Zhitong Hong Kong Stock Analysis | Favorable news for innovative drugs emerges one after another, foldable screens ignite consumer electronics

[Market Dissection]

From the index perspective, the Hang Seng Index fell by 0.63% today, but the internal structure is not bad. This is because larger weighted stocks are adjusting, such as Xiaomi (01810), which has been criticized for "order transfers" and insufficient production capacity. Other varieties are not considered weak.

According to CCTV News, in the early hours of July 3rd Eastern Time, which is this afternoon Beijing time, the U.S. House of Representatives, controlled by the Republican Party, passed procedural rules with a narrow margin of 219 votes in favor and 213 votes against, clearing the way for comprehensive debate and final voting later. Although there were twists and turns, it is certain that it will eventually pass, which is all within expectations.

The "little non-farm" ADP employment data came in unexpectedly weak, marking the first negative growth since March 2023. Tonight's big non-farm payrolls are also not expected to be optimistic, with most institutions predicting below 100,000, lower than the market's general expectation of 110,000 new jobs. Theoretically, this brings a glimmer of hope for a rate cut in July. Trump is also very anxious; on July 2nd local time, U.S. President Trump shared an article titled "Federal Housing Finance Agency Director: The Federal Reserve Chairman Should Accept Congressional Investigation" on social media. Trump commented that "Mr. Too Late" should resign immediately. However, Powell may not yield, as the Federal Reserve is not under his control.

U.S. tariffs have finally broken the ice with Vietnam. According to CCTV News, U.S. President Trump stated on July 2nd local time that the U.S. has reached a trade agreement with Vietnam. All goods exported from Vietnam to the U.S. will face at least a 20% tariff, and the U.S. will "fully open its market." This news is actually better than expected, and most Chinese exporters may continue to operate in Vietnam. From the companies' perspective, the final tariff rate is within a controllable range. For example, Shenzhou International (02313), which has deep roots in Vietnam, rose by 2.44%. However, there is an additional condition that goods exported from Vietnam to the U.S. will face a 40% tariff, including some Chinese goods. In other words, this is mainly aimed at China. For these "washed" goods, the follow-up response will be to reroute them to other countries, so it is expected that DTX Shipping (02510) will benefit, rising over 4% today.

The Ministry of Commerce stated: firmly opposes any party reaching a deal at the expense of China's interests. If such a situation occurs, China will resolutely counteract to safeguard its legitimate rights and interests. The Ministry of Commerce responded to reports about the U.S. president planning to lead a business delegation to visit China: I have no information to provide. This highlights China's stance and indicates that the shadow of the tariff war continues to loom. Therefore, the market trend is relatively tangled.

This morning, Dizhe Pharmaceutical (688192.SH) announced that the new drug Shuwozhe's application for market launch has officially been approved by the U.S. Food and Drug Administration (FDA). This is the company's first overseas innovative drug and also the first globally innovative drug independently developed in China to be approved in the U.S. This is significant and stimulates innovative drugs again. In the Hong Kong stock market, there are also many positive developments for pharmaceutical stocks. Kangfang Biologics (09926) announced that the Phase Ia clinical study of AK146D1 for the treatment of advanced solid tumors has completed the enrollment of its first subject, indicating that it has entered the clinical stage. Today it surged over 14%. Basestone Pharmaceuticals-B (02616) released an announcement disclosing the targets of two self-developed bispecific antibody drugs for autoimmune/inflammatory diseases, which also rose over 9% today. Other companies with potential similar themes, such as Junshi Biosciences (01877) and Innovent Biologics (01801), also saw good gains Focus on the trend-following Sanofi (01530) and Genting New Year (01952).

Consumer electronics have become popular today due to foldable screens. Apple's foldable iPhone has entered the P1 (Prototype 1) development stage in June, and Apple's existing core suppliers are expected to be among the first beneficiaries, with more consumer electronics suppliers entering the upstream components of foldable screens. Apple's foldable screen shipments for 2026 may have been revised up to 15 million units. Domestic major manufacturers are already laying out plans; on July 2, Honor released a new foldable smartphone, Magic V5, focusing on deep AI integration. Related stocks FITHONTENG (06088) surged over 7%, while Sunny Optical (02382), Q Technology (01478), and GoerTek (01415) all rose over 4%.

NVIDIA's stock price recently hit a new historical high, as the mass production of NVIDIA's GB200 reaches its peak, and the next-generation AI server chip GB300 is expected to be launched in the second half of 2025. Naturally, the domestic PCB/CCL industry will benefit, and domestic AI infrastructure is also accelerating. Alibaba Cloud will invest over 400 million RMB in the coming year. According to a research report from Tianfeng Securities, the market space for M8 PCB boards corresponding to AI servers and switches is expected to be 50-60 billion by 2026. A significant beneficiary in the Hong Kong stock market is the July gold stock from Zhitong, Kingboard Laminates (01888), which surged over 8% today. Kingboard Group (00148) also rose over 4%.

The 4th Solid-State Battery Conference and Silicon-Based Anode Industry Innovation Conference will be held from July 3 to 5 in Ningbo, Zhejiang. Currently, semi-solid batteries are starting to be scaled for installation, while all-solid-state batteries are expected to begin small-scale deployment in 2027 and be applied on a large scale in the energy storage field after 2030. The low-altitude economy and humanoid robots are also expected to open up application space. Industry giant CATL (03750) officially announced an increase in investment in silicon-based anode solid-state battery technology after hours, rising 2.69% today, reaching a new high. Overseas major banks are also increasing their positions; the Hong Kong Stock Exchange's information system shows that Morgan Stanley's long position in CATL's H shares increased from 7.05% to 8.09% on June 27. Morgan Stanley's short position in CATL's H shares increased from 4.86% to 5.83%.

The popularity of solid-state batteries has also stimulated the upstream sector. Yesterday, Ganfeng Lithium (01772), mentioned in the stock picking, received good news: its wholly-owned subsidiary Ganfeng International Limited plans to acquire the remaining 40% equity of Mali Lithium B.V. from Leo Lithium Limited with its own funds of USD 342.7 million. Recently, the company has delivered the full payment for the acquisition of Mali Lithium's equity and completed the equity transfer. The Mali Goulamina lithium spodumene project under Mali Lithium has officially started production with an annual capacity of 506,000 tons of lithium concentrate, and the capacity is gradually being released. Today it rose over 5%.

The stablecoin license has also gained traction today, with Multi-Point Smart (02586) stating that it is preparing to apply for a stablecoin license in Hong Kong. It surged nearly 90% at one point today but later fell back to 23%. This stock was a gold stock in June. Meanwhile, Guotai Junan International (01788), which has already obtained a license, also benefited from this trend, with the added concept being its investment banking business. According to the Hong Kong Stock Exchange, Changchun Changguang Chenxin Microelectronics Co., Ltd. has submitted a listing application to the main board of the Hong Kong Stock Exchange CITIC Securities and Guotai Junan International are its joint sponsors. Since the merger of Guotai Junan and Haitong Securities, Guotai Haitong Securities has topped the industry with a total of 26 sponsorship representatives. Today it rose over 11%.

Recently, metal prices have been quite strong, with China Hongqiao (01378) in the aluminum sector reaching a historical high, and Minmetals Resources (01208) hitting an annual high. Jiangxi Copper (00358) and China Aluminum (02600) are also trending upwards. Additionally, the copper concept stock Zijing Mining (02899), highlighted as a July gold stock by Zhitong, has shown the strongest performance in the gold sector, as the Hong Kong Stock Exchange has confirmed that the company can proceed with a proposed spin-off listing. Furthermore, its wholly-owned subsidiary Zijing Gold International plans to acquire 100% equity in the RG gold mine project held by Cantech for a consideration of USD 1.2 billion, with the specific acquisition targets consisting of 100% equity in RGG (holding mining assets) and 100% equity in RGP (holding processing plant assets) held by Cantech. Today it rose over 3%.

【Sector Focus】

Recently, the Shanghai Automobile Sales Industry Association, Jiangsu Provincial Federation of Industry and Commerce Automobile Dealers Association, Zhejiang Provincial Automobile Circulation Association, and Anhui Provincial Automobile Dealers Association jointly issued a letter requesting that manufacturers improve the operational difficulties faced by automobile dealers in the Yangtze River Delta region. From the perspective of the dealer industry, there are four prominent issues, including imbalanced target setting by manufacturers; distorted rebate systems; collapsed pricing systems; and damaged supporting services.

The All-China Automobile Dealers Association suggests that manufacturers and dealers share a cooperative relationship and should fully recognize the direct impact of timely rebate fulfillment on dealers. They should come up with practical solutions to thoroughly resolve long-standing issues troubling dealers, such as unclear rebate policies, rebate fulfillment periods, and restrictions on rebate usage. Only in this way can a mutually trusting and win-win cooperative ecosystem be built between manufacturers and dealers, addressing the "involution" competition problem existing in the automobile industry at a deeper level. The involution in the automobile industry is evident, resulting in difficulties for everyone. Although this is merely an initiative issued by the association, its influence is significant. It is expected that the relevant authorities will also pay close attention. Once the involution decreases, related auto parts companies will improve their performance, as profits will emerge from shortened payment periods.

Main varieties: Minth Group (00425), Nexperia (01316), Fuyao Glass (03606).

【Stock Picking】

Dachang Shipping (02510): Continuously launching new ocean routes to the Middle East and India-Pakistan routes is worth looking forward to

In 2024, Dachang Shipping achieved revenue of USD 1.34 billion, a year-on-year increase of 53.3%; profit attributable to equity shareholders was USD 366 million, a year-on-year increase of 1666.9%.

Commentary: In recent years, Dachang Shipping has continuously launched new ocean routes to expand its service network, extending trade routes to New Zealand and Canada in 2021, to the UK, Netherlands, Germany, Belgium, and the US East Coast in 2022, and opening routes to Indonesia and East Africa in 2023. As of December 31, 2024, Dachang Shipping operates 46 routes, including 11 independently operated, 22 joint operations, 10 space swaps, and 3 space leases, covering 61 major ports in 20 countries and regions worldwide Layout in the medium and large vessel market. In 2021, on the occasion of its 20th anniversary, Yang Ming Marine Transport ordered 6 ships of 7000 TEU container vessels from Shanghai Waigaoqiao Shipbuilding, marking the first batch of medium to long-distance route vessels for the next 20 years. Last year, Yang Ming Marine Transport also ordered 3 ships of 14000 TEU container vessels and 3 ships of 7092 TEU container vessels from Shanghai Waigaoqiao Shipbuilding, marking its first order for ten-thousand TEU vessels. The 5 ships of 1900 TEU container vessels and 3 ships of 2700 TEU container vessels previously ordered from Huangpu Wenchong have all been delivered with high quality, adding new strength to Yang Ming Marine Transport's operational fleet. In September 2024, Yang Ming Marine Transport signed a construction contract for 2 ships of 4300 TEU container vessels with Huangpu Wenchong. Recently, Yang Ming Marine Transport placed an order for 5+5 ships of 5000 TEU container vessels with Huangpu Wenchong, with the new ships using traditional fuel and expected to be delivered in the second quarter of 2028. The cost of each new ship is approximately $62.5 million, and the total transaction amount will reach $625 million after the confirmation of the alternative order. The company's Middle Eastern shareholders empower the expansion of the India-Pakistan and Middle Eastern route businesses along the "Belt and Road," further enhancing Yang Ming Marine Transport's competitiveness and growth potential. The second largest shareholder, Mr. Sharafuddin, as the founder of Shara Shipping Agency, one of the largest shipping companies in the Middle East, has established a solid local resource foundation for Yang Ming Marine Transport through business cooperation, and it is expected that routes in the Middle East and India-Pakistan will become growth drivers for the company's future performance