Broker: CGS International
Date of Report: June 5, 2025

ICBC Powers Ahead: Bullish Momentum for China’s Banking Giant, While NIO Faces Margin Squeeze Amid Fierce EV Competition

Market Overview: Investors Eye Fed Rate Cuts as Sector Performance Diverges

Global financial markets are navigating a landscape shaped by economic uncertainty and shifting monetary policy expectations. U.S. Treasuries surged following weaker-than-expected economic data, with swap traders now pricing in two Federal Reserve interest rate cuts before the end of 2025, the first likely in October. The dollar slipped modestly, while the S&P 500 edged higher, led by health-care and communication names. Notably, big tech stocks were mixed as Meta Platforms saw gains and Tesla declined. The Institute for Supply Management’s index of services dipped to 49.9 in May, signaling contraction, with hiring slowing to the lowest pace in two years. Investors are bracing for the upcoming jobs report, which is expected to show slower nonfarm payroll growth and a steady unemployment rate.

Sector outlooks remain dispersed, with trade uncertainty weighing on health care, technology, and construction, while retailers and financial services firms continue to spot growth opportunities amid tariff variability. In this climate, prudent sector allocation is paramount for investors seeking to capitalize on emerging opportunities.

Industrial & Commercial Bank of China Ltd (ICBC, 1398.HK): Bullish Trend Maintains Strong Momentum

Ticker: 1398.HK
Last Price: HK\$5.82

ICBC, the world’s largest commercial bank by total assets, continues to deliver robust technical signals, indicating sustained bullish momentum. The bank provides a comprehensive suite of financial services including deposits, loans, fund underwriting, and foreign currency settlement to individuals, enterprises, and institutions.

Key Technical Highlights

• V-shaped Rebound: The stock recently staged a strong V-shaped rebound from support at HK\$4.88, breaking through previous resistance levels that have now turned into support.
• Ichimoku Cloud: Price action is decisively above all Ichimoku indicators, affirming a clear bullish bias.
• MACD: The MACD histogram is positive, with both the MACD and its signal line elevated above the zero line, reinforcing momentum strength.
• Stochastic Oscillator: The indicator has moved above the 50-midpoint, confirming upward momentum.
• Rate of Change (ROC): The 23-period ROC has crossed above zero, further validating the upward trend.
• Directional Movement Index: Signals strong bullish strength.
• Volume: Healthy expansion in trading volume supports the price action.

Trading Strategy and Key Levels

The report notes that ICBC has already surpassed the first technical target price of HK\$5.21 (identified in a previous analysis). Momentum remains strong, with the potential for further gains as technical indicators align in favor of continued upside.

NIO Inc (HKG: NIO): Margin Pressures Intensify Amid Escalating EV Competition

NIO, a leading electric vehicle (EV) manufacturer, continues to face challenging market dynamics as competition intensifies in China’s fast-evolving EV sector.

Key Financial and Strategic Highlights

• 1Q25 Non-GAAP Net Loss: NIO’s net loss widened to RMB 6.3 billion in Q1 2025, up from RMB 4.9 billion in Q1 2024, primarily due to higher operating expenses.
• Product Pipeline: The company boasts a strong pipeline, including the NIO, ONVO, and Firefly brands, which could drive future top-line growth.
• Competitive Headwinds: Heightened competition is expected to temper shipment growth, impacting profitability in the near term.
• Valuation: CGS International reiterates a Hold rating for NIO, with a revised DCF-based target price of HK\$30.62, reflecting the near-term pressures and longer-term potential.

Investment Ratings and Methodology

Stock Ratings Definition

• Add: Expected total return exceeds 10% over the next 12 months.
• Hold: Expected total return between 0% and 10% over the next 12 months.
• Reduce: Expected total return below 0% over the next 12 months.

Total expected return is defined as the sum of the percentage difference between the target price and the current price, plus the forward net dividend yield. Stock price targets typically have a 12-month investment horizon.

Sector and Country Ratings

Stock Ratings Distribution (as of March 31, 2025)

A total of 551 companies are under coverage for the quarter ended March 31, 2025.

Conclusion: Sector Dispersion and Stock Selection Are Key

In summary, the outlook for Hong Kong-listed equities remains mixed, with sector divergence and macroeconomic headwinds shaping investment decisions. ICBC stands out with strong and persistent bullish momentum, supported by robust technical indicators and favorable trading volumes. In contrast, NIO’s near-term prospects are clouded by rising competitive pressures and increasing operational expenses, despite its impressive product pipeline. Careful stock selection and sector allocation will remain critical as investors navigate evolving market dynamics and policy shifts in 2025.