Zhitong Hong Kong Stock Analysis | Trump Eases Stance on Tariff War, Multiple Positive Factors Catalyze Robot Sector to Surge Again

[Market Dissection]

The trade war has finally shown signs of easing, and the US stock market is expected to successfully test the bottom again. The Hong Kong stock market opened higher today and maintained a steady trend throughout the day, closing up 2.37%, with the Hang Seng Index surpassing the 22,000-point mark.

The US stock market is now on the edge of danger; if it falls below recent lows again, the consequences will be severe, and capital outflow will be inevitable. Global asset management giant Janus Henderson is currently considering reducing its exposure to US assets. Approximately 10% of the funds may shift to Europe, China, the Middle East, and Latin America. This is just the beginning; if stability cannot be maintained, the outflow ratio may be even higher. The total amount of global funds is limited, and the trend of one rising while the other falls is inevitable. Looking at emerging markets, India became the first major market last week to erase the declines caused by tariffs, with the MSCI Emerging Markets Index rising 1.7% on Wednesday, and the South Korean KOSPI index recovering from the declines caused by US-imposed reciprocal tariffs. The Chinese market is also very close to recovery.

Now, looking at the fundamental situation, reports indicate that China has banned South Korean companies from exporting products containing Chinese rare earths to the US, which is to prevent loopholes. We have rich experience in this area; even Elon Musk is worried that the rare earth permanent magnet materials needed for his Optimus robot may be banned. Jinli Permanent Magnet (06680) also took the opportunity to rise over 12% today. Just in terms of rare earths, US military enterprises are feeling the pressure, as high-tech weapons cannot continue to be produced, and it would be false to say the military-industrial complex is not anxious. Additionally, media reports on April 23 stated that high tariffs from the US have forced Chinese buyers to replace American products with LPG from the Middle East, and the impact on global LPG trade is becoming apparent. Related daily necessities are also suffering from tariffs and can only raise prices to pass on costs to consumers, and agricultural products are even worse, as they cannot be sold at all.

Without personal pain, Trump is unlikely to back down. In the face of harsh realities, Trump finally relented, stating at a press conference at the White House on Tuesday that he does not intend to take a hardline stance when reaching a trade agreement with China. He told reporters that tariffs on China will not remain at 145%, but they will not drop to zero either; the final figure will make China "very satisfied." After a round of extreme pressure, he has circled back to the starting point, estimating that the final rate will still be around 10%, but to negotiate with us, he must lower his stance and show sincerity; otherwise, he will not easily agree to talks. According to two sources, at a private meeting held by JP Morgan, Bessent warned attendees that US-China negotiations have not yet started. In his view, although both sides believe the current situation is unsustainable, negotiations between the two countries will be "very difficult." Indeed, there are too many differences, and it depends on how both sides find the greatest common divisor.

In any case, Trump's rhetoric has a significant impact on the market, just like the last crisis was successfully resolved, but the marginal utility is expected to decrease unless substantial progress is seen. Gold stocks generally move in the opposite direction, with Chifeng Jilong Gold Mining (06693) dropping over 15% today.

According to the logic of easing relations, the main direction for market correction is companies with a significant proportion of US business, such as QuanFeng Holdings (02285), Techtronic Industries (00669), Nexperia (01316), Lenovo Holdings (03396), and CXO types like WuXi AppTec (02268) and WuXi Biologics (02269) Yesterday, it was mentioned that the robotics industry is not pessimistic, and today it has exploded. The first Embodied Intelligent Robotics Games will be held from April 24 to 26 in Huishan District, Wuxi City, with relevant leaders from Yushu and Xiaomi participating in topic discussions. At the same time, Elon Musk stated during Tesla's earnings call that Tesla has made good progress with the humanoid robot Optimus and is confident in achieving an annual production capacity of one million units within five years. Another catalyst: According to media reports, Hong Kong Chief Executive John Lee visited several technology companies in Hangzhou, where he held closed-door meetings with the main leaders of the "Hangzhou Six Little Dragons" tech companies and visited Qiangnao Technology and Yushu Technology, hoping to strengthen cooperation in scientific and technological innovation between Zhejiang and Hong Kong. Hong Kong has many internationally renowned universities, but lacks industrial integration due to the absence of large physical companies. Closer ties with the mainland hold promise, and there is hope for breakthroughs through robotics.

The robotics sector is experiencing rapid growth, particularly for UBTECH. On April 22, the Heilongjiang Provincial Department of Education successfully signed a strategic cooperation framework agreement on artificial intelligence education with Shenzhen UBTECH Technology in Harbin. The two parties will promote industry-education integration in the field of embodied intelligence, relying on vocational colleges to jointly build collaborative centers, training bases, and industry colleges, jointly developing general education textbooks on artificial intelligence, and integrating relevant vocational skills training and certification into the talent cultivation system, forming a high-skilled talent training model that connects "industry, academics, and employment." Entering the vocational training sector is also a good path, and UBTECH (09880) surged over 17%. Other stocks such as Yujian (02432), Sutech Juchuang (02498), and MicroPort Robotics-B (02252) also saw good gains.

BYD Company Limited (01211) announced its profit distribution and capital reserve transfer plan for 2024, proposing to distribute a cash dividend of RMB 39.74 per 10 shares (tax included) to all shareholders, with a total cash dividend amount of approximately RMB 12.077 billion, and to issue 8 bonus shares for every 10 shares, with a capital reserve transfer of 12 shares for every 10 shares. This plan is very strong, and today it rose nearly 4%; Mercedes-Benz CEO: The EU should create a fair competitive environment for Chinese electric vehicle manufacturers. It is expected that the EU will relax policies for Chinese car companies in the near future. Xiaomi (01810) Wang Hua: The launch date of the YU 7 remains unchanged, still set for June to July this year. Today it rose 6.87%.

XPeng Motors (09868) is also benefiting from robotics: Currently, the Iron robot is being practically applied in XPeng's Guangzhou factory, handling tasks such as parts delivery and assembly inspection, with plans to apply it in store services in the future. At the same time, XPeng Motors plans to achieve large-scale production of industrial-grade L3 humanoid robots by 2026 and launch home service robots. Today it surged 8.73%.

Tencent Holdings Limited (00700) launched 13 new games at the annual Game Night last night. It also released updates and new features for 18 existing games, as well as 8 games it has invested in. Nomura expects Tencent's total revenue in the first quarter to increase by 10% year-on-year to RMB 176 billion, with online game revenue expected to grow by 15% annually. Furthermore, based on the latest holdings in the first quarter reports from major fund companies, the vast majority of funds investing in Hong Kong stocks have Tencent as their top holding. This shows that institutions have a strong preference for it. Today, Tencent Holdings rose 3% The quarterly reports are being released one after another, and well-performing stocks are gaining popularity. For example, Zhejiang Shibao (01057) achieved total operating revenue of 718 million yuan, a year-on-year increase of 45.47%. The net profit attributable to the parent company was 48.735 million yuan, a year-on-year increase of 123.77%; the net profit excluding non-recurring items was 45.1573 million yuan, a year-on-year increase of 121.54%. This is quite impressive, and today it surged over 19%, driving the smart driving sector's Heizhima Intelligent (02533) to rise over 5%.

European pharmaceutical giants are calling for drug prices to be raised to the same level as in the United States. On the evening of April 22, Kangzhe Pharmaceutical (00867) announced that the company proposed to spin off its subsidiary Demai Pharmaceutical Co., Ltd. and independently list it on the main board of the Hong Kong Stock Exchange. After the independent listing, Demai Pharmaceutical will have its own financing platform, making it easier to access capital market funds, providing sufficient financial support for its R&D, marketing, and other activities. After the spin-off, Kangzhe Pharmaceutical can focus more on its main business. This spin-off will distribute all shares of Demai Pharmaceutical held by the company to shareholders in kind, and the equity of Demai Pharmaceutical enjoyed by shareholders will not be diluted, allowing them to benefit from the potential returns brought by the future valuation increase of Demai Pharmaceutical. Today it rose 4.79%.

【Sector Focus】

According to reports, during the Easter holiday, Macau recorded approximately 2.825 million entries and exits, with 520,000 being tourists. Some tourism operators stated that the industry delivered an impressive performance during this holiday. The average daily number of tourists during the holiday was 130,000, far exceeding expectations and significantly increasing compared to the same period last year. The distribution ratio of holiday tourists is favorable, and the willingness to enter the area is a "good start," which can somewhat promote the community economy. There are hopes that the "May Day" Golden Week will see even better visitor numbers.

Macquarie released a research report stating that during the Easter holiday, more than 520,000 tourists visited Macau. With the influx of tourists from Hong Kong and the Korean wave star concerts, the average daily gaming revenue in Macau for the week ending on the 21st was 650 million patacas, an annual increase of 8% and a weekly increase of 6%. If the average daily gaming revenue for the remaining days of this month is between 550 million and 650 million patacas, the gaming revenue for April will reach 18 billion to 18.9 billion patacas, a year-on-year decrease of 3% to an increase of 2%, close to March's level. Based on the current trend, it is expected that May Day will bring good expectations.

Main stocks in Hong Kong: MGM China (02282), Sands China (01928), Wynn Macau (01128), Galaxy Entertainment (00027).

【Stock Picking】

Fuyao Glass (03606): Steady Growth in Q1 Performance, Continuous Expansion of Overseas Capacity

Recently, Fuyao Glass released its Q1 2025 report. The company achieved operating revenue of 9.91 billion yuan, a year-on-year increase of 12.16%; the net profit attributable to shareholders of the listed company was 2.03 billion yuan, a year-on-year increase of 46.25%.

Commentary: Fuyao Glass's performance in the first quarter of this year showed steady growth, with sales and average prices increasing steadily without being affected by tariffs. Since its listing in 1993, the company's performance has maintained a good growth momentum. Revenue has grown from just over 100 million to 39.252 billion yuan in 2024, and net profit attributable to the parent company has expanded from tens of millions to 7.498 billion yuan in 2024. Fuyao Glass is still expanding its production capacity in multiple locations worldwide. Currently, its overseas capacity is 6.8 million sets, mainly concentrated in the United States and Russia, while domestic capacity is 34 million sets, distributed in locations such as Fuqing, Changchun, Chongqing, Shanghai, and Guangzhou Around early 2024, Fuyao Glass invested 3.25 billion and 5.75 billion respectively to significantly expand glass production capacity in Fujian and Hefei. To ensure supply and reduce costs, Fuyao Glass is building float glass production lines in multiple locations, with a self-supply ratio exceeding 90% (float glass accounts for 34% of automotive glass costs). Furthermore, the company has begun to lay out upstream silica sand plants, having established four major factories in Hainan, Hunan, Inner Mongolia, and Liaoning, further reducing glass production costs. The unit price of the company's automotive glass is expected to continue rising due to product upgrades, and the company is also extending its business upstream in an attempt to continuously lower production costs. Both factors are beneficial for enhancing product profit margins and driving profitability