Zhitong Hong Kong Stock Market Analysis | All parties "win big" and the stock market is in high spirits, with market leaders surging and optimistic about the future

[Market Dissection]

Under Trump's regulation, the three major U.S. stock indices reached their highest point since February this year. From the perspective of caring for the stock market, Trump is still reliable. Global stock markets are also in a festive mood. The Hang Seng Index jumped 1.23% today, firmly standing above 24,000 points.

Trump did not forget to "add insult to injury": on the 24th, he stated that both Israel and Iran violated the ceasefire agreement. Trump expressed his dissatisfaction with both countries, especially with Israel. He also stated that Iran's nuclear capabilities no longer exist. By keeping Israel in check, the source is basically controlled, and Iran certainly would not dare to take action.

All parties expressed that they have "won big." According to Xinhua News Agency, Iranian President Ebrahim Raisi stated in an open letter to the Iranian people on the 24th that, after the brave resistance of the Iranian people, the war initiated by Israel, which lasted for 12 days, has come to an end. He also called for all institutions to focus on reconstruction efforts starting immediately. Tens of thousands of people gathered in Tehran and set off fireworks to celebrate. On the same day, Israeli Prime Minister Benjamin Netanyahu stated in a nationwide televised address that Israel has "defeated" Iran's nuclear program and achieved a "historic victory" in the 12-day war with Iran. Everyone is happy, and everyone has good days ahead.

Having extricated himself from the Middle East, Trump can now focus on tariffs. As the deadline for the U.S. to postpone tariffs approaches, the European Union is preparing to take more counter-tariff measures to pressure the U.S. Bjorn Seibert, chief of staff to European Commission President Ursula von der Leyen, stated that before the July 9 deadline for U.S.-EU trade negotiations, the EU needs to coordinate its stance internally and prepare to take more counter-tariff measures against the U.S. to create a "real threat" to the U.S.

The Federal Reserve is also showing some flexibility. On June 24 at 10 a.m. Eastern Time, Federal Reserve Chairman Jerome Powell delivered his semi-annual monetary policy report testimony before the House Financial Services Committee: "If inflationary pressures are indeed under control, then we will be in a position to lower interest rates, sooner rather than later." When asked about the possibility of a rate cut in July, Powell stated, "But I don't want to specify which meeting. I think we don't need to rush because the economy is still strong." The "New Federal Reserve News Agency" reported that Powell does not rule out the possibility of a rate cut in July but hinted that it is more likely to wait until at least September. Regardless, the tone is no longer hardline. The market once again sees the dawn of rate cuts, with a strong response led by real estate.

A few days ago, this column also mentioned that Hong Kong's residential market is already recovering. Morgan Stanley recently released a research report stating that after falling 30% from its peak, Hong Kong housing prices may be entering an upward cycle that could last four to five years.

Additionally, New World Development (00017) has made positive progress. On June 23, the company announced that it is still "actively negotiating" with creditors regarding the refinancing of existing loans, and the negotiations are ongoing. This announcement responds to the highly watched HKD 87.5 billion loan refinancing plan. Recently, it was reported that New World Development has obtained preliminary agreement from all lending institutions on the refinancing plan, including banks that previously opposed it, while a few banks are still drafting formal written commitments. New World hopes to obtain full agreement from over 50 existing lending banks by June 30. New World Development (00017) rose over 8% today, while other properties such as Hang Lung Properties (00101) also rose over 8%, and the trending rising Henderson Land Development (00012) rose over 4% The liquidity in the financial market continues to be injected. On June 25, the central bank will conduct a 300 billion yuan MLF (Medium-term Lending Facility) operation through fixed quantity, interest rate bidding, and multiple price bidding methods, with a term of one year. Given that 182 billion yuan of MLF is maturing in June, this results in a net injection of 118 billion yuan, marking the central bank's fourth consecutive month of exceeding the renewal of maturing MLF. Following the expectation of interest rate cuts in the United States, mortgage rates are expected to decrease further. Strong performers in the domestic market include property-related companies such as Shimao Services (00873), Greentown Management Holdings (09979), Evergrande Property (06666), and China Overseas Grand Oceans (00081), all of which have risen over 5%.

Today, the strongest market force is the "stock market flagbearers" making a comprehensive effort, triggered by Guotai Junan International (01788) officially receiving approval from the Hong Kong Securities and Futures Commission yesterday to upgrade its existing securities trading license to provide virtual asset trading services and related consulting opinions. The company becomes the first Hong Kong-based Chinese securities firm with comprehensive virtual asset service capabilities, marking a key step for traditional Chinese financial institutions to deeply participate in virtual asset trading. This means that clients of Guotai Junan International will soon be able to directly trade various virtual assets, including mainstream cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), as well as stablecoins like Tether (USDT), through its platform. The large volume of virtual currencies can further attract dollar assets.

As a result, there is a capital competition between China and the United States in this field, with major securities firms actively pushing in this direction, which is the original driving force behind the collective strength of securities stocks today. Additionally, the strength of securities stocks also highlights optimism for the future market. The previously mentioned Hongye Futures (03678) has seen renewed market enthusiasm due to its scarce full license, continuing to surge over 33%. The leading investment advisory firm Jiufang Zhitu Holdings (09636) rose over 12%, while other firms such as Zhongzhou Securities (01375), China Everbright Holdings (00165), Shenwan Hongyuan (06806), and China Merchants Securities (06099) rose over 13%.

U.S. solid-state battery company Quantumscape surged over 30% in after-hours trading on Tuesday. The company stated that it has successfully integrated its Cobra separator process into its standard battery production line, which will serve as the foundation for its high-efficiency continuous flow separator production system. From an industrial progress perspective, several companies have recently disclosed their latest advancements and mass production timelines in the solid-state battery field. The rapid development of solid-state batteries is expected to bring a comprehensive update to the lithium battery industry chain and significantly enhance equipment value. The target mass production timelines for leading companies are mostly set for 2026-2027, with Longpan Technology (02465) and CATL (03750) both rising over 4%.

On June 24, the State Council Information Office confirmed that a military parade will be held on September 3, showcasing all domestically produced active main battle equipment. In addition to displaying a new generation of traditional weaponry, some new combat forces, including unmanned intelligence, underwater operations, cyber offense and defense, and hypersonic capabilities, will also be featured. In 2024, global military spending will increase for the 10th consecutive year, with particularly rapid growth in Europe and the Middle East. At this NATO summit, countries generally plan to increase military spending, with related Hong Kong stocks including AVIC Industry (02357) and China Shipbuilding Defense (00317) All major banks are optimistic about gaming. JP Morgan released a research report stating that in the first 22 days of this month, Macau's gaming gross revenue reached 14.8 billion patacas, averaging over 670 million patacas per day. This implies that the average daily gaming gross revenue for the last seven days is 685 million patacas, similar to May's 684 million patacas, breaking the seasonal slump in June. Citigroup raised its forecast for June's total gaming revenue in Macau from 18.5 billion patacas to 19 billion patacas to reflect the trend of total gaming revenue so far this month, indicating that the average daily total gaming revenue for the remaining days of this month is about 600 million patacas. Leading companies Sands China (01928) and Galaxy Entertainment (00027) are both emerging from the bottom.

【Sector Focus】

Micron officially confirms the discontinuation of DDR4, with Micron's DDR4 capacity accounting for 25%, and DDR4 will continue to be "severely out of stock."

In May, the spot price of DDR4 increased by 9%-37% month-on-month, and since June, the increase has reached 17%-37%. In just two weeks, its spot price has risen by about 50%, and prices for various capacities have skyrocketed more than twice since the second quarter.

According to the Science and Technology Innovation Board Daily on the 24th, the DRAM pricing website DRAMeXchange shows that the spot price of DDR4 continues to soar, with the average price of DDR4 16Gb chips at $12 on the evening of the 23rd. The price for the same 16Gb capacity DDR5 (2Gx8) 4800/5600 is quoted at $6.014, marking the first time in DRAM history that the previous generation product is priced 100% higher than the latest specifications.

After the exit of the three major manufacturers, Changxin Storage (unlisted) is facing tight capacity, and SMIC (00981) may become a secondary alternative. The gap in automotive and industrial storage is widening (Micron only retains supply in this area), and relevant orders for Hua Hong Semiconductor (01347) are expected to increase. Shanghai Fudan (01385) is deeply cooperating with Changxin and Yangtze Memory in the Xinchuang field. The shortage of DDR4 is accelerating domestic module manufacturers' shift to local solutions, increasing demand for their storage control chips. Changxin Storage is accelerating the expansion of DDR5 and transforming into high-end DRAM, driving demand for ASMPT (00522) packaging and testing equipment.

【Stock Picking】

Hua Hong Semiconductor (01347): Domestic substitution is expected to accelerate, promoting considerable future growth potential.

According to Global Network news, U.S. Commerce Department officials have notified major global semiconductor manufacturers such as TSMC and Samsung that they plan to revoke exemptions that allow these companies to use U.S. technology in mainland China. The company achieved sales revenue of $541 million in Q1 2025 (YoY +17.6%, QoQ +0.33%).

Commentary: The U.S. plans to tighten semiconductor technology exemptions, and the urgent need for self-controlled core links in the semiconductor supply chain remains pressing, with domestic substitution expected to accelerate. As of the end of Q1 2025, the company's monthly capacity equivalent to 8-inch wafers is 413,000 pieces, and the shipment of wafers equivalent to 8-inch in Q1 2025 is 1,231,000 pieces (YoY +20.0%, QoQ +1.5%), with a capacity utilization rate of 102.7% (YoY +11.0pct, QoQ -0.5pct) remaining stable. Due to factors such as increased depreciation from the expansion of the second 12-inch production line, the gross profit margin in Q1 2025 fell month-on-month. The company expects revenue of about $550-570 million in Q2 2025, with a gross profit margin of 7%-9%, overall remaining stable With downstream demand steadily recovering, the company expects prices to gradually rise. Fab 9, as a new capacity base for Hua Hong Semiconductor, is anticipated to bring significant revenue growth as its capacity ramps up, with considerable growth potential in the future.

Cooperation with overseas clients is progressing smoothly. The company has become a preferred foundry choice for overseas companies like STMicroelectronics in China; it is expected that Hua Hong's foundry MCU products will accelerate their launch into the Chinese market. Hua Hong Semiconductor stated that a new round of price increases may begin, with capacity ramp-up bringing revenue growth potential, and is optimistic about the enhancement of Hua Hong Semiconductor's overall competitiveness following the acquisition of Huali Microelectronics.

Overseas leading memory manufacturers are planning to reduce output in 2025, and supply is expected to gradually contract. Downstream demand is warming up, and from March to May 2025, the comprehensive price index for DRAM and NAND has continued to rise month-on-month, indicating that a new cycle of recovery for memory may have arrived