Zhitong Hong Kong Stock Analysis | "East Rising West Falling" has become a trend, and the reasons for the market's speculation on consumption vary

[Market Dissection]

The biggest topic in the market today is "the rise of the East and the fall of the West." Overnight, U.S. stocks experienced a "bloodbath," with the Nasdaq closing down 4%, marking its largest daily decline since September 2022, and the S&P 500, which fell 2.7%, also hitting a new closing low since last September. The Dow Jones Industrial Average dropped nearly 2.1%, erasing gains since the U.S. elections in November last year. The total market value of the seven major U.S. tech stocks shrank by nearly $760 billion in a single day, approximately 5.5 trillion yuan. Meanwhile, China's A-shares were mostly in the green, and Hong Kong stocks opened lower but rose, with the Hang Seng Index nearing a positive close.

The decline in U.S. stocks is not surprising at all. Looking back at yesterday's analysis: "The U.S. stock market can decline, but it must not derail and should not trigger financial risks. This is a major concern for the Hong Kong stock market, which is why funds are hesitant to take action." Although a decline was predicted, the extent of the drop was indeed unexpected, almost going out of control. However, the big players are calling for "reflection." Duan Yongping believes that "as long as the bubble doesn't burst, investment will be difficult, and one should enjoy being in cash." Regarding the "rise of the East and the fall of the West," this column has already raised this slogan on February 26.

The theory of U.S. recession has gained some recognition. On March 10, former U.S. Treasury Secretary Summers wrote in a post on social media platform X: "I believe there is indeed a possibility of economic recession. There is a core reason: completely counterproductive economic policies." Strictly speaking, this is just one of the reasons, and elaborating would be too lengthy. In any case, the conclusion is that the weakness of U.S. stocks is difficult to reverse. "The rise of the East and the fall of the West" is a trend, and this column has already raised this slogan on February 26. Although currently, it seems that capital is more inclined to flow to Europe, in due time, heading East will be an important option.

Internally, the U.S. is also pessimistic about its own stock market. Citigroup downgraded its rating on U.S. stocks from overweight to neutral while upgrading its rating on Chinese stocks to overweight, stating that the U.S. exceptionalism narrative has at least paused. Citigroup noted that considering the strength of China's tech industry, government support for the sector, and low valuations, even after a significant rise in the stock market, the Chinese stock market still appears quite attractive. As mentioned earlier, the conflict between MAGA and LGBT has never ceased.

According to the Chinese Embassy in the U.S., Chinese Ambassador Xie Feng delivered a speech yesterday (10th) at the "China in Spring" global media dialogue session in the U.S.: "China has become a major trading partner for over 150 countries and regions. Last year, the number of newly established foreign-invested enterprises grew by 9.9%. In January of this year, investments from the UK, South Korea, and the Netherlands in China increased by 324%, 104%, and 76%, respectively. The narrative of 'foreign capital fleeing China' has been declared bankrupt, and the idea that 'China's large market is a must' has taken root. This timing is very good."

Tesla (TSLA.US) plummeted 15.4% overnight (10th), and since its historical high closing price of $479.86 on December 17 last year, its stock price has fallen by 54%, with a market value evaporating by over $800 billion. Musk stated, "It is difficult to balance the business, but we cannot let America go bankrupt; we need to work for another year." It seems that the richest man is not just in it for the money, but for a sense of "breath." However, to be honest, Tesla's high valuation is largely based on just a few car models, and storytelling accounts for a significant portion. In contrast, Chinese car manufacturers are more focused on hard work. The result of this hard work is strong competitiveness. The China Association of Automobile Manufacturers announced on the 11th that from January to February, the production, sales, and exports of new energy vehicles all increased by over 50% year-on-year From January to February, the production and sales of new energy vehicles reached 1.903 million and 1.835 million units, respectively, representing a year-on-year growth of 52% for both. The sales of new energy vehicles accounted for 40.3% of the total sales of new cars. In terms of exports, 282,000 new energy vehicles were exported, a year-on-year increase of 54.5%. These achievements reflect market choices that cannot be hindered by trade barriers. Today, XPeng (09863) surged over 9%, while Nio (09866) rose nearly 10%.

Following the release of the general-purpose embodied intelligent model GO-1 yesterday, Zhiyuan Robotics today launched its new product "Second Wave" - the biped humanoid robot Lingxi X2. In addition to regular walking, running, and dancing, Lingxi X2 can also lift weights, ride a scooter, play on a balance bike, and cycle. This indicates that robots are continuously evolving. The valuation in this sector is also rising rapidly. According to a report by The Information on the 20th, Figure AI is seeking $1 billion to $2 billion in Series C funding, with a valuation as high as $40 billion. This figure is more than 15 times its valuation of $2.6 billion a year ago. On March 11, Yujiang Technology (02432) released the world's first "dexterous operation + straight-knee walking" embodied intelligent humanoid robot. It can perform complex operations across different scenarios and collaborate with multiple units. The robot, named Dobot Atom, is a full-size bionic humanoid robot designed for industrial-grade precision operations, equipped with a self-developed neural-driven dexterous operating system NDS and a humanoid straight-knee walking system AWS, leading embodied intelligence technology to deeply land in diverse scenarios such as industry and services. As long as new achievements are made, the market will enthusiastically support them, and today it surged over 11%.

Cross-industry collaboration is back. On March 11, Leapmotor (09863) Chairman Zhu Jiangming revealed that the company has formed a humanoid robot R&D team of dozens of people, with the project currently in the pre-research stage. "Automakers have this capability, and in the future, it will mainly be used for assembly on the vehicle production line." Although the team is small, automakers have inherent advantages, which is also a point of interest. Today, the stock surged over 13%, as many automakers, including Xiaomi (01810), XPeng, and BYD (01211), are also developing robots.

AI news continues to emerge. On March 13, the "Cloud Intelligence Gathering, Building a New Future for the AI Industry - Artificial Intelligence and Controllable Cloud Computing Industry Ecosystem Conference" will be held in Hangzhou, guided by the Hangzhou Economic and Information Bureau and the Hangzhou Data Resources Bureau, hosted by Zhejiang Computing Power Technology. Market news suggests that DeepSeek's next-generation AI model DeepSeek-R2 may be officially released ahead of schedule on Monday (March 17). DeepSeek-R2 has made breakthroughs in several key areas, including superior programming capabilities, multilingual reasoning abilities, and providing higher accuracy at lower costs. Professionals believe that if these features are realized, it could give it a significant advantage in the global AI competition. This may present another revaluation opportunity for asset prices. Huilyang Technology (01860), Kingsoft Cloud (03896), and Kuaishou-W (01024) are once again in high demand Today, the consumer sector also performed prominently, but the reasons for the rise vary. 1. The expectation of rising agricultural product prices: Following the surge in egg prices in the U.S. leading to a spike in "egg smuggling" cases at the U.S.-Mexico border, another phenomenon has emerged due to skyrocketing food prices: a surge in coffee bean thefts. Over the past year, coffee bean futures prices have more than doubled. In Japan, the latest data from the Ministry of Agriculture, Forestry and Fisheries shows that rice prices in supermarkets have risen by 90% compared to a year ago. The reason is that many people are hoarding rice, leading to a significant reduction in market supply. Regardless of the reasons, such as avian influenza in the U.S. or safety concerns in Japan, the market certainly has expectations for rising agricultural product prices. Therefore, related companies like YouRan MuYe (09858), COFCO Joycome (01610), Uni-President Enterprises (00220), and ZhenJiu LiDu (06979) have found reasons for their price increases; 2. Expectations of a recovery, such as cosmetics company MaoGePing (01318), biotech company JuZi ShengWu (02367), trendy toy company Pop Mart (09992), electronic cigarette company Smoore International (06969), luxury gold company LaoPu JinHuang (06181), and restaurant company YiHai International (01579); 3. Additionally, newly included stocks in the Hong Kong Stock Connect have surged, such as MaoGePing and XiaoCaiYuan (00999), both seeing nearly 10% increases.

Regarding the sharp decline in U.S. stocks and whether Trump will intervene to stabilize the market, it seems that whether he intervenes or not, there will be a rebound; there must be a chance to catch a breath. It is estimated that the only strategy Trump can come up with is to play the Eastern card. According to the Hong Kong South China Morning Post, Chinese and U.S. leaders will meet in China next month. Can the spokesperson confirm this? In response, Mao Ning stated, "I have no information to release on that question." It is known that this is a one-sided verbal exchange, but it may provide some comfort to the market.

【Sector Focus】

On March 17, 2025, the NVIDIA GTC conference will be held in San Jose, California. This globally anticipated tech event will focus on "hardware innovation," with the GB300 AI server and AI robots being the highlights. In addition to the GB300, the market is also very interested in NVIDIA's next-generation platform Rubin's architectural design to be unveiled at the GTC conference. The biggest change is that the NVLink connection for high-speed data transmission will adopt an orthogonal architecture, using high-multilayer boards made of mixed-pressure PTFE. As the transmission rate jumps from 112Gbps to 224Gbps, traditional PPO resin materials can no longer meet the demands of high-frequency signals. The low-loss PTFE resin combined with HVLP5 copper foil has become a necessity, with HVLP5 copper foil being used alongside PTFE. Therefore, the value in the PCB segment has greatly increased, and high-frequency, high-speed HVLP5 copper foil is expected to become the core of future NVIDIA server connections (the advantages of HVLP5 high-frequency, high-speed copper foil connections over traditional copper connections are evident). In this arms race for computing power, PCBs (printed circuit boards), as core components of cabinet servers, are 迎来技术迭代的爆发点。

Main varieties in the Hong Kong stock market: JianTao Laminated Board (01888), JianTao Group (00148).

【Stock Picking】 AVIC Science and Technology (02357): Europe's significant defense spending orders are worth anticipating, and the low-altitude economy is poised for takeoff.

The Third Session of the 14th National People's Congress disclosed that China's defense spending budget for 2025 is CNY 1,784.665 billion, a year-on-year increase of 7.2%, maintaining a growth rate of over 7% for the fourth consecutive year. AVIC Optoelectronics' total operating revenue for 2024 is expected to be CNY 20.69 billion, an increase of 3.07% year-on-year; the net profit attributable to shareholders of AVIC Optoelectronics is CNY 3.361 billion, an increase of 0.65% year-on-year.

Commentary: Currently, Germany is significantly increasing its defense spending, and Europe is expected to follow suit, making European military orders worth looking forward to. The company's business spans the aviation industry chain, with its controlling subsidiaries, including AVIC Helicopter, Hongdu Aviation, AVIC Optoelectronics, and AVIC Aircraft, forming core competitiveness across various upstream and downstream businesses in the aviation industry chain. AVIC Science and Technology is deeply involved in the low-altitude economy, driving its development through its subsidiaries. Its controlling subsidiary, AVIC Helicopter, is the largest, highest output, and most comprehensive in product series in China's helicopter manufacturing industry. The company's helicopter products have stronger compatibility with the civilian market and cover a full range of helicopters, including ultralight, light, medium, and large models. Since 2022, the company has been continuously promoting important asset restructuring projects. Its subsidiary, AVIC Electronics, absorbed and merged AVIC Electromechanical through a share swap and was subsequently renamed "AVIC Aircraft." Additionally, another subsidiary, AVIC Helicopter, completed the acquisition of 100% equity in Harbin Aircraft and Changhe Aircraft. Recently, Harbin Aircraft Group plans to transfer all its shares in AVIC Helicopter to AVIC Science and Technology. The company formed a high-speed electric vertical takeoff and landing aircraft (H-eVTOL) technical solution in June 2023. With the impending arms upgrade, foreign trade business may become a growth point for the trainer aircraft industry; the domestic large aircraft will inject new growth, with several companies under its umbrella serving as core suppliers.

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