Zhitong Hong Kong Stock Analysis | The Independence of the Federal Reserve is Questioned, Gold Gains Momentum, and AI-Friendly Policies Resurface

[Market Dissection]

Overnight, the three major U.S. stock indices all experienced adjustments, and Europe is also facing troubles. French Prime Minister Élisabeth Borne has decided to initiate a vote of no confidence regarding her significant budget cuts plan, but the three main opposition parties have stated they will not support this vote. The French stock market led the decline in Europe, with the CAC 40 index dropping over 2%. The Hong Kong stock market surged too aggressively yesterday, so a correction today is normal, closing down 1.18%.

Wall Street's optimism about the Federal Reserve's interest rate cuts has not yet settled, and Trump's threat to dismiss Federal Reserve Governor Lisa Cook has raised concerns. Cook's term was originally set to end in 2038, and if Trump successfully dismisses Cook, he would have the opportunity to secure a majority of four seats on the seven-member Federal Reserve Board, potentially directly influencing future monetary policy. If the independence of the Federal Reserve is called into question, confidence in dollar assets will waver. Investors will turn their attention to traditional safe-haven assets such as gold and yen, as well as cryptocurrencies. Gold stocks have strengthened again, with CHINAGOLDINTL (02099) turning a profit in its interim report, showing strong growth momentum in its main business, and there is significant room for future capacity increases, such as at the Jiamar Mine and Youlongbu Tailings Reservoir. Additionally, the company is conducting exploration work in the Bayi Ranch and Zhegu Langbei exploration areas, which have shown substantial resource potential, likely supporting larger-scale expansions in the future. Today, it surged over 10%, while other varieties like Lingbao Gold (03330) also rose over 9%; Zhaojin Mining (01818) and Shandong Gold (01787) increased over 4%.

Trump has once again waved the tariff stick, threatening to impose approximately 200% tariffs on rare earth magnet supplies from China. China will certainly not indulge him, but Europe is less certain. On Monday Eastern Time, Trump threatened that if countries imposing digital taxes do not repeal such legislation, the U.S. will impose "subsequent additional tariffs" on goods from those countries. The performance of U.S. tech giants—including Alphabet, Meta, Apple, and Amazon—has been significantly affected by this tax. Trump's threats generally have a strong impact on Europe, and it is highly likely that these taxes will be repealed, which could amount to a considerable sum, likely resulting in significant contributions to the treasury.

On Monday, the U.S. government proposed adding copper, silicon, silver, and other materials to the 2025 critical minerals list, as they are vital to the U.S. economy and national security. Additionally, the U.S. Geological Survey indicated it would analyze the possibility of including uranium and metallurgical coal. The U.S. tariff war has reached a point of concern about backlash, and it seems these critical minerals will need to be exempt from tariffs; otherwise, they simply cannot withstand the pressure. Jiangxi Copper (00358) and China Nonferrous Metal Mining (01258), mentioned yesterday, both rose over 2% again.

The gaming stocks mentioned yesterday received another catalyst, with Golden Century Holdings (03918) reporting strong interim results, with total gaming revenue of approximately $332 million in the first half, a year-on-year increase of 17.2%; net profit was approximately $149 million, a year-on-year increase of 68.8%. It surged nearly 18%, reaching a new high for the period, while other stocks like Melco International Development (00200) rose over 9%, and Wynn Macau (01128) increased over 5%.

Automobile stocks are still in a brutal elimination round. Previously discussed were mainly order volumes, and the latest view is on accelerating R&D speed. Over the past forty years, the pace of automotive R&D has hardly changed: it generally takes four to five years for a new car to go from project approval to market launch This cycle is both a guarantee of quality and a prerequisite for supply chain stability. However, this logic is being subverted by Chinese electric vehicle companies and Tesla: the time has been compressed to two years, allowing a brand new model to complete its journey from concept to mass production. The pace has nearly doubled. By this standard, those who cannot keep up with this rhythm will likely struggle to survive. Currently, the market recognizes XPeng (09868) and Great Wall Motors (02333).

Puma, which has long held a top three position in the industry, can no longer withstand the pressure. Recently, market news indicated that the Pino family is considering strategic options for the German sports brand Puma, including a potential sale. The Pino family is working with advisors and engaging with potential buyers, including Anta and Li Ning, and has also explored interest from other American sportswear companies and sovereign wealth funds in the Middle East. Anta (02020) responded that they do not comment on market rumors. Li Ning (02331) stated that as of now, the company has not conducted any substantive negotiations or evaluations regarding the transactions mentioned in the rumors. There are not many strong players currently, and it is estimated that Chinese companies will still be the ones to take over. Both of these companies have opportunities and will continue to be monitored for further developments.

The reason overseas companies are struggling is that Chinese companies are becoming increasingly competitive, continuously eating into the market share of foreign enterprises. Therefore, domestic companies that are strong and capable of expanding their territory have significant momentum, such as Angelalign (06699), which reported mid-term results with revenue of $161.4 million, a year-on-year increase of 33.1%. Gross profit was approximately $100 million, a year-on-year increase of 32.9%. Adjusted net profit was $19.5 million, a year-on-year increase of 84.8%. The profit attributable to the company's owners was $14.643 million, a year-on-year increase of 362.65%; earnings per share were $0.09, with a special interim dividend of HKD 0.46 per share. The domestic invisible orthodontics market is highly concentrated, with Angelalign holding a 41.70% market share in 2022, ranking first. The global invisible orthodontics market shows a situation of one strong player and many strong competitors, with Align Technology holding a 64% market share globally in 2023, while Angelalign's global market share is only 4%, indicating that the company still has significant development space in overseas markets. The focus is on overseas markets, and today it surged over 10%.

The globally renowned index company MSCI previously announced the results of its index review for August 2025. Among them, Meitu (01357) was included in the MSCI China Index, which will officially take effect after the market closes today (26th). Today it rose nearly 8%.

【Sector Focus】

The State Council recently issued the "Opinions on Deepening the Implementation of the 'Artificial Intelligence+' Action," proposing that by 2027, artificial intelligence should be widely and deeply integrated with six key areas, with the penetration rate of new generation intelligent terminals, intelligent agents, and other applications exceeding 70%. The scale of core industries in the intelligent economy will grow rapidly, the role of artificial intelligence in public governance will be significantly enhanced, and the open cooperation system for artificial intelligence will continue to improve.

Key content includes: strengthening technological collaborative innovation between artificial intelligence and fields such as biomanufacturing, quantum technology, and sixth-generation mobile communication (6G); increasing financial and fiscal support for the artificial intelligence sector; and vigorously developing new generation intelligent terminals such as smart connected vehicles, AI smartphones and computers, intelligent robots, smart homes, and smart wearables Looking at the time, it has been less than a year and a half, which can be considered very urgent. Next, capital expenditure will focus on the artificial intelligence field, mainly benefiting chip-related companies: Semiconductor Manufacturing International Corporation (00981); computing power and large models from SenseTime; others include Weimob Group (02013), Fourth Paradigm (06682), Kingdee International (00268), and Mingyuan Cloud (00909).

【Stock Picking】

SenseTime-W (00020): Recent financial report may show improvement expectations, leading in global technology stack competitiveness

According to predictions by Zhongtai Securities, SenseTime's total revenue for 2025 is expected to be CNY 4.872 billion. Based on historical seasonal distribution, the first half of the year accounts for about 40%-45%, so the interim report revenue is expected to be between CNY 1.95 billion and CNY 2.2 billion, a year-on-year increase of about 25%-30%. In terms of profitability, it is expected that the loss in the first half of 2025 will narrow to CNY 1.8 billion to CNY 2 billion, a year-on-year decrease of about 10%-20%. If the revenue from Lingang AIDC exceeds expectations, there is a possibility of turning a profit. The company will disclose its interim report for the 2025 fiscal year on August 28.

Comment: The company's recent performance has been strong, possibly related to improved expectations for the financial report. The company's technology stack innovation index ranks second globally and first domestically, especially leading Alibaba Cloud and Baidu Smart Cloud in areas such as resource utilization optimization and model compression. Its "Daily New" large model is comparable to GPT-4 in multimodal capabilities, with model invocation volume in Q2 2025 increasing by 300% year-on-year, and the willingness of clients in financial and government sectors to pay increasing sixfold. The company's market share in intelligent cockpit visual AI software has ranked first globally for five consecutive years (reaching 38% in Q1 2025), with its Zhi Ying intelligent driving holding a 7.2% market share in the urban NOA market (third place). The end-to-end solution UniAD has completed high-difficulty real vehicle testing, with over 2.6 million units delivered. The company holds over 1,200 patents, and its self-developed AI chip "Yuan Nao" has energy efficiency comparable to international mainstream levels, while solid-state battery research and development has entered the pilot test stage (energy density 350Wh/kg), with plans for mass production in 2027. Global layout: overseas revenue share is expected to increase from 18% in 2023 to 27% in 2024, but the growth rate in Q1 2025 has slowed to 15%, requiring attention to geopolitical risks (such as AI regulatory policies in Europe and the United States). The company is collaborating with the Chinese Academy of Sciences to develop semi-solid batteries and has invested in New Source Power (hydrogen fuel cells). In 2024, it will participate in establishing the Shanghai Artificial Intelligence Ecological Fund (scale of CNY 10 billion), focusing on the large model industry chain. The company is optimistic about the intensive release of AI + AR glasses by major manufacturers and the iterative improvement of large models on the interactive capabilities of AI + AR glasses