The Hang Seng Index basically closed flat, while the Hang Seng TECH Index rose by 0.96%. Among the top stocks in terms of trading volume, Tencent Holdings rose by 0.63%, Meituan-W fell by 1.97%, Alibaba-SW gained 0.97%, China Construction Bank rose by 0.19%, and Industrial and Commercial Bank of China fell by 0.46%.

In today's early session, the three major A-share indices once rose sharply and then fell back, with the Shanghai Composite Index hitting a low of 2904 points. Notably, some broad-based ETFs saw an increase in trading volume. Before the close, trading volumes of multiple 1000 ETFs surged, with the half-day trading volumes of Southern CSI 1000 ETF, Huaxia CSI 1000 ETF, and GF CSI 1000 ETF all exceeding yesterday's full-day volumes.

The combined trading volume of the above three ETFs exceeded RMB 2.2 billion. Among them, the trading volume of Southern CSI 1000 ETF approached RMB 1.3 billion, compared to less than RMB 800 million for the full day yesterday. Regarding the outlook for the broader market, researchers from Huatai Securities, including Wang Yi, noted that the market lacks new variables in the near term, and policy expectations are low. However, the downside risk at the index level may be limited. The current risk premium in A-shares implies conservative expectations for domestic real estate sales and the US dollar index, which may have overcorrected. Capital flows, valuations, and policy indicators collectively suggest that the mid-year calendar may still hold promise.

Today, it was reported that Sequoia China recently completed a RMB 18 billion new yuan fundraising, which is the largest fundraising activity by a Chinese venture capital firm in the past year. It is understood that the new fund has received support from the Hangzhou Municipal Government and several state-owned insurance companies.

On July 9, Charles Chen, CEO of Hong Kong Exchanges and Clearing Limited, said at the "Bond Connect Anniversary Forum 2024" that the Hong Kong Exchanges are currently preparing for the launch of 10-year Treasury bond futures, which will provide another tool for international investors to manage interest rate risks in RMB assets. This will also help attract more foreign investment into China's bond market, further opening up China's financial market and advancing the internationalization of the RMB.

A research report from Guosen Securities stated that throughout the first half of the year, Hong Kong-listed internet companies have shown signs of a bottoming-out and recovery in their micro fundamentals. Despite continued macroeconomic pressures, we have observed that Tencent's overseas game revenue has led the recovery, Meituan's takeout business profitability per order began to rebound sequentially in Q1, and Meituan's local services business is gradually differentiating itself from ByteDance's competition. We believe that we are now at the starting point of a small-cycle recovery in micro-enterprise operating efficiency, which will drive the long-term fundamental recovery of Hong Kong-listed internet stocks.

Furthermore, internet companies have successively launched large-scale share repurchase plans this year. In the first half, Tencent, Meituan, and Kuaishou repurchased shares worth HKD 52.3 billion, HKD 7.7 billion, and HKD 970 million, respectively. Currently, most Hong Kong-listed internet companies trade at adjusted net profit multiples of 15-20x for fiscal year 2024, which is relatively low compared to Nasdaq tech giants trading at PE multiples of 25-30x for fiscal year 2024. The overall valuation is low, highlighting investment value. We currently recommend prioritizing the allocation of Hong Kong-listed internet leaders with clear competitive landscapes.

Kuaishou-W (01024.HK) closed up 4.04%. Kuaishou announced on the Hong Kong Stock Exchange that on July 8, 2024, as part of its proposed HKD 16 billion share repurchase plan disclosed in the announcement dated May 22, 2024, it entered into share repurchase contracts with independent brokers. According to these contracts, the brokers or their affiliates will repurchase no more than HKD 6 billion of the company's Class B ordinary shares on the Stock Exchange based on pre-set parameters outlined in the share repurchase contracts. Unless modified or terminated under the terms of the share repurchase contracts, the share repurchase plan will commence on August 8, 2024, and end on May 30, 2025, or upon completion of repurchases totaling HKD 6 billion.

NIO-SW (09886.HK) closed down 1.12%. According to Tianyancha's intellectual property information, NIO Auto Tech (Anhui) Co., Ltd. recently applied to register three "Jiadian Coffee" trademarks under the international classifications of scientific instruments, food, catering, and accommodation. Currently, all three trademarks are awaiting substantive examination. It is reported that Jiadian Coffee is an additional service provided by NIO within its battery swap stations, where car owners can scan a QR code to order coffee during the battery swap wait time. This service has already entered trial operation at NIO's battery swap stations in Shanghai.

Meituan (03690.HK) closed down 1.97%. HSBC Research published a report stating that it met with Meituan's Chief Financial Officer and capital markets team in London to discuss the company's business, environment, social, and governance (ESG) issues, mainly covering competition and growth drivers. Regarding competition, Meituan noted that Douyin's competition in the on-site service business has become more rational, and competition with Ctrip (09961.HK) in the hotel and tourism sectors has also stabilized.

In terms of its takeout business, Meituan is keen to expand its market share but does not intend to increase subsidies to compete for low-quality orders. As for community group buying, Meituan focuses more on high-quality growth and profitability, with market share stabilizing. For Meituan's core local commerce, order growth is the primary driver of takeout business growth. Management believes that "Pinhaofan" can cater to price-sensitive users and improve the unit economics of low-priced orders in the long run.

Additionally, the bank believes that Meituan has sufficient cash for share repurchases and to repay convertible bonds maturing next year. Meituan is also cautiously exploring expansion opportunities in Saudi Arabia, while Keeta has already gained a certain market share in Hong Kong. The bank maintains a "Buy" rating on Meituan with a target price of HKD 170.

JD.com-SW (09618.HK) closed down 0.78%. Domestic media reported that the head of JD.com's Yanxi large model said at the World Artificial Intelligence Conference that general large models are just the "seeds," while industrial scenarios are the "fertile soil" for development. Therefore, while advancing technological progress, it is also necessary to deeply embed in industries to achieve disruptive applications that enhance productivity. It is believed that large models should be viewed as the infrastructure of the AI industry.

Hong Kong-listed semiconductor stocks collectively strengthened. By the midday close, Hua Hong Semiconductor rose nearly 6%, Grandchip Semiconductor gained over 3%, Shanghai Fudan Microelectronics, Semiconductor Manufacturing International Corporation (SMIC), and Advance Semiconductor Manufacturing Corporation (ASMC) rose more than 2%, and China Electronics Huada Technology and Himax Technologies gained over 1%. Overnight, the Philadelphia Semiconductor Index in the US market closed up 1.93%, marking its sixth consecutive day of gains and a new high since June 20, with cumulative gains of 6.3% over six trading days.

UBS analysts stated that the expansion of semiconductor CoWoS advanced packaging is faster than expected, with a forecast of reaching 45,000 wafers per month by the end of this year and 65,000 wafers per month by the end of next year. By 2026, more companies will embark on expansion plans, potentially increasing capacity by an additional 20% to 30%. Analyst Lin Lijun said that the industry's planning for expansion in 2026 indicates increasing visibility and demand for cloud accelerators. Shipments of mobile phones and personal computers (PCs) declined significantly last year but grew slightly this year, suggesting that generative AI may accelerate the replacement cycle.

After two consecutive days of share price declines, $AcBel Polytech (06088.HK) rebounded significantly today, closing up 20%. According to sources from Apple's supply chain companies, the company recently received a slightly revised upwards guidance for the production targets of the iPhone 16 series. After the revision, the production targets for the iPhone 16 series are around 90 million units this year. Another source from Apple's supply chain confirmed that Apple has indeed slightly revised upwards the production targets for the iPhone 16 series.

Executives from Apple's supply chain companies stated that during the domestic 618 e-commerce promotion in June, Apple adopted a price reduction strategy, which significantly boosted sales of the iPhone 15 series after the price cuts. This may have further boosted Apple's sales expectations for the iPhone 16 series.

ZTE Corporation (00763.HK) opened flat today and then extended gains, reaching a high of HKD 19.16 in the afternoon, up 10.75% at one point, marking a new high since November last year.

The company stated yesterday (August 8) on an investor interaction platform that it expects generative AI to gradually produce a "qualitative change from quantitative change" in mobile products. The company actively promotes the "AI FOR ALL" product strategy, believing that AI technology is not limited to flagship models but should be widely adopted across various devices. It is expected to launch new mobile phone products equipped with AI functions in July.

Cinda Securities believes that one major obstacle to the development of large models on the end side is user privacy concerns. Apple's previously announced "Private Cloud Computing" is expected to provide advanced practices for the industry to address this pain point. In addition to training its own models, Apple is actively collaborating with third parties to maximize user experience, maintaining its end-side AI advantages in both the short and long term.

The bank believes that Apple's three-tier Apple Intelligence highlights the long-term, forward-looking, and comprehensive nature of its AI strategy. Leveraging years of experience and technology in user experience, Apple Intelligence may help the company create differentiated competitive advantages. As a benchmark enterprise in the consumer electronics industry, Apple is expected to once again lead the AI growth wave in the industry.

Furthermore, Apple's sales in China declined earlier, and although there has been some recovery in the short term, its valuation is still relatively low. As we enter the second half of the year, Apple's new devices are about to be released, and the sales impact in China may be more moderate than last year. The current opportunities in the Apple supply chain deserve attention.

Source: Hong Kong Stock Research