Zhitong Hong Kong Stock Analysis | The sudden drop during the session turned out to be a false alarm as "Lychee in Chang'an" makes a strong debut

[Market Dissection]

This morning, both markets were quite normal, but in the afternoon, there was a sudden sharp decline. Fortunately, it stabilized later, with the Hang Seng Index slightly down by 0.08%.

There are reports stating: "The China-U.S. trade negotiations lasted about 6 hours, and Chinese officials have left, but Bessent, Lutnick, and Greer have not yet left." In fact, negotiations are inherently a process of repeated games, and it is impossible to reach an agreement quickly.

According to CCTV news reporters, the first meeting of the China-U.S. economic and trade consultation mechanism will continue on June 10 local time. It is estimated that the focus here is still on rare earths. Not only the United States, but other following third parties are also facing urgent issues regarding rare earths. Xinhua's commentary: The new regulations on rare earth export controls aim to "regulate exports," rather than being a so-called "tactical countermeasure" that arises from a whim. Legally, it is necessary to occupy the high ground and not confuse it with tariffs. China's rare earths (00769) in Hong Kong stocks rose more than 13% today.

The unrest in California continues, and Trump's strong suppression aims primarily to strike at the Democratic stronghold of California. Of course, the consequences will also be quite serious, with the military parade on June 14 approaching, and it is hard to say what kind of commotion will arise then.

The capital market is also responding. The latest data shows that South Korean retail investors turned into net sellers of U.S. stocks for the first time in May, while Japanese retail investors also became net sellers of U.S. ETFs in the same month. Data from the Tokyo Stock Exchange indicates that Japanese retail investors sold approximately $166 million worth of U.S. themed ETFs, marking the largest reduction since April 2023.

International capital is seeking new directions, but Europe clearly cannot bear the load. The world's largest sovereign fund, the Norwegian Oil Fund, which holds $1.9 trillion, warns that the European capital market lacks competitiveness due to structural issues, and its own allocation to European stocks has significantly dropped from 26% to 15% over the past decade.

According to trends, the Chinese market has the potential to take on this load. The offshore RMB once rose more than 100 points, breaking through 7.18. Gold continues to perform strongly, with WanGuo Gold Group (03939) and China National Gold International (02099) showing a beautiful upward trend, while other non-ferrous companies like China Hongqiao (01378), Aluminum Corporation of China (02600), and China Nonferrous Mining (01258) are also being favored by funds.

The heavyweight press conference mentioned yesterday was held as scheduled, mainly focusing on the elderly healthcare sector. As mentioned, MicroPort Medical (00853) and HeartTech Medical (02291) rose more than 6%, while iKang Healthcare (01789) rose more than 3%. Additionally, attention should be paid to the real estate direction. Xiao Weiming, Deputy Secretary-General of the National Development and Reform Commission, stated at a State Council Information Office press conference that a number of major strategic tasks, major policy measures, and major engineering projects in the livelihood sector will be proposed; it is expected that the scale of central budget investment supporting social undertakings this year will increase by more than 30% compared to the end of the "13th Five-Year Plan."

It can be seen that under the counter-cyclical fiscal efforts, major domestic infrastructure projects are gradually starting, highlighting investment opportunities in major infrastructure projects in the central and western regions. Infrastructure materials company China Liansu (02128) rose nearly 6%. There are also new movements in real estate, with private real estate companies restarting overseas financing. New City Development (01030): The parent company of New City Holdings, New City Development, is advancing its dollar issuance work, with an expected issuance amount between $250 million and $300 million This is a good phenomenon, with a rise of over 7% today.

In the pharmaceutical sector, the main speculation is that tomorrow's talks will yield results, and related pharmaceutical stocks with a high proportion of overseas business continue to be speculated. The CXO sector mentioned yesterday has collectively strengthened, such as Tigermed (03347), Zai Lab (06127), and Kelun Pharmaceutical (06821), as well as Kanglong Huacheng (03759): last year, more than half of the revenue came from the U.S. market for Chinese Contract Research Organizations (CROs) and Contract Development and Manufacturing Organizations (CDMOs).

The shipping sector is also speculating on expectations. According to reports, in the past week, container shipping rates from China and East Asia to the U.S. West Coast surged by 94%, with the price per standard container (FEU) approaching $6,000. This data comes from real-time booking price monitoring in the shipping market. DTX (02510) rose over 5%, and SITC International (01308) rose over 6%. The aviation sector also saw a collective increase.

AI demand remains strong, with TSMC's revenue in May reaching NT$320.52 billion, a year-on-year increase of 39.6%. ByteDance's Volcano Engine will hold the 2025 Original Power Conference in Beijing on June 11-12, with the Doubao family set to undergo a full upgrade. Volcano Engine's revenue is expected to exceed 12 billion in 2024, with a revenue target doubling to 25 billion in 2025, and the market share of large model calls reaching 46.4%, surpassing the combined total of Alibaba Cloud and Baidu Smart Cloud.

Meta is strategically counterattacking after setbacks with the Llama large model. Zuckerberg is personally recruiting a secret "super intelligent" AI team of about 50 experts, aiming for the throne of Google and OpenAI. Meta plans to invest up to several billion dollars in ScaleAI, which is expected to become Meta's largest external investment in history. Related stocks such as HuiLiang Technology (01860), Yimaitong (02192), and Fourth Paradigm (06682) all rose over 8%.

The market for solid-state batteries continues to heat up. Industry insiders indicate that solid-state batteries have been confirmed as the core direction for the next generation of power batteries, with policies, funding, and the industrial chain forming a three-pronged push, making the installation of solid-state batteries increasingly imminent. CITIC Securities predicts that global solid-state battery shipments will reach 642.6 GWh by 2030, with a compound annual growth rate of 133% from 2024 to 2030. Longpan Technology (02465) rose over 6%.

How hot is LABUBU? Even banks rely on it to attract deposits. Some banks have launched deposit promotions offering LABUBU; depositing 50,000 yuan can earn a blind box. Pop Mart (09992) has indeed become a phenomenon in consumer goods, rising over 3% again today.

The Ministry of Commerce of China announced that it has decided to initiate an anti-dumping investigation into imported pork and pork by-products originating from the European Union. Given the complexity of the case, it has decided to extend the investigation period to December 16 of this year.

DeKang Agriculture and Animal Husbandry (02419) is pioneering a new paradigm for growth in China's pig industry. The company's self-bred DeKang E-series breeding pigs will be widely promoted starting in 2023, with significant cost reduction effects. Institutions predict that the company's total costs may have fallen below 13 yuan per kilogram, placing it among the top tier in the industry. The company plans to expand from Southwest to South China and East China markets, steadily expanding its self-operated farms and No. 1 family farm while focusing on developing the No. 2 family farm model, with an expected growth rate of around 30% in pig sales over the next three years [Sector Focus]

"The Lychee of Chang'an" has been very popular these days; it is a novel by the famous writer Ma Boyong. The previous hit drama was "The Longest Day in Chang'an," which was also a phenomenal TV series. This year, the TV and film rights for the novel "The Lychee of Chang'an" have been sold, which is enough to prove the recognition of this work.

The TV series started airing on June 7, and today is the third day. It has a total of 35 episodes and stars Lei Jiayin and Yue Yunpeng. It is currently the number one show across all platforms, trending on Weibo, Xiaohongshu, and various hot searches. After the TV version concludes, the film version of "The Lychee of Chang'an" will follow, registered by Shanghai Aimei Film and Television Culture Media Co., Ltd., directed by Da Peng, with Da Peng, Shen Yuyue, and Dai Si'ao as screenwriters, and starring Da Peng, Liu Dehua, Yang Mi, Zhang Ruoyun, Liang Chao, Wang Yutian, etc., set to be released on July 25, 2025. With the daily airing of the TV series, it is expected to maintain continuous popularity and public discourse.

Related concept stocks saw many varieties hitting the limit up today in the A-shares market. In the Hong Kong stock market, major varieties include the producer Maoyan Entertainment (01896) and other indirect varieties such as the channel provider Alibaba Pictures (01060) and the projection provider MAXCHINA (01970).

[Stock Picking]

Hansoh Pharmaceutical (03692): Performance Maintains Rapid Growth, Innovative Drugs Accelerate International Expansion

In 2024, the company achieved revenue of 12.261 billion yuan, a year-on-year increase of 21.3%, with drug sales revenue of 10.688 billion yuan, a year-on-year increase of 13.7%; R&D expenditure was approximately 2.702 billion yuan, a year-on-year increase of 28.8%, accounting for about 22.0% of revenue; profit was 4.372 billion yuan, a year-on-year increase of 33.4%.

Comment: The company's innovative drug revenue accounts for a high proportion, driving rapid performance growth, with self-research and BD dual-wheel drive, a rich early pipeline layout, and active international expansion.

Recently, the company announced that its core product, the third-generation EGFR-TKI Amelot, has been approved in the UK for indications including: 1) as a monotherapy for adult patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) with activating epidermal growth factor receptor (EGFR) mutations; 2) treatment for adult patients with locally advanced or metastatic EGFR T790M mutation-positive non-small cell lung cancer. The company will continue to promote the product's launch in the EU.

The acceleration of innovative drugs going overseas continues, as the company has successfully entered into an overseas licensing agreement with a renowned American pharmaceutical company. The company signed a licensing agreement with Regeneron (REGN.US), granting Regeneron rights to develop, produce, and commercialize the GLP-1 receptor agonist HS-20094 and other pipeline products outside of mainland China and Hong Kong and Macau. The company will receive an upfront payment of $80 million and up to $1.93 billion in milestone payments. Regeneron's recognition indicates that the product quality is high.

In 2023-24, the company successively reached licensing agreements with global pharmaceutical giants GSK (GSKUS) and Merck (MRKUS) in the fields of oncology and metabolism. This latest achievement indicates that the company's R&D strength is highly recognized among well-known overseas enterprises. Hansoh Pharmaceutical has reached its fourth licensing agreement with global pharmaceutical companies in the past two years, highlighting the company's successful innovative transformation