Zhitong Hong Kong Stock Analysis | Hong Kong stocks enter a technical bull market, DeepSeek changes global capital flow

[Anatomy of the Market]

The market has arrived, and it's hard to stop it. The Hong Kong stock market continues to rebound, forming a bullish arrangement, and has entered a technical bull market, rising again by 1.84% today, with trading volume maintaining over HKD 240 billion.

The news over the weekend was relatively positive, as the China Securities Regulatory Commission (CSRC) issued the implementation opinions on "Doing a Good Job in the Financial 'Five Major Articles' in the Capital Market," which aims to unblock the entry points and bottlenecks for medium- and long-term funds such as social security, insurance, and wealth management into the market, and accelerate the promotion of digitalization and intelligent empowerment of the capital market. The continuous entry of medium- and long-term capital is the foundation for the market's strength. Relatively speaking, the level of the CSRC is a bit low, but there is confidence boosting; otherwise, brokerage stocks and insurance stocks would rise sharply, but the actual situation shows that the increase is not significant, and it is estimated that they will only gain momentum when the market is relatively crazy. However, Alibaba (09988), Baidu (09888), and Tencent (00700) have already started to move. This indicates that the market recognizes the technology sector more.

On February 9, the National Bureau of Statistics released data showing that in January, affected by the Spring Festival, the national consumer price index (CPI) rose, with the year-on-year increase expanding from 0.1% last month to 0.5%, and the month-on-month change turning from flat to an increase of 0.7%. This data indicates that China is expected to shake off deflation and continue economic recovery. The U.S. tariff war is still ongoing, but the focus has shifted. Last Friday (February 7), Trump stated during a meeting with Japanese Prime Minister Shinzo Abe that he plans to introduce "reciprocal tariffs" measures against multiple countries/regions on "next Monday or Tuesday" (February 10 or 11). "Reciprocal tariffs" refer to tariffs imposed on U.S. imports that are equal to the rates imposed by trading partners on U.S. exports. Some institutions predict that the EU, India, Brazil, Vietnam, Taiwan, South Korea, and others may be "named" by Trump and become targets for the U.S. to impose "reciprocal tariffs." For us, the U.S. has limited cards to play, and our countermeasures are relatively sharp, so we can only think of other ideas. The market has seen the current situation clearly, which is why more and more foreign capital is optimistic about China.

According to media reports, U.S. President Trump stated on the 7th local time that he believes DeepSeek does not pose a threat to national security and that the U.S. can ultimately "benefit" from the AI innovations of this startup. Trump is relatively genuine and pragmatic, knowing that he cannot resist. On February 8, according to data released by QuestMobile, DeepSeek's daily active users surpassed Doubao for the first time on January 28, and then broke the 30 million mark on February 1, becoming the fastest application to reach this milestone in history. DeepSeek, as a global phenomenon, has a far-reaching impact on AI. During the Spring Festival in 2025, the three major telecommunications companies in China, China Mobile (00941), China Telecom (00728), and China Unicom (00762), have all fully integrated DeepSeek's open-source large model. Among the individual stocks mentioned, China Telecom (00728) rose over 4% today.

On February 9, the promotional price experience period for DeepSeek-V3 API services officially ended, with the price for every million output tokens significantly increasing from 2 yuan to 8 yuan. The price increase is quite natural, as a sudden surge in access will raise costs The price increase is a clear signal that primarily benefits computing power data centers, as demand is rising, and cloud access will also continue to increase, benefiting cloud service companies.

In terms of computing power, SenseTime (00020) ranks among the top in Asia. It is expected to benefit from this wave. Major players are making significant investments, with Tencent Cloud planning to build its first data center in the Middle East in Saudi Arabia, investing over $150 million in the region over the next few years. The Middle East is investing heavily in AI due to its wealth, and even the UAE has a high level of AI development. The U.S. company Stargate is also expected to seek investment from Saudi Arabia. Reports indicate that Alibaba (09988) plans to invest $1 billion in DeepSeek, but insiders at Alibaba claim this is false news. However, Alibaba, being a tech company based in Hangzhou, is close by and may have related collaborations. Over the past year, Alibaba has invested in five leading AI large model companies, all with substantial investments, and Alibaba Cloud can provide them with AI cloud computing services. Startups do not need to worry about server and computing power issues. Today, the stock surged by 5.5%.

Other benefiting companies include VST Holdings (00856): As computing centers continue to be built, the demand for AI servers is increasing. The company, as the general agent for Lenovo and Huawei, naturally benefits, and there are good performance expectations. Recent trends in Lenovo Group (00992) and Digital China (00861) clearly show this. Additionally, the cloud star system jointly developed with Huawei Cloud has already connected with DeepSeek, and will soon empower the entire Huawei Cloud. Today, the stock rose over 5%.

BYD (01211) announced that it will hold an intelligent strategy launch conference on the evening of February 10, and "Smart Driving Equality" is expected to become an important trend in the development of China's automotive industry. It is expected to implement intelligent strategies across all models. There are rumors that BYD's "Eye of the Sky" smart driving system may be available for models priced below 100,000 RMB. As a leading automotive company, its every move serves as a barometer for the industry. With low-end models adopting smart driving, this is equivalent to a dimensionality reduction attack, forcing other car companies to follow suit, or they will struggle to sell, which will inevitably lead to a surge in demand for lidar. Leading supplier SOTY (02498) mainly supplies companies such as BYD (002594.SZ), Geely Automobile (00175), XPeng (09868), GAC Group (601238.SH), and Toyota. Today, the stock surged nearly 6%, and with the increase in robotics direction, the outlook remains positive. Nexperia (01316) also significantly benefits, with its products EPS/CIS/HPS/DL covering markets in North America, Asia-Pacific, Europe, and South America. Today, the stock rose nearly 12%.

Zhixing Automotive Technology (01274) announced that the company plans to place a maximum of 11.1902 million shares at a placement price of HKD 20.88 per share. The net proceeds from the placement are approximately HKD 228 million, with 60% intended for enhancing the research and development of advanced smart driving and integrated cockpit solutions and products. Zhixing Technology has reached a cooperation agreement with Horizon and Continental Group's joint venture, Smart Driving Continental, to collaboratively develop lightweight urban smart driving products based on the Journey 6 series. In the past, placements were generally met with skepticism, but this time the stock continued to rise by 4%, indicating market recognition of the potential of smart driving Changan Automobile, Great Wall Military Industry, China Optics, and Dong'an Power all announced on the 9th that their indirect controlling shareholder, the Equipment Group, is planning a restructuring with other state-owned central enterprises, which may lead to a change in the company's controlling shareholder, but the actual controller will remain unchanged. Changan and Dongfeng are planning a restructuring, and the integration of state-owned enterprises in the automotive sector is accelerating. Dongfeng Group Co., Ltd. (00489) surged over 25%; this is an inevitable trend, especially as competition in the automotive industry is exceptionally fierce. Without restructuring, there is a risk of elimination, as even Japan's Honda and Nissan are considering mergers and restructuring, and the same applies domestically. However, subsequent developments are not simply about restructuring; there are many variables ahead.

The market continues to explore new directions empowered by DeepSeek, such as in the medical sector, as detailed in the sector focus, and there are also educational sectors like Chalk (02469).

DeepSeek is changing the trend of global capital flow. According to Goldman Sachs data, since DeepSeek's release on January 27, there has been a capital outflow of $3 billion from emerging Asia outside of China, mainly from the South Korean and Taiwan markets (each $1 billion). This reflects that investors are reassessing investment opportunities within the technology sector. The Goldman Sachs report pointed out that over the past three months, the allocation of emerging markets and Asian mutual funds has gradually shifted from hard technology to soft technology. This trend became more evident after the important announcement from the AI company DeepSeek at the end of January.

【Sector Focus】

According to Huatai Computer: "AI + Healthcare" was previously underestimated by the market, and related investment opportunities should be emphasized in 2025. As AI technology continues to advance, its applications in the healthcare field will become increasingly widespread, covering almost all medical processes, including pathological research, drug development, genetic testing, disease screening, auxiliary diagnosis, imaging analysis, and precision medicine, which will enhance healthcare standards, increase accessibility to medical services, and reduce healthcare costs, reshaping the healthcare industry.

AI + Auxiliary Diagnosis: Clinical Decision Support Systems (CDSS) are the core applications, utilizing natural language processing, machine learning, and other technologies to learn from historical medical records, imaging, and test results data from various hospital business systems to build reasoning systems, achieving functions in auxiliary diagnosis, treatment assistance, medical order tracking, treatment reminders, compliance rule settings, compliance monitoring, clinical guidelines, adverse reaction monitoring, and similar case recommendations.

Main varieties: iKang Healthcare (01789), MicroPort Medical (00853), Gaoshi Medical (02407).

【Stock Picking】

Dongyue Group (00189): E Fund significantly increases holdings, with various indicators leading the industry.

On January 9, E Fund Management Co., Ltd. increased its holdings in Dongyue Group (00189) by 2.761 million shares at a price of HKD 8.39 per share, totaling approximately HKD 23.1648 million. After the increase, the latest number of shares held is approximately 122 million, with a holding ratio of 7.06%.

Comment: E Fund continues to increase its holdings, and the holding ratio is not low, indicating a strong outlook for the future. The industry fundamentals are also optimistic, with a significant increase in production scheduling in the downstream air conditioning industry in February 2025, strong downstream demand, and the realization of long-term contract prices for air conditioning manufacturers in 2025, providing support for refrigerant prices. The refrigerant industry is expected to maintain high prosperity, and the profitability of related refrigerant production companies is expected to improve significantly In 2025, HFCs quotas rank 4th domestically, and R22 quotas rank 1st domestically. Dongyue Group is the leader in China's fluorosilicone industry, with integrated advantages in both fluorochemical (hydrofluoric acid + refrigerants + fluorinated polymer materials) and silicon chemical (monomers + intermediates + deep processing products) industrial chains. In terms of innovation, in 2023, the company added 101 new product grades, with a large number of high-end material new products entering the market sampling or small batch supply stage, laying a good foundation for enhancing the company's industrial height and competitiveness; 81 new authorized patents were granted, bringing the total number of authorized patents to 620; 22 standards were released, including 2 national standards, 2 industry standards, 1 local standard, and 17 group standards, with the total number of various standards hosted by the company reaching 127. In 2023, the company's R&D expenditure was approximately RMB 935 million, accounting for 6.45% of revenue.

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