Zhitong Hong Kong Stock Analysis | The Rise of Pharmaceutical Stocks Amid Interest Rate Cuts: "Cold King" Adjusts, "Ning King" Takes Over

[Market Dissection]

Today is the last trading day of August. Despite the impact of institutional portfolio adjustments, the Hang Seng Index remained relatively stable, closing up 0.32% as both the US and A-shares ended in the green.

Although Cook appealed against Trump's overreach in dismissal, and the independence of the Federal Reserve faces legal scrutiny, the market seems unfazed. Investors are shifting their focus to interest rate cuts. Federal Reserve Governor Waller has intensified calls for lowering short-term borrowing costs in the US, stating he would support a rate cut next month and further cuts in the next three to six months to prevent a collapse in the labor market. Waller is a strong candidate for the future chair of the Federal Reserve, and his statements carry significant weight, essentially declaring that a rate cut in September is a done deal. Following this signal, the RMB exchange rate surged sharply, rising over 340 points at one point, reaching around 7.11 yuan.

Overnight gold prices surpassed $3,400 per ounce, hitting a five-week high. Gold stocks were directly catalyzed, and of course, performance was also a significant driver. Zijin Mining (02899) reported a net profit attributable to shareholders of 23.292 billion yuan in the first half of the year, an increase of 54.41% year-on-year, and today it rose over 3%. Chifeng Gold (06693) reported a net profit attributable to shareholders of 1.107 billion yuan in the first half of the year, a substantial increase of 55.79% year-on-year, and today it rose nearly 6%. Zhaojin Mining (01818) reported a net profit attributable to shareholders of 1.440 billion yuan in the first half of the year, a staggering increase of 160.44% year-on-year, and today it rose over 4%. Leading player China National Gold International (02099) surged over 8%. The copper industry, which has been mentioned multiple times, also performed well, with China Nonferrous Mining (01258) reporting a net profit of $263 million in the first half of the year, a year-on-year increase of 20.2%. The improvement in performance is mainly due to the rise in international copper prices, increased production and sales of copper and anode copper from its own mines, and increased sales of cathode copper year-on-year. Jiangxi Copper (00358) reported a net profit attributable to shareholders of 4.175 billion yuan in the first half of the year, a year-on-year increase of 15.42%, with both major products rising over 8%.

The US interest rate cut is beneficial for the innovative drug industry, as the characteristics of the innovative drug industry itself—“high investment, long cycle, high risk”—make it very sensitive to funding costs. The rate cut directly reduces the financing costs for companies. Additionally, rate cuts usually lead to an expansion of dollar liquidity. Some global capital may seek other high-growth markets. Chinese companies are not only in the global top tier in cutting-edge fields such as ADC and dual antibodies, but their innovative achievements have also gained recognition from international giants. Therefore, expectations for capital inflow have greatly increased. Today, related innovative drug companies such as WuXi Biologics (02269), Innovent Biologics (01801), WuXi AppTec (02359), and Ascletis Pharma (02096) all rose over 6%.

Recently, the AI sector, which has been performing strongly, has encountered a cooling period. The National Development and Reform Commission held a press conference at 10 a.m. today. Zhang Kailin, Deputy Director of the High Technology Department of the National Development and Reform Commission, stated at the press conference that the development of "Artificial Intelligence +" must firmly avoid disorderly competition and a rush to enter the market. The leading company Cambricon Technologies (688256.SH) has once again issued a stock trading risk warning, marking the second announcement regarding stock price fluctuations since August. Additionally, East China Semiconductor (688110.SH) announced on the evening of the 28th that its stock price has repeatedly triggered abnormal trading fluctuations and severe abnormal fluctuations since July 29 To protect the interests of investors, the company will conduct a suspension review regarding stock trading fluctuations. In this atmosphere, capital has halted its offensive pace. Semiconductor Manufacturing International Corporation (00981) announced its interim results, with a net profit attributable to the parent company of approximately USD 320 million, a year-on-year increase of 35.6%. The performance is quite good, and subsequent capacity is in short supply. Today, there was a slight passive adjustment, but it remains promising in the future.

Interestingly, the stock price of "Mao Wang" has surpassed "Han Wang" again. Today, Kweichow Moutai (600519.SH) rose over 2%. It seems that the competition for the stock king is quite fierce, but as always, "sauce-flavored technology" is unlikely to remain the highest-priced variety for the long term. The era of Moutai has passed at this stage, whether from the market environment, economic environment, or policy environment; that high-speed development soil is no longer available. It will enter a low-speed development period, but as a stable defensive stock, it is still acceptable. After all, its moat is deep enough. There are many competing products in other aromatic liquors, but there are no rivals for sauce-flavored Moutai; the entire Moutai Town relies on the Moutai brand to sustain itself. Looking ahead, if the economy enters a prosperous period and private purchasing power increases, Moutai's sales will rise. Moutai's rebound today directly drove the rebound of Zhenjiu Lidu (06979) by over 6%. The second half of the year enters the peak season, mainly depending on whether the sales of new light bottles can pick up.

"Han Wang" adjusted, while "Ning Wang" stood up again. Contemporary Amperex Technology Co., Limited (CATL) was favored by capital today, mainly because the battery equipment leader, Siengda Intelligent (300450.SH), and Hangke Technology (688006.SH) each released an unexpectedly good interim report, both hitting the daily limit. Siengda Intelligent's second-quarter revenue was 3.512 billion yuan, a year-on-year increase of 43.86%; net profit attributable to the parent company was 375 million yuan, a year-on-year increase of 456.29%. This data is quite explosive. Siengda Intelligent's largest customer is CATL, and the two are basically bound together. The strength of equipment indicates that a new round of capacity expansion in the battery industry has begun. Some small articles claim that CATL's annual production capacity exceeds 700 GWh, and it is expected that this year's actual output will be revised up by 30 GWh to reach 700 GWh, an increase of about 36%. Under this expectation, CATL (03750) rose over 4%, and other lithium battery-related stocks like Zhongchuang Xinhang (03931) also rose nearly 6%. Additionally, Tianneng Power (00819) announced its results today, with a profit attributable to shareholders of 820 million yuan, a year-on-year decrease of 11.68%. However, the stock price surged over 10% today, mainly because the company suspended its unprofitable lithium battery business and refocused on its core lead-acid battery business. The highlights include the development of AI and the incremental stimulus brought by the new national standard policy for lead-acid batteries, as well as the orderly advancement of the Vietnam base into overseas markets.

Guotai Junan International (01788) announced on August 28 that Guotai Haitong Group's subsidiary, Guotai Junan International Holdings Limited, officially launched cryptocurrency trading services for Hong Kong investors, aiming to meet the growing demand of Hong Kong investors for the cryptocurrency market. The announcement stated that after successfully opening a cryptocurrency account, customers can immediately trade various cryptocurrencies, including Bitcoin and Ethereum. Today, it rose over 15% [Sector Focus]

On August 29, Foreign Ministry spokesperson Guo Jia Kun expressed serious concerns over the U.S. military's plan to deploy the "Aegis" medium-range missile system in Japan, stating that this would harm the legitimate security interests of other countries and pose a substantial threat to regional strategic security. China urges the U.S. and Japan to respect the security concerns of other countries and refrain from introducing the "Aegis" medium-range missile system, taking concrete actions to contribute positively to regional peace and stability.

Next, the grand parade commemorating the 80th anniversary of the victory of the Chinese People's Anti-Japanese War and the World Anti-Fascist War will commence, and any attempts by external forces to stir trouble are bound to be futile. The strong national defense capability is the true guarantee of security.

Let's see if there are opportunities in related military industry stocks. Main varieties: China Shipbuilding Defense (00317), Aviation Industry Corporation of China (02357).

[Stock Picking]

BYD Electronics (00285): Significant progress in liquid cooling technology, overall improvement in the electric vehicle industry chain

Apple plans to begin a major three-year design overhaul for the iPhone 17 series starting in September 2025, entering large-scale production in the third quarter. In July of this year, parent company BYD saw a year-on-year surge of 225% in electric vehicle registrations in Europe, reaching 13,503 units, surpassing Tesla. In the first half of 2025, the group recorded sales of approximately RMB 80.606 billion, an increase of about 2.58% year-on-year, with attributable profit rising approximately 13.97% to about RMB 1.730 billion.

Commentary: The performance is very stable, with some drag from consumer electronics, but the new energy vehicles and AI sectors are performing well. The company is a core subsidiary of BYD Group, focusing on R&D and manufacturing services in automotive electronics, AI, and consumer electronics. In automotive electronics: Intelligent upgrades, smart driving, and smart cockpit participation in the "Tian Shen Zhi Yan" intelligent driving system, covering multiple models. Intelligent suspension system: Self-developed "Yun Niao" intelligent suspension system has begun mass production. Thermal management and sensors: Continuously expanding product lines to enhance vehicle value. The traditional peak season for consumer electronics is approaching in the third quarter, with major terminals intensively launching new AI smartphones and AR glasses, driving industry demand.

In terms of AI business: Cloud: Collaborating with NVIDIA to layout servers and liquid cooling technology, entering the data center market. The company has made significant progress in liquid cooling technology through close cooperation with NVIDIA. The company has mastered immersion liquid cooling technology and plans to launch corresponding server products. The company is developing AMR robots based on the NVIDIA platform to promote intelligent manufacturing. Consumer electronics: Major clients and innovative acquisitions of Jabil's (Jabil) partial business deepen cooperation with major clients like Apple. Layout in emerging consumer electronics fields such as foldable screens and AI glasses.

Recently, BYD Electronics has strengthened its internal incentive mechanism through equity incentives, promoting the execution of company strategy and long-term development. BYD's competitiveness in the global market continues to improve, positively impacting its subsidiary BYD Electronics. BYD Electronics has advantages in the electric vehicle components sector, benefiting from the overall positive trend in the industry. In the future, with the continuous development of automotive intelligence, AI, and consumer electronics, the company is expected to achieve steady growth