Zhitong Hong Kong Stock Analysis | Trump's Ultimatum Catalyzes the Market, Dollar Weakens, Resource Stocks Strengthen

[Market Dissection]

The market is still revolving around tariff news, seemingly transmitting positive signals again. Hong Kong stocks opened high and continued to rise, closing up 1.53%, which also lifted A-shares.

According to a draft letter obtained by the media from the Office of the United States Trade Representative (USTR) on June 2, the Trump administration has requested relevant countries to submit their "best trade negotiation proposals" by Wednesday (June 4, Eastern Time), including tariff and quota plans for purchasing U.S. agricultural and industrial products, as well as plans to eliminate non-tariff barriers. Otherwise, they will face hefty punitive measures. The "90-day suspension period" for reciprocal tariffs imposed by Trump is set to end on July 8, and currently, the U.S. has only reached a framework agreement with the UK, leaving very little time. Therefore, Trump must intensify his ultimatum; whether it will be effective is uncertain, but the stock market is treating it as good news.

Additionally, in response to a question from a reporter from Agence France-Presse, the White House indicated that Chinese and U.S. leaders will hold a call this week. When asked if the spokesperson could confirm this news, Foreign Ministry spokesperson Lin Jian replied that he had no information to provide. This also indicates that the White House is anxious and deliberately leaking information to test our reaction. Applying pressure before negotiations is indeed not the correct diplomatic approach, and it is quite disliked in Chinese philosophy.

Countermeasures are necessary. According to a report from Singapore's Lianhe Zaobao on June 2, multiple regions in China have announced strengthened controls to prevent the illegal outflow of strategic minerals. Reports indicate that relevant authorities in Hunan Province stated they would seriously implement local regulatory responsibilities, systematically investigate local strategic mineral export enterprises, and establish records; Guangxi has also stated it will continue to supervise and manage the exploration and mining of national strategic minerals, increasing efforts to crack down on illegal mining activities such as unlicensed mining and cross-border mining. Additionally, relevant departments in Guizhou, Jiangxi, and Yunnan have also stated they will ensure the implementation of various tasks according to their responsibilities. Rare earth permanent magnets are among the first to be affected, with JLMAG (06680) rising nearly 6%. Other companies like China Minmetals Resources (01208) also rose over 6%.

Lithium resources are also important assets. Longpan Technology (02465) announced that its holding subsidiary, Lithium Source (Asia Pacific), signed a "Production Pricing Agreement" with Eve Energy Malaysia Sdn.Bhd., expecting to sell 152,000 tons of lithium iron phosphate cathode materials to Eve Energy and its affiliates from 2026 to 2030, with a total contract sales amount expected to exceed 5 billion yuan. It is reported that Eve Energy is one of the overseas subsidiaries of leading battery company Yiwei Lithium Energy. By locking in long-term sales in advance, Longpan Technology surged over 11%, driving Tianqi Lithium (09696) up nearly 3%.

There is a growing consensus that the U.S. dollar is weakening, with more and more Wall Street investment banks recently reiterating their predictions: due to interest rate cuts, slowing economic growth, and President Trump's trade and tax policies, the dollar will further weaken. Currently, the ICE Dollar Index has seen a cumulative decline of 8.9% this year. According to statistics from Dow Jones Markets, this index has recorded the worst performance for the first five months of the year in history. As the dollar weakens, gold strengthens; on Monday, Eastern Time, international gold prices returned to $3,400, with both spot gold and COMEX gold futures rising over 2%. On June 3, domestic brand gold prices followed suit, with brands like Chow Tai Fook, Lao Miao Gold, Chow Sang Sang, and Lao Feng Xiang seeing their gold jewelry prices rise, with increases ranging from 18 to 22 yuan "The Hermes of the gold industry," Lao Pu Gold (06181) rose over 6% today, reaching a historical high. Chow Tai Fook (01929) also hit an annual high.

The official manufacturing PMI recorded 49.5, just 0.5 higher than last month, and this was achieved against the backdrop of fierce export competition. The Caixin manufacturing PMI dropped to 48.3, a significant decrease of 2.1 from last month, marking the lowest level since October last year. This indicates a gradual decline in external demand, and further policy stimulus is needed. Bank stocks collectively strengthened today, with Industrial and Commercial Bank of China (01398), Agricultural Bank of China (01288), and China Construction Bank (00939) all rising over 3%.

The first IPO for a stablecoin is here, with stablecoin giant Circle expected to list on the New York Stock Exchange on June 5. This will be the first IPO in the stablecoin sector. According to a press release from China Everbright Holdings (00165) published in June 2016, it jointly invested with IDG Capital in the global top blockchain financial company Circle, becoming a significant strategic shareholder. China Everbright Holdings rose over 15%, but other varieties adjusted, such as Yika (09923) which fell over 6%, as the actual issuance of stablecoins is still some time away, likely not until the end of the year. It can't keep rising indefinitely.

The pharmaceutical sector has become increasingly resilient, as new products continue to bring good news. Hansoh Pharmaceutical (03692) granted product licensing to Regeneron, receiving an upfront payment of $80 million. Although this amount is not high and market enthusiasm is weak, it is a significant encouragement for innovative drugs. Junshi Biosciences (01877), Luye Pharma (02186), SiHuan Pharmaceutical (00460), and Sino Biopharmaceutical (03933), among others, have all gained traction, each rising over 7%. Additionally, the brain-computer interface concept company MicroPort NeuroTech (02172) surged nearly 20%.

Ukraine's recent drone attacks have sparked heated discussions, highlighting a major trend in future warfare, while unmanned vehicles are also set to become a new direction. Youjia Innovation (02431) recently announced that its L4-level autonomous minibus, which uses automotive-grade solutions, has been selected for China Telecom's unmanned minibus project and will complete delivery in the second quarter. This marks a further recognition of Youjia Innovation's L4 autonomous driving technology and development capabilities, entering the fast lane of L4 commercialization. Youjia Innovation rose nearly 10% today, while the unmanned delivery concept company SF Intra-City (09699) saw significant gains, and SF Holding (06936) rose nearly 6%.

Pop Mart (09992) received another catalyst as its IP products became a hit. The Macao Tourism Board announced the launch of the "Roaming Macao with POP MART" project, which will open this Friday (6th) at 2:30 PM. A 7-meter tall LABUBU installation will debut at the Taipa Pao Jiao Road rest area. This is the first large-scale cultural tourism project co-hosted by the tourism board and POP MART, creating an international IP city tour. The Macao Tourism Board stated that the aforementioned activities will set up large photo spots at four locations in Macao, featuring four popular characters: BabyMolly, CRYBABY, DIMOO, and LABUBU, each themed around different Macao delicacies, appearing at Feng Tang Xie Xiang, Bai Ge Nest Front Square, Gang Ding Front Square, and Taipa Pao Jiao Road rest area The event duration is from June 6 to September 21, totaling 108 days. Pop Mart has set a new historical high.

Xiaomi (01810) founder Lei Jun disclosed at the Xiaomi investor conference that the latest launched Xiaomi Yu7 price cannot be the rumored 235,900 yuan, and the official pricing will be determined 1-2 days in advance. According to Lei Jun, Xiaomi's automotive business losses are gradually narrowing, and it is expected to achieve profitability in the third to fourth quarter of this year. Xiaomi (01810) rose over 3%.

【Sector Focus】

On June 3, the National Development and Reform Commission and the National Energy Administration issued opinions on deepening and enhancing the service level of "obtaining electricity" to comprehensively create a modern business environment for electricity consumption. The opinions propose to consolidate and enhance the "three zeros" service. Expand the "three zeros" service targets. Fully support the development and growth of the private economy, expanding the "zero investment" for low-voltage electricity access to various private economic organizations with 160 kilowatts and below, and encourage regions with conditions to further increase the upper limit of low-voltage access capacity. Improve the quality and efficiency of the "three zeros" service. For temporary and mobile electricity demands in scenarios such as spring irrigation and autumn harvest, tea frying and tobacco roasting, and night markets, power supply companies should cooperate with local governments to plan and construct convenient electricity access points, providing services such as "scan to use electricity" for the public without installation reporting and quick electricity use, supporting rural revitalization and stimulating consumption vitality.

This policy can reduce the electricity costs for small private enterprises, optimize the business environment, and bring incremental benefits to power equipment companies. Major beneficiaries: Dongfang Electric (01072), Xinao Energy (02688), Honghua Smart Energy (01083).

【Stock Picking】

Pharmaron (03759): Subsidiary invests in overseas fund, Q1 performance improves with new orders steadily increasing

Pharmaron announced that to fully utilize the professional investment institutions' capabilities in the biopharmaceutical industry, its wholly-owned subsidiary Pharmaron UK Limited plans to participate as a limited partner with its own funds of $30 million to invest in BLC Healthcare USD Fund I L.P. On May 30, 2025, Pharmaron UK signed the "Amended and Restated Agreement of Exempted Limited Partnership of BLC Healthcare USD Fund I L.P."

Comment: The target fundraising amount for the partnership is approximately $100 million (final amount subject to actual fundraising). The main goal is to invest directly or indirectly in the global biopharmaceutical and life health sectors, simply understood as the company extending its reach overseas, which is beneficial for opening up overseas markets. The previous decline was mainly due to the company's reduction plan: within three months after June 10, 2025, it will reduce no more than 26,672,900 shares through centralized bidding or block trading, accounting for 1.5% of the company's total share capital. Q1 performance is improving, with revenue reaching 3.099 billion yuan, a year-on-year increase of 16.03%; net profit attributable to the parent company was 306 million yuan, a year-on-year increase of 32.54%. Each business segment also performed well, with revenue from laboratory chemistry and biological science services increasing by 15.7% year-on-year, and revenue from preclinical CRO business increasing by 19.1%, with strong growth in China's clinical development services Overseas clinical development service revenue is steadily increasing. As a leading enterprise in the CRO field, the company has an integrated service platform covering the entire chain of drug discovery, preclinical research, clinical development, and commercial production, with a laboratory to CMC conversion rate of 81.47%. Multi-business collaboration from clients contributes 74.84% of revenue, significantly reducing client switching costs. The company has achieved fruitful results in the application of AI technology, such as enhancing enzyme activity and stability in the field of biocatalyst performance design and modification by establishing AI models, as well as creating models for candidate enzyme screening to optimize performance and improve chemical process R&D efficiency, providing more efficient technical support for drug development.

Leveraging its advantages, the company has undertaken a large number of orders from Europe and the United States, with the proportion of overseas revenue increasing to 85%. In terms of orders, the company's new order amount for 2024 has increased by over 20% year-on-year, and the new order amount in the first quarter has increased by over 10% year-on-year, with new orders for laboratory services and CMC (small molecule CDMO) services both increasing by over 10% year-on-year. As more late-stage clinical and commercialization projects are delivered, the company's performance is expected to grow steadily