Zhitong Hong Kong Stock Analysis | The Federal Reserve's June Rate Cut Expectations Strengthen, Shift in Direction as Technology Rises

[Market Dissection]

Expectations for interest rate cuts in the United States have suddenly surged, undoubtedly surprising the market, with Hong Kong stocks jumping 1.07% today.

ADP reported an increase of 37,000 jobs in May: the lowest since March last year, far below the market expectation of 114,000. Tariffs have begun to affect companies' willingness to hire, and the overall resilience of the job market is starting to weaken. The ISM Services Index fell below 50 (49.9): this is the first time in nearly a year that it has dropped into the contraction zone. The data reflects the initial impact of tariffs on the economy, while the real effects will become apparent three months after the tariffs are implemented. After the data was released, Trump clearly became anxious: "ADP data is out! 'Big Delay' Powell must cut rates now. He is unbelievable!!! Europe has already cut rates nine times!" Additionally, on June 4, the latest national economic conditions survey report released by the Federal Reserve showed that U.S. economic activity has slightly declined since the last report, with businesses and consumers facing increased policy uncertainty and price pressures, and the overall economic outlook remains pessimistic. It is evident that the Federal Reserve is also aware of the seriousness of the problem. Next, we will look at the non-farm payroll and inflation data; if both are not ideal, the possibility of a rate cut in June is high. Because if Powell dares to hold off on cutting rates, he won't be able to bear the blame.

Today, the Hang Seng Index performed well, but individual stocks have seen some changes. What does "what is hot must die" mean? Look at the latest joke: "Some diehards are still hoping for another wave in the robotics industry to save themselves, claiming that the robotics industry is a major trend, and the future is bright. However, the profit effect does not lie. You see, our new consumption people are drinking sparkling yellow wine, playing cards, and making money by playing with blind boxes and jewelry." Among them, Lao Pu Gold (06181) fell over 9%. E-cigarettes also couldn't hold up, with Smoore (06969) dropping over 11%. Pharmaceutical stocks also did not escape.

Finally, it's the turn of technology stocks. There were quite a few catalytic messages today. The 2025 Tianjin Five Avenues Financial Forum was held in Tianjin today. Zhou Liang, Deputy Director of the National Financial Regulatory Administration, stated in his speech that the Financial Regulatory Administration will continue to increase financial support for technological innovation. Coupled with the upcoming Lujiazui Forum, positive expectations for the technology sector are also warranted.

In fact, U.S. tech stocks have also been strong recently, just overshadowed. Nvidia regained the title of the world's most valuable company, reaching $3.46 trillion; Broadcom hit a historic high, with a total market value of $1.23 trillion. Nvidia's supporting concept, Hongteng Precision (06088), rose over 13%. In terms of computing power, North American AI has entered the era of million-card clusters. Elon Musk's xAI company is building a supercomputing cluster in Memphis, Tennessee, initially consisting of 100,000 Nvidia Hopper GPUs. Musk also hinted that he will soon double the cluster size to 200,000 GPUs and plans to expand to 1 million GPUs in the future. Broadcom plans to deploy 1 million XPU clusters on a single architecture by 2027 for its three hyperscale customers. Meanwhile, domestically, we are still in the era of ten-thousand-card clusters, with the total scale of China Mobile's three clusters being nearly 60,000 GPU cards Most other tech giants are at the level of 10,000+, and many are domestic cards. There is still significant room for improvement. Therefore, the demand for AI servers from ZTE Corporation (00763) has emerged, rising nearly 6% today. Cloud concept stocks Kingsoft Cloud (03896) and Kingdee International (00268) both rose over 7%. Chips also clearly benefited, with WSTS predicting a year-on-year growth of 11.2% in the global semiconductor market. SMIC (00981) and Hua Hong (01347) both rose over 4%.

Recently, China Mobile's Guangdong branch launched a public tender procurement project for hybrid optical cables for 2025, purchasing hybrid optical cables including G.652D and empty optical fibers totaling 38 fiber-kilometers, marking the first step from experimental to commercial use for hollow-core fibers. If calculated at the maximum price limit of 200,000 yuan per fiber-kilometer, the unit price for this bulk purchase of hollow-core fibers is close to 50,000 yuan per core-kilometer, which is 2,500 times that of solid-core fibers. Regarding hollow-core fibers, Yangtze Optical Fibre and Cable (06869) stated that it has completed pilot tests with the three major domestic operators and is collaborating with several equipment manufacturers and internet companies for testing, with relevant indicators being globally leading. The market expects it to win the bid, rising over 7% today.

On Thursday, Nintendo officially launched its new gaming console, Switch 2, globally. The Switch 2 is very similar to its predecessor in many aspects of product design but features a larger screen and better graphics, and will launch with exclusive games including "Mario Kart World." The market generally expects that the Switch 2 will be in short supply globally. Ampere predicts that Switch 2 sales will exceed 100 million units by 2030. Currently, Nintendo has sold a total of 152 million units of the first-generation Switch. This news is a significant stimulus for gaming stocks, with Zhongxu Future (09890), Xindong Company (02400), and Zhong Shouyou (00302) being favored due to upcoming new game catalysts, all rising over 8%.

Consumer electronics have also suffered significant declines, but there is heavy news coming up. On June 5, Huawei's official Weibo announced that the Huawei Pura 80 Pro and Huawei Pura 80 Pro+ would open for reservations at 10:08. About two and a half hours later, the number of reservations exceeded 40,000. Huawei's offline stores also released pre-sale notifications, allowing customers to pay a deposit of 100 yuan for priority pickup. Apple's annual Worldwide Developers Conference (WWDC) will be held from June 10 to 14, which is expected to bring new catalysts, with related stocks such as Gao Wei Electronics (01415), Sunny Optical (02382), and AAC Technologies (02018) all rising over 6%.

The rare earth permanent magnet topic that has been repeatedly mentioned is still fermenting, mainly due to the significant rise in overseas rare earth prices, which has served as an effective countermeasure tool. Jinli Permanent Magnet (06680) surged again today, rising over 12%.

The "27th Shanghai International Film Festival" today launched ticket sales on the two major platforms, Damai and Taopiaopiao, with ticket sales reaching 370,000 within the first hour, surpassing last year's 355,000. Among them, 92 films and over 600 screenings sold out, with the "Best Director Film of the Golden Goblet Award" selling out in just 26 seconds It can be seen that after the weakening of home buying, other consumption remains strong. Alibaba Pictures (01060) has made a very wise transformation, rising over 5% again today.

Another Alibaba-related company, Sun Art Retail Group (06808), is also performing well. The company is actively transforming, changing its five operational areas into four, namely East China, South China, North China, and Northeast China. The company is renovating its business as planned, focusing on sales scale and absolute gross profit in the fiscal year 2026. The future direction is towards a Sam's Club model, with a rise of over 7% today.

【Sector Focus】

The U.S. Federal Communications Commission (FCC) Space Bureau has approved Globalstar's application to expand its second-generation "Direct-to-Device" (D2D) satellite constellation, aimed at providing network coverage for Apple devices. China plans to have a total of 80,000 low-orbit commercial satellites, which must be deployed within a 7-year validity period according to international satellite regulations. Currently, China has 492 commercial satellites in orbit. The market space is enormous. Low-orbit satellite constellations (such as GW constellation and Qianfan constellation) are accelerating network formation, and satellite mass production technology has matured, reducing the cost per satellite to $500,000 (an 80% decrease from 2020). Breakthroughs in reusable rocket technology (such as Blue Arrow Aerospace's Zhuque-3) are significantly lowering launch costs, with the cost per launch potentially dropping to one-third of SpaceX's. The year 2025 is expected to be the busiest year for global satellite launches in history and a year of explosive growth for China's commercial space industry.

Main varieties: Shanghai Fudan (01385), Nanjing Panda Electronics Co., Ltd. (00553), Asia-Pacific Satellite Holdings (01045)

【Stock Picking】

Kintor Pharmaceutical (00148): Major shareholder increase releases confidence, various business improvements worth looking forward to

On June 3, Chairman Zhang Guorong increased his holdings in Kintor Pharmaceutical (00148) by 150,000 shares at a price of HKD 23.0833 per share, totaling approximately HKD 3.4625 million. After the increase, the latest number of shares held is approximately 16.0484 million, with a latest holding ratio of 1.44%.

Commentary: The company is the world's largest producer of copper-clad laminates, leading in market share and strengthening cost advantages through vertical integration of the supply chain. Its business spans chemicals, electronic materials, and real estate. In terms of its main business: developing high-frequency, high-speed copper-clad laminates (low dielectric constant/low thermal expansion coefficient) to meet the needs of AI computing servers, 6G communications, and new energy vehicle radar; in 2024, it will add a monthly production capacity of 400,000 copper-clad laminates and 200,000 square feet of PCB, actively seizing the Southeast Asian market. In the chemical business: an 800,000-ton acetic acid project is set to be put into production in February 2025, with total acetic acid production capacity reaching 1.4 million tons/year after the project is operational, and the chemical sector's output value is expected to reach 5 billion yuan in 2025, a significant increase from 2.2 billion yuan in 2024. The Huizhou base has 450,000 tons of phenol and acetone (already in production) and 240,000 tons of bisphenol A (to be produced in 2024), supporting the demand for engineering plastics in new energy vehicles and photovoltaic films; in terms of real estate: it has clearly exited residential development in mainland China in 2024, accelerating the disposal of existing projects (such as Kunshan Jingtian), focusing on rental properties (with annual rental income exceeding HKD 1.4 billion) to reduce performance volatility Looking ahead, by the end of 2025, the first phase of the Beihai Green New Materials Industrial Park (340,000 tons of caustic soda + 140,000 tons of epichlorohydrin) will be put into production, radiating to the Southeast Asian market; AI material certification: If the testing results for high-frequency copper-clad laminate customers are realized, it may trigger a surge in orders. The historical dividend yield is better than the deposit interest rate, and a final dividend of HKD 0.36 will still be distributed in the 2023 performance trough. Major shareholders continue to increase their holdings, releasing confidence