External uncertainties persisted, yet both markets demonstrated resilience as Hong Kong equities edged up 0.07% on the day. The 60-day negotiation window outlined in the US-Iran memorandum of understanding expired on August 17. When pressed on whether Washington intended to extend the agreement, President Trump responded in the negative. With midterm elections approaching, Trump's approval rating has slipped to 33%, marking a new low for his second term. The Iran situation has become a thorny issue, leaving Trump with little room to maneuver as he maintains a tough public stance, vowing to continue military pressure and threatening to "bomb heavily" if Oman obstructs negotiations.
Iran, meanwhile, remains defiant and has warned of a shift toward full-scale offensive operations. Tehran continues to tighten its grip on the Strait of Hormuz, with a fuel transport vessel repeatedly changing course before coming to a halt. The shipping-related investment thesis continues to strengthen, with TS Lines (02510) advancing another 5% and OOIL (00316) and SITC (01308) both gaining over 2%.
Despite US memory chip and optical communications stocks still climbing against the broader trend — with SanDisk up nearly 9%, Coherent gaining about 8%, and Lumentum rising 4.6%, while the chip index rebounded 1.6% and appeared poised for a bull market return — domestic markets are no longer following suit. The concerns ahead are far from reassuring. The apparent prosperity is built on a foundation of debt, as AI infrastructure has triggered a record wave of bond issuance. US investment-grade bond issuance has again set new historical records this year, with August volume reaching $145.2 billion as of August 17, the highest for that month on record. Furthermore, six months this year have seen issuance levels ranking first or second highest for their respective months. There is an even bigger problem: the US Treasury reported that China and Japan led foreign selling of US Treasuries in June, with all three major foreign holders — China, Japan, and the UK — reducing their positions, and China's holdings falling to their lowest level since 2008.
As US, Japanese, UK, and German government bonds have all recently tumbled, with yields surging to multi-year or even multi-decade highs, widespread concerns have been raised. Robin J Brooks, senior fellow at the Brookings Institution, noted in a recent report that there is no straightforward way to predict when a country will face a debt crisis, but as the past week has shown, market stress is clearly building rapidly.
A fresh food crisis is brewing. JPMorgan's latest report projects that global food price inflation will climb from 2.8% in the first half of this year to 5% by the first half of next year. The reasons cited include disrupted passage through the Strait of Hormuz due to Middle East conflicts, coupled with the potential for a strong El Ni帽o to reduce crop yields. These multiple factors are expected to hit agricultural production, keeping food prices elevated through the first half of 2027. The report estimates that food price inflation will reach 5% in the first half of 2027, pushing overall inflation up by 0.6 percentage points. In response, SHIYUE DAOTIAN (09676) surged over 14%, CH MODERN D (01117) gained 6.69% to HK$1.515, YOURAN DAIRY (09858) rose more than 5%, and DEKON AGR (02419) climbed over 3%.
Yushu Technology Co., Ltd. is set to debut on the Shanghai Stock Exchange's Science and Technology Innovation Board on August 19. Related robotics concepts continue to generate momentum, with a fresh batch of stocks joining the rally after some names moved higher the previous day. STARPLUS LEGEND (06683), which has a partnership with Yushu, saw a sharp late-session surge as funds chased the stock. The buzz centers on the 50-50 joint venture "Yuxing Entertainment," established to develop consumer-grade IP robots, with plans to leverage the popular IP character "Zhou Tongxue" to achieve mutual benefits. However, until consumer robots solve the "brain" problem, they remain little different from ordinary toys, and this timeline is measured in years. The stock surged nearly 35% today. Other robotics-related names are also moving, with ESTUN (02715) up over 8%, SANHUA (02050) on the T-chain rising more than 5%, and harmonic reducer maker LAIFUAL (03952) gaining over 2%.
According to the China Construction Machinery Association, excavator sales in July 2026 reached 19,521 units, up 13.9% year-on-year, with exports of 11,913 units rising 21.2% and accounting for approximately 61% of total sales — a record high. Loader sales reached 11,774 units, surging 30.8% year-on-year. The strong loader growth directly benefits LONKING (03339): the company's core strength lies in loaders, where it maintains a leading market share position. The overseas loader competitive landscape is far more favorable than that of excavators. The company established its overseas presence early, with well-developed distribution channels across Southeast Asia, Central Asia, the Middle East, and Latin America. Loaders are highly standardized products that are well-suited for export markets. As a featured pick for August, the stock surged over 11% today. SANY INT'L (00631) also gained more than 9%, following the shipment of its first batch of SKT110Ei pure electric autonomous mining trucks to South America — marking the first deployment of Chinese autonomous mining technology in the Latin American market — while overseas sales revenue achieved rapid growth in the first quarter.
GENSCRIPT BIO (01548) once again led the innovative drug sector, with its AIDD business doubling year-on-year and AI-driven pharmaceutical companies seeing an order boom. Its gene-protein integrated platform continues to scale. The stock rose over 8% again today. The Wuxi group continues to lead the CXO sector, with WUXI XDC (02268) gaining over 7% after its Singapore base's BCM3 facility successfully achieved GMP release, marking a new phase in its global capacity expansion. WUXI BIO (02269) rose more than 5% after being named to the global best practices list for sustainable biopharmaceutical leaders, an honor roll that includes Merck, Eli Lilly, Johnson & Johnson, AstraZeneca, Takeda, GlaxoSmithKline, and Bayer — underscoring the significance of the recognition. PHARMARON (03759) is set to release earnings on August 21, having previously guided for first-half net profit growth of 4%-10%, and gained nearly 6% today. ASYMCHEM (06821), which reports on August 25, rose 5% today.
Internet giants appear subdued in the current AI wave, scrambling to catch up from behind. Alibaba (09988) is streamlining its operations, shifting from aggressive acquisitions to consolidation. In a recent internal letter, Lingxi Interactive Entertainment CEO Zhou Bingshu announced that Alibaba will sell its stake in the company, with Xinchen Capital becoming the new shareholder. Industry sources indicate the deal is valued at over $1.5 billion, exceeding RMB 10 billion. AI is capital-intensive — as early as early last year, Alibaba CEO Wu Yongming announced investments exceeding RMB 380 billion over three years — and this capital recovery is aimed at building AI war chests. The stock rose 3.68% today.
On the other side, TENCENT (00700)'s Tencent Cloud announced on August 18 that it will open its first data center in Johor, Malaysia, with an initial plan for three availability zones. This marks Tencent Cloud's first deployment in Malaysia. Once operational, Johor will become a key node for Tencent Cloud in Southeast Asia, allowing local businesses to deploy AI-related services nearby to meet rapidly growing demand for AI agent applications. Tencent Cloud's data lake computing DLC has also set two new world records in TPC-DS 100TB performance and price-performance ratio, with comprehensive performance reaching 654 million — nearly 10 times the previous record — while unit performance cost dropped to RMB 11.04, roughly one-sixth of the previous level. The battle among tech giants continues to intensify.
Sector focus
According to media reports, China is accelerating efforts to reduce dependence on US technology, with some state-affiliated institutions instructed to uninstall Microsoft's customized Windows 10 operating system. This directive advances the originally scheduled retirement date by several months, reflecting Beijing's growing concerns over foreign software in sensitive government systems. The customized Windows 10 version was developed by CMIT, a joint venture between Microsoft and state-owned China Electronics Corporation, established in 2016 to adapt Windows to meet China's cybersecurity and national security requirements. CMIT had originally planned to end support in February 2027, but the new directive moves the timeline forward. While unconfirmed, from a security perspective, this move appears inevitable. This benefits domestic software substitution plays: KINGSOFT (03888) and CHINASOFT INT'L (00354).
Stock spotlight
NEXTEER (01316): Thailand plant celebrates 20,000th CEPS unit, with order catalysts ahead
On July 31, Nexteer's Thailand plant reached a key production milestone, with employees gathering to witness the 20,000th column electric power steering (CEPS) unit roll off the line. Achieving this volume in just three months from start of production to full output validates the facility's efficient manufacturing and delivery capabilities along with its mature quality control systems.
Commentary: Southeast Asia's accelerating automotive electrification and intelligent transformation continues to release market demand. The Thailand plant's successful ramp-up marks tangible progress in the company's Southeast Asian expansion, directly accelerating its globalization efforts. First-half revenue reached $2.242 billion, up 3.9% year-on-year, with net profit attributable to shareholders of $86 million, up 35.2%. Free cash flow improved significantly to $109 million, up from $37 million in the same period last year. The company has developed a complete steer-by-wire product matrix encompassing steer-by-wire, rear-wheel steering, EMB, and the MotionIQ software suite. With industry intelligence and advanced autonomous driving penetration accelerating, and high-value-added chassis products entering a volume ramp cycle, steer-by-wire is expected to begin scaling up from 2026E.
Key catalysts ahead: In the first half of 2026, two new steer-by-wire projects enter mass production, including the Zeekr 9X, which is in a volume ramp phase. One L4 Robotaxi steer-by-wire project in North America is already in production, with two customers in development stages. Four projects have been awarded but not yet in production, with one customer under development. In Europe, one steer-by-wire project has been awarded but is not yet in production. Management guides for full-year orders to potentially reach $6 billion (versus approximately $4.9 billion in 2025).
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