Commerce Department indicates challenges with rules-based controls, suggesting a shift towards company-specific restrictions [1] NVIDIA and Market Performance - Adjustments to NVIDIA's roadmap are viewed as inconsequential, with strong demand for existing products [2] - NVIDIA remains a top pick in semiconductors, with expectations of continued strong business trends through CY25 [2] SIA Monthly Data - August SIA data showed stronger-than-expected performance across logic and memory segments, with notable growth in the Americas (+59.0%) and China (+25.7%) [2] - The overall semiconductor sales for August reached $56.159 billion, reflecting a 15.4% year-over-year increase [11] Memory Market Insights - DRAM sales increased significantly, with a month-over-month growth of 66.2%, while NAND sales were up 38.3% [6] - The memory market is experiencing volatility, with expectations of modest deceleration in September due to weak overall demand [7] Future Outlook - The semiconductor industry is seen as bottoming out, with a return to growth expected in CY24 compared to CY23, driven by inventory drawdowns and strong demand in data center markets [8] - Forecasts for CY24 project a growth rate of 19.4%, with a slight increase from previous estimates [7]

Investment Rating - The report suggests a potential for a further 10% tactical equity rally in the near term, indicating a positive investment outlook for the industry [2][5]. Core Insights - Policymakers in China are showing increased urgency in addressing deflation, with significant monetary easing and measures to stabilize the stock and property markets [2][4]. - A supplementary budget of Rmb1-2 trillion is expected to be announced, aimed at supporting consumption and local government financing, which is anticipated to improve quarterly growth from 3% in 2Q-3Q24 to 5% in 4Q24 [3][19]. - The report emphasizes that while recent policy moves are a step towards combating deflation, a return to sustainable growth will be a long and challenging process [4][26]. Summary by Sections Policy Expectations - A supplementary budget is expected to be approved by the NPC Standing Committee, likely in late October, focusing on consumption support and local government fiscal needs [8][7]. - Monetary easing is anticipated, including a policy rate cut of 20 basis points and a 25-50 basis points reduction in the reserve requirement ratio (RRR) [9][3]. Economic Growth Projections - Real GDP growth is forecasted to improve slightly from 3.6% in 3Q24 to 4.7% in 4Q24, with further acceleration to 5.3% in 1Q25 due to the easing measures [19][20]. - The report highlights that the deflation loop is deepening, necessitating more aggressive policy measures to stimulate demand and break the cycle [20][21]. Investment Positioning - The report recommends focusing on A-share companies with high excess dividend yields and free cash flows, as well as discounted dual-listed H-shares that may benefit from the People's Bank of China's measures [5][34]. - A tactical rally of approximately 10% for the CSI300 index is considered possible, contingent on macroeconomic improvements and corporate earnings recovery [41][40]. Long-term Outlook - The report indicates that a decisive exit from deflation will require substantial central government support for housing and social welfare, with a recommended stimulus size exceeding US$1 trillion over two years [17][28]. - The ongoing battle against deflation is characterized as both cyclical and structural, necessitating a shift in policy focus towards enhancing private consumption and addressing housing market challenges [27][26].

Investment Rating - The report assigns an "Overweight" (buy) rating for the industry [22][27]. Core Insights - China equities experienced a strong rebound in September due to a combination of stimulus measures announced by the PBOC, CSRC, and CBIRC, alongside expectations for further fiscal support [3][6]. - The CSI300, CSI500, and CSI1000 indices rose by 21%, 24%, and 23% respectively, while the HSI and HSCEI increased by 17% and 19% [3]. - The sustainability of the rally is contingent on the anticipated size of the fiscal package, with macro data and earnings revisions being closely monitored [3][9]. Market Performance - Key sector performance showed Real Estate (37%), IT (25%), and Consumer Staples (24%) as the top three performing sectors, driven by improving liquidity, fiscal support, and retail excitement [7][8]. - Conversely, Utilities (8%), Energy (11%), and Telecom (12%) were the bottom three sectors, as investors shifted focus to higher-beta sectors [8]. Economic Data - China's August retail sales grew by 2.1% year-on-year, which was below expectations, while fixed investment rose by 3.4% year-on-year [17][20]. - Industrial production increased by 4.5% year-on-year, with notable growth in electricity production and electronic equipment [17][20]. - The trade surplus with the U.S. widened to US$91.0 billion, with exports growing by 8.7% year-on-year [17][20]. Fund Flows and Financing - For the four weeks ending September 20, EPFR-tracked funds recorded a net outflow of US$547 million from A-shares, with active funds contributing US$382 million to this outflow [9][10]. - A-share margin financing as a percentage of market cap remained at 2%, while gross margin buys increased to 10.5% [9][10]. Fund Issuance - Preliminary data indicated that equity fund issuance rose to Rmb22 billion in September, while balanced fund issuance remained low at Rmb0.6 billion [10]. - Year-to-date equity fund issuance totaled Rmb99 billion, which is below the median of Rmb107 billion from 2016 to 2023 [10].

Investment Rating - The report indicates a cautious optimism regarding the investment outlook for the Chinese market, suggesting that policy changes may restore foreign investor confidence [1][4][14]. Core Insights - The report emphasizes a shift in China's policy framework, focusing on balancing safety and development, with social stability as a priority [2][4][53]. - It highlights the expectation of approximately 2 trillion RMB in fiscal policy measures aimed at addressing debt risks and stimulating local government spending [6][7][10]. - The report suggests that while initial fiscal measures may seem modest, they reflect a significant policy shift and coordination among various government departments [8][10][12]. - The potential for further policy measures, particularly in the real estate sector, is noted as crucial for economic recovery and investor confidence [12][14][46]. Summary by Sections Fiscal Policy - The report anticipates the introduction of around 2 trillion RMB in fiscal policies, with half allocated to debt resolution and the other half to support local government spending and infrastructure [6][7][10]. - It argues that the scale of initial fiscal measures may not meet high expectations but represents a critical shift in policy direction [8][10][12]. Market Sentiment - The report discusses the mixed sentiment among international and domestic investors, with some expressing disappointment over the scale of fiscal measures while others recognize the importance of the policy shift [8][10][14]. - It notes that the market's recovery is contingent on the successful implementation of these policies and the stabilization of the real estate market [12][14][46]. Economic Outlook - The report projects a gradual improvement in GDP growth, estimating a rise from a 3% annualized rate in Q3 to 4.7% in Q4, with further growth expected in early 2024 [18][19]. - It emphasizes the need for stronger policy measures to combat deflation and stimulate consumption, particularly in the real estate sector [20][22][51]. Real Estate Sector - The report highlights recent positive signals in the real estate market, including increased sales and visits to property showrooms, suggesting a potential recovery [48][49]. - It stresses the importance of sustained policy support and the need for a more predictable regulatory environment to rebuild confidence in the real estate market [50][51].

Investment Rating - The report indicates a positive shift in policy towards addressing deflation, suggesting a potential for investment opportunities in the near future [2][4][5] Core Insights - The report emphasizes a significant change in the policy approach to combat deflation, drawing parallels to previous major policy shifts in response to economic challenges [4][5][6] - It highlights the importance of fiscal stimulus, estimating an additional fiscal support of approximately 1 to 2 trillion RMB to boost consumption and support local governments [6][7][9] - The report suggests that while immediate fiscal measures may be moderate, the recognition of deflation as a critical issue marks a substantial shift in policy mindset [5][6][8] Summary by Sections Policy Shift - The report notes a clear transition in policy focus towards addressing deflation, with decision-makers acknowledging the need for urgent action [4][5][6] - It identifies key moments that contributed to this shift, including high-level discussions and public forums that emphasized the importance of tackling deflation [4][5] Fiscal Policy - The anticipated fiscal expansion is expected to range from 1 to 2 trillion RMB, aimed at enhancing consumer spending and addressing local government debt issues [6][7][9] - The report indicates that the fiscal measures will likely include support for consumption and social welfare, reflecting a shift from traditional supply-side policies [6][7] Economic Outlook - The report predicts a gradual recovery in GDP growth, with expectations of a rise from an annualized rate of 3% to around 5% in the coming quarters [7][9] - It emphasizes that while the immediate impact of fiscal measures may be limited, they are crucial for stabilizing the economy and preventing further decline [6][9] Market Reaction - The report observes a positive market response to the policy announcements, with a notable increase in stock market indices reflecting renewed investor confidence [10][11] - It highlights the potential for valuation recovery in the Chinese market, suggesting that the market could return to a price-to-earnings ratio of around 12 times if fiscal policies are effectively implemented [10][11]

Investment Rating - The report suggests a likely 50 basis points (bp) cut in the Fed funds rate at the upcoming FOMC meeting, indicating a positive investment outlook for the sector [2][4][6]. Core Insights - The Fed is expected to initiate an easing cycle, with a strong case for a 50bp cut due to current restrictive policy levels and a shift in risk balance [4][5][6]. - Economic projections indicate a forecasted GDP growth of 2.1% for 2024, with an unemployment rate expected to rise to 4.2% [7]. - The report anticipates a total of 100bp of cuts in 2024 and 150bp in 2025, supporting a soft landing for the economy [6][8]. Economic Data Summary - Core PCE inflation is projected to rise by 0.14% month-over-month, with a year-over-year rate of 2.7% [43][48]. - Retail sales are expected to show a modest increase of 0.3% excluding autos, while overall retail sales may decline by 0.2% due to lower vehicle sales [25][26]. - Industrial production is forecasted to increase by 0.8% month-over-month, rebounding from previous declines [22][24]. - Jobless claims are projected to fall to 225,000, indicating a stable labor market [32][33]. Inflation and Price Trends - CPI inflation showed a core increase of 0.28% month-over-month, stabilizing the year-over-year rate at 3.2% [43][44]. - Food prices rose by 0.1% month-over-month, while energy prices declined by 0.8% [45][48]. - The report highlights a significant increase in airline fares by 3.9% month-over-month, marking the largest gain in over two years [45]. Housing Market Insights - Existing home sales are expected to decline by 2.5% month-over-month, reflecting a slowdown in the housing market [37][38]. - Housing starts are projected to rebound by 6-7% month-over-month, reversing previous declines attributed to weather impacts [29][31]. Manufacturing Sector Overview - The Philadelphia Fed manufacturing index is expected to edge up to -5.0, indicating slight improvement in manufacturing conditions [34][35]. - The employment index in manufacturing remains weak, suggesting ongoing challenges in the labor market [23]. Consumer Sentiment and Spending - Consumer sentiment is gradually improving, with expectations for inflation remaining stable [46]. - The report indicates that lower gasoline prices may support real spending in the upcoming quarter [25].

J P M O R G A N North America Fixed Income Strategy 13 September 2024 Phoebe White AC (1-212) 834-3092 phoebe.a.white@jpmorgan.com J.P. Morgan Securities LLC Liam L Wash (1-212) 834-5230 liam.wash@jpmchase.com J.P. Morgan Securities LLC • Economics: Core CPI surprised to the upside, rising 0.28% in August supported by a jump in OER. We continue to expect the Fed will lower the policy rate by 50bp at next week's FOMC meeting. We expect the median dots will show 100bp of easing by YE24 and another 150bp of ea ...

Global Data Watch • US labor market and inflation performance looks different ... • … bolstering case for relatively fast Fed ease through year-end • Don't get carried away with momentum as we look toward 2025 • Next week: Modest US jobs (150k); stable global PMI; BoC eases A wide divide Relative to its potential path, the US is the only large economy to have generated a complete post-pandemic recovery. As the performance gap with other advanced economies continues to widen—most notably in wealth generation ...

J P M O R G A N Global Quantitative & Derivatives Strategy 27 August 2024 US Equity Financing and AIR TRF Monitor Aug 27, 2024 • Short-dated implied financing rates increased on the S&P 500, Nasdaq 100, and Russell 2000 w/w, leading to a flattening of the funding term structure. • Pricing on the S&P 500 AIR TRFs increased 1 bp on the Sep'24 contract, 4 bps on the Dec'24 contract, 3 bps on the Mar'25 contract, and were little changed across the rest of the curve w/w. • Volumes on S&P 500 AIR TRFs totaled ~$8 ...

Investment Rating - The report indicates a positive outlook for the U.S. economy, with expectations of a 50 basis point rate cut by the Federal Reserve in September, contingent on upcoming employment data [7][8]. Core Insights - The U.S. economy is showing signs of robust consumer spending, with real consumer spending increasing by 0.4% in July and an upward revision of 2Q GDP growth to 3.0% from 2.8% [3][4]. - Business spending remains cautious, with nominal shipments of nondefense capital goods declining for three consecutive months, indicating a potential slowdown in business investment [4][5]. - The core PCE price index, the Fed's preferred inflation measure, rose only 0.16% month-over-month in July, suggesting moderating inflation risks [2][9]. - The personal saving rate has dropped to 2.9%, nearing post-COVID lows, raising concerns about future consumer spending sustainability [9][11]. - The labor market shows signs of cooling, with payroll gains expected to be modest at 150,000 for August, maintaining the unemployment rate at 4.3% [6][41]. Economic Growth and Consumer Spending - The report revises the 3Q GDP growth estimate to 1.5%, up from 1.3%, reflecting stronger consumer spending forecasts [3]. - Consumer confidence has improved slightly, with the Conference Board index rising to 103.3 in August from 101.9 in July [11][50]. Business Investment and Employment - Equipment spending forecast for 3Q has been raised to 5.0% from 1.0%, driven by strong aircraft shipments and capital goods imports [5]. - Business sentiment remains cautious, as indicated by downbeat regional Fed surveys, suggesting potential challenges ahead for business investment [4][6]. Housing Market - Housing data remains weak, with pending home sales declining 5.5% month-over-month in July, reaching an all-time low [11][60]. - The report anticipates a significant drop in real residential investment for 3Q, revised down to -10% from -5% [12]. Labor Market Dynamics - The labor market differential from the consumer confidence survey has decreased, indicating a growing perception of job scarcity [45]. - Job openings in the JOLTS report are expected to remain stable, with a slight increase anticipated for August [26][28]. Inflation and Consumer Behavior - The core PCE inflation rate remains above the Fed's target at 2.6% year-over-year, but recent trends suggest a moderation in inflationary pressures [2][61]. - The report highlights a disconnect between consumption and income growth, with real disposable income growth slowing [9][61]. Trade and International Factors - The nominal goods and services trade balance widened to -$80.1 billion in July, reflecting a significant increase in the goods deficit [23]. - The report notes that service imports may receive a boost from payments related to the Paris Olympics, impacting the trade balance [23].