Zhitong Hong Kong Stock Analysis | The competition for large models has already begun, and resource stocks continue to strengthen

[Market Dissection]

Global markets continue to be in a state of chaos, with only the Dow Jones Industrial Average supporting the U.S. stock market, while others are all down; the Korea Composite Stock Price Index fell by 4.5%, SK Hynix dropped by 10%, the Nikkei 225 Index fell by 1.6%, and the Tokyo Stock Exchange Index fell by 0.4%. Kioxia in Japan dropped by 9%. The A-shares performed relatively well, while the Hong Kong stocks gapped down, falling by 1.49%.

Trump claimed that an agreement is close to being reached, but that is not the case; it was just a verbal boost for the stock market. Iran stated that it is close to reaching an agreement with Oman, and two shipping lanes in the Strait will be closed, with "charging standards" remaining a core disagreement. This essentially tacitly acknowledges Iran's control. After all the efforts by the U.S., the result is that Iran smoothly completed the power transition and also gained control of the Strait, and it is expected that asset unfreezing and compensation will follow.

In July, the ADP private sector added 44,000 jobs, lower than the market expectation of 75,000 and also below the revised 95,000 in June. The weak data further weakened interest rate hike expectations, and coupled with intensified great power competition, gold continued to rise. Recently, in the Asian early session, spot gold broke above the $4,300 per ounce mark for the first time since June 18. Lingbao Gold (03330) rose nearly 9%, and Guotai International Gold (03939) rose over 4%; today, domestic brand gold stores also saw a rare surge in gold prices, with daily increases concentrated between 55-58 yuan per gram, and Chow Tai Fook (01929) rose nearly 4%.

Other disturbing news: According to Caixin's report on August 5, Chinese tax authorities have begun to levy a 20% personal income tax on the income from overseas insurance policies. However, the taxation is not yet universal, and there are no unified and clear enforcement standards. Hong Kong insurance stocks are under pressure, with AIA Group (01299) falling nearly 6%. There are also rumors that CATL (03750) is affected by political factors and has halted production at its overseas factory in Hungary. These are unverified rumors that significantly affect sentiment, and the underlying concerns are understood, leading to a drop of over 5% today.

China's countermeasures yesterday were quite precise, and the U.S. felt the pressure; it’s not a trivial matter, and future policies will need to be weighed carefully, but it does not hinder the giants from making profits. According to the Hong Kong Stock Exchange, Goldman Sachs' long position in Zhongji Xuchuang (03308) H-shares increased from 11.65% to 12.19% on August 3, 2026. Previously disclosed data showed that Goldman Sachs' holding in Zhongji Xuchuang H-shares increased from 5.95% to 11.90% on July 30. JPMorgan's long position in Zhongji Xuchuang H-shares increased from 5.6% to 13.72% on July 31, 2026. There is a speculation: could it be that they intentionally released news to lower the stock price for easier accumulation? Looking at this trend, it is estimated that they are still accumulating in the past two days, with a rise of over 3% today.

The competition between the two sides has begun: Meta today launched the first programming agent Muse Code beta version and the MuseSpark 1.2 model, entering the market at a price lower than DeepSeek-V4-Flash. On the same day, DeepSeek announced: "Plans to significantly raise API service pricing in the near future, with expected large increases." Other leading domestic models also show signs of price war loosening, for example, the Zhiyu GLM model will see a significant price increase after the discount ends Daring to raise prices reflects strength behind it, and price increases are naturally beneficial for large models. MiniMax (00100) surged over 17% today, boosted by the positive news of being included in the index. Luxshare Precision (02475) was also added today, rising over 4%.

In the midst of competition, domestic substitution continues to strengthen. Silicon carbide (SiC) substrates are the most critical upstream materials for third-generation semiconductors, which have long been monopolized by the U.S. companies Wolfspeed, Coherent, and Japan's Rohm. Domestic Tianyue Advanced (02631) has strong potential for domestic substitution, with an approximately 51% market share in 8-inch silicon carbide substrates. Domestic power chip companies such as Starpower, Sanan, and China Resources Micro are adopting domestic substrates to reduce overseas supply chain risks; overseas, Infineon, Bosch, and ON Semiconductor are obtaining automotive certifications and bulk purchasing, allowing Chinese substrates to enter the supply chains of international giants. They have launched 12-inch silicon carbide substrate products and rose nearly 6% today.

The repeatedly mentioned PCB concept sector continues to maintain strength during the trading session. Shenghong Technology (02476), mentioned yesterday, has a large number of research reports being released today, with content similar to what was mentioned yesterday, and it rose over 4% again today. Other core varieties such as DingTai GaoKe (01377) rose over 2%.

Coal stocks have surged today, driven by extreme high temperatures. The market has entered an active destocking phase, and supply contraction continues to ferment. On the supply side, as of August 4, a total of 61 coking coal mines in major coal-producing cities in Shanxi have been shut down, involving a capacity of 65.2 million tons, with most operating mines maintaining only 50%-70% of their operating rates. The pace of regional resumption varies, and the hard supply gap on the supply side is difficult to fill in the short term. Starting from 6 PM on August 5, all coal types at the Baturta station in Inner Mongolia increased by 12 yuan/ton. The starting prices for the "Three Swordsmen" large coal mines in Shaanxi have all been raised by 20-35 yuan/ton. In terms of thermal coal, the CCTD Bohai Rim thermal coal spot index has risen for three consecutive days, marking the first consecutive increase after a ten-day horizontal trend in July. The price of thermal coal at Qinhuangdao Port has increased to 823 yuan/ton. Coal prices are expected to rise in August and September, with Strength Development (01277) and Yanzhou Coal Energy (01171) rising over 6%.

Hong Kong stocks have always favored companies with substantial dividends. Today, Wharf Real Estate Investment Company (01997) announced a 6% increase in interim basic net profit to HKD 3.311 billion. The board decided to raise the dividend payout ratio from 65% of recurring core basic net profit to 90% starting in 2026, leading to a 38% increase in basic dividends. The first interim dividend is HKD 0.94 per share, a 42% increase compared to the same period in 2025, with a total dividend payout of HKD 2.854 billion, accounting for 90% of the basic net profit from Hong Kong investment properties and hotels. The dividend will be paid on September 10, 2026. Such a high interim dividend is much better than keeping money in the bank, and today it surged over 14%. If the market is filled with companies that make money and generously distribute it to investors, why worry about funds not coming into the stock market? Looking at the A-share market, there are many companies that never distribute dividends, and even those that do make very little. If listed companies are only here to raise money and not to create wealth for shareholders, that is quite problematic.

Another recently active company, Auntie Shanghai (02589), also has good dividends, with an interim dividend of HKD 210 million for 2026, a payout ratio of 65.5%, compared to only 35% in the same period last year. The dividend will be paid on September 29, with a payout of HKD 2 per share Innovative pharmaceutical performance is indeed strong. BeiGene (06160) reported a 32.3% year-on-year increase in revenue to USD 3.219 billion for the first half of the year, with adjusted net profit rising 110.7% year-on-year to USD 820 million, both exceeding market expectations. Genscript Biotech (01548) plans to hold a board meeting on August 15 to approve its interim results. Today, it rose over 5%, likely betting on performance exceeding expectations. Kelun-Biotech (06990): The clinical trial application for the new dual payload ADC drug SKB565 has been approved for the treatment of advanced solid tumors, and today it rose over 3%.

Yesterday, I mentioned JinJing New Energy (01783): The company has multiple themes, such as the recent completion of the first power battery processing plant, which uses advanced patented technology from Germany, combining automation and intelligence to efficiently convert retired power batteries into recyclable raw materials. Once built, there will be no need to transport them overseas for processing, directly improving efficiency and profitability; the supply is also abundant, with a global recycling network and over 70 service points covering 28 countries. It thrives on dismantling black powder, selling tiered energy storage PACKs, and providing recycling disposal services. The company also has a theme of planning to acquire Shanghai Youfu Cloud for 2.5 billion yuan, entering the AI computing power leasing field. The target company has qualifications for high-performance GPU procurement and can build a "green energy + digital infrastructure" business model. The operating company has established a wide network and connections in the internet data center and cloud computing fields and has signed a five-year service agreement with a Chinese technology company, with a total contract value of no less than 2.4 billion yuan. With scarcity, monopoly, stable performance, and AI computing power themes, it is not surprising that it strengthened again today, rising over 8%.

【Sector Focus】

According to reports, NVIDIA is urgently seeking AI base station suppliers in China to develop 6G AI-RAN base stations (which are responsible for communication connections and can also undertake AI computing). Sources from the core of the telecommunications industry chain revealed that NVIDIA is accelerating its entry into the telecom operator market and looking for base station manufacturer partners in China to develop 6G base stations that meet overseas market requirements. The sources stated that NVIDIA is pushing this project at a "relatively urgent" pace, hoping to enter the trial network by 2027 or 2028.

Related Hong Kong stocks: ZTE Corporation (00763), Zhongji Xuchuang (03308), Hon Teng Precision (06088), AsiaInfo Technologies (01675).

【Stock Picking】

China Minmetals Rare Earth (01208): Rising copper prices drive profit growth, capacity continues to expand

China Minmetals Rare Earth produced 137,800 tons of copper in the second quarter, an 8% increase quarter-on-quarter. The company expects revenue of USD 2.28 billion in the first quarter of 2026, a year-on-year increase of 45.2%; net profit attributable to shareholders is USD 420 million, a year-on-year surge of 218.3%.

Comment: China Minmetals Rare Earth's performance is impressive, benefiting from rising copper prices, stable production in mines, and significant increases in cobalt and precious metal by-product revenues. The company is a flagship platform for overseas copper mines under a state-owned enterprise, with operations in Peru, the Democratic Republic of the Congo, and Australia, with copper business revenue accounting for about 80%. Its flagship asset is the world-class open-pit copper mine Las Bambas in Peru (holding 62.5%), one of the top ten large copper mines globally The multi-mine production capacity tier is improving, with the expansion of the sulfide mine at the Kinsevere copper mine (wholly owned) in the Democratic Republic of the Congo, expected to reach full production of 80,000 tons of copper and 4,000 tons of cobalt by 2026; the new copper mine at Khoemacau in South Africa and two zinc-lead polymetallic mines in Australia will release capacity in batches.

The company has abundant resource reserves, with total copper resources of 82 million tons, zinc 15 million tons, and cobalt 130,000 tons, providing ample long-term production capacity. The production target for Las Bambas in 2026 is 380,000 to 400,000 tons of copper, with a single-quarter production exceeding 100,000 tons in the first quarter. The Kinsevere expansion is ramping up, aiming for 80,000 tons of cathode copper capacity within the year, along with cobalt by-products for export. The Dugald River zinc mine and Rosebery polymetallic mine in Australia are steadily producing zinc, lead, and precious metals for the overseas market.

The mines are entering the longest stable production cycle; the mine life extends until 2041, with only 17% of mining rights explored, leaving significant room for future resource increases; mining costs are in the lowest 20% range of global copper mines, with C1 mining costs in the first half of 2026 dropping to $0.55 per pound, with by-product molybdenum, gold, and silver sharing production costs. The total output of zinc (zinc concentrate containing zinc) is 55,538 tons, remaining basically flat compared to the same period in 2025.

Minmetals Resources' Las Bambas produced 109,000 tons of copper concentrate in the second quarter of this year, in line with the annual production guidance of 380,000 to 400,000 tons. The Khoemacau mine's output in the first half of the year was 22,000 tons, accounting for approximately 42% to 46% of the annual guidance. With improved equipment utilization, new mining equipment 投入， and higher ore grades, production is expected to increase in the second half of the year. The operational conditions of each mine are expected to be relatively stable in the second half of the year, with Las Bambas' production likely reaching the upper limit of the annual guidance, and with concerns about social stability easing after the Peruvian presidential election, improvements in production and costs will continue to drive profit growth