Generally, during the Chinese A-share market's Spring Festival holiday, overseas markets tend to perform well. However, once trading resumes, selling pressure often emerges. The Hong Kong market followed this pattern today, declining by 1.82%. The A-share market held up relatively well overall, resisting the pressure, but the significant gap down remains a considerable concern. Reviewing the Hong Kong market's performance over the holiday: initially, robotics stocks were in focus. For example, DOBOT (02432) surged nearly 24%, but gave back all gains within two days. The reason is that while the robots featured in the Spring Festival Gala showed significant improvement over previous versions, their performance was largely scripted, following fixed programs. They are still far from genuine consumer adoption. Without breakthroughs in "intelligence," large-scale entry into households remains unlikely. This requires time, so after the initial excitement, a return to rationality made the sell-off inevitable.
Another focus was on large language models. KNOWLEDGE ATLAS (02513) saw its new flagship model, GLM-5, demonstrate strong capabilities, significantly narrowing the gap with Claude Opus 4.6. Additionally, MINIMAX-WP (00100) made waves as its MiniMax M2.5 model, trained on 2.45 trillion tokens, unexpectedly claimed the top spot. These represent solid technical prowess. After a one-day adjustment, these stocks continued their ascent today.
On February 20th, the U.S. Supreme Court ruled that tariff measures implemented by the U.S. government under the International Emergency Economic Powers Act (IEEPA) lacked clear legal authorization and announced the termination of a series of these measures. The U.S. administration is unlikely to accept this passively. Its latest response involves invoking Section 122 of the Trade Act of 1974. On the 21st, former President Trump announced an increase in the "global import tariff" rate on goods entering the U.S. from 10% to 15%, effective "immediately." Overall, the direct impact on China is relatively limited, but countries like the UK and Japan, which previously thought they had gained an advantage, may face negative consequences. The situation remains chaotic, posing ongoing negative shocks to the global economy.
Trump is currently highly anxious and is again playing the "China card," claiming he will visit China on March 31st. China's Foreign Ministry responded that there is no information available to provide at this time. Currently, China is not in a hurry; for any talks with Trump, he would need to bring tangible leverage to the table. The most critical unresolved issue remains Iran. On February 26th, the U.S. and Iran are scheduled to hold a third round of indirect talks in Geneva. Given the significant differences between the parties and escalating military actions, the talks could collapse at any moment.
The latest developments in the Middle East are highly tense. The U.S. military has assembled a dual-carrier strike group in the region. The USS Abraham Lincoln carrier strike group is already positioned in the Arabian Sea/Persian Gulf, controlling the southern approach to the Strait of Hormuz. The USS Gerald R. Ford carrier strike group entered the Mediterranean Sea on February 20th and is expected to complete its deployment by February 26th, forming a pincer movement with the Lincoln from the west. This represents the largest U.S. naval buildup since the 2003 Iraq War. Iran is also standing firm. The Iranian Revolutionary Guard Corps has completed comprehensive deployment to seal off the Strait of Hormuz, with anti-ship missiles, unmanned vessels, and torpedoes all in position and on high alert. Senior Iranian officials have repeatedly publicly warned that any U.S. military strike will lead to the complete closure of the Strait of Hormuz.
The market is beginning to price in these expectations. The oil and gas sector is a natural focus for speculation. Equipment-related stocks like SHANDONG MOLONG (00568) rose over 11%, and CHINA OILFIELD (02883) gained nearly 5%. Tightening shipping capacity is also an inevitable consequence. CSSC SHIPPING (03877) and China CSSC Holdings Limited (00317) both rose over 5%. Oil tankers are also in high demand. CIMC Group (02039), with orders for oil and gas projects in Angola, Africa; Petrobras in South America; and the European Golar Norwegian FLNG project expected to be progressively delivered over the next two years, anticipates orders of at least $3 billion by 2026, and its stock rose nearly 12% today. CIMC ENRIC (03899) gained over 3% after recently securing new orders for three LNG bunkering vessels, estimated at approximately 600 million RMB each, totaling around 1.8 billion RMB.
The AI sector presents a mixed picture. Jan Hatzius, Chief Economist at Goldman Sachs, stated that AI investment spending is expected to contribute essentially zero to U.S. GDP growth in 2025. A primary reason is that many devices required for AI rely on imports. Despite U.S. companies investing billions, the importation of chips and hardware offsets the practical contribution of these investments in GDP calculations. A bearish report also emerged from the U.S.: Citrini Research recently published a report outlining a hypothetical scenario set in June 2028. In this scenario, the disruptive impact of AI leads to mass white-collar unemployment, a decline in consumer spending, defaults on software-supported loans, and an economic contraction. U.S. stock IBM plunged 13%, its largest drop in 25 years, and cybersecurity stocks were hit hard again. In Hong Kong, many stocks in the AI application sector declined. Ultimately, the concern is that the capabilities of large models could disrupt many industries.
However, the hardware side of AI remains fervent. The underlying logic is that from a future development perspective, AI is an unstoppable mega-trend. Everyone wants to capture this high ground. Having already invested so much, no one dares to stop, fearing falling behind and suffering the consequences. Therefore, even before large-scale applications emerge, there is a rush to build out hardware. The result of this "go all out, fast-track" approach is price increases. Fiber optics and optical communications have already seen significant price hikes. Memory prices continue to rise, with inventory for DRAM and NAND reportedly down to only about 4 weeks. GigaDevice (03986) rose nearly 12%. The price increases are now spreading to PCBs. Leading company Kingboard Laminates (01888) issued a profit alert, forecasting a more than 80% year-on-year increase in net profit for 2025, and its stock surged over 12%. Kingboard Holdings (00148) also issued a slightly better-than-expected profit forecast, though the positive surprise was mainly driven by investment income, and its stock rose over 7% today. Shanghai Alpha Silicon Carbide Technology (02631), a player in silicon carbide (SiC), gained over 6%.
The ultimate requirement for AI is power. Weichai Power (02338) rose over 7% after U.S. permitting documents for OpenAI's "Stargate" data center in Texas revealed the use of emergency generators from "Baudouin," a wholly-owned subsidiary of Weichai Power. This marks a significant milestone for "Baudouin" in gaining recognition from hyperscale data center companies. Dongfang Electric (01072) also rose over 5%.
Other concepts related to price increases: The U.S. announced the inclusion of elemental phosphorus and key herbicides like glyphosate into its list of critical strategic materials. International phosphate fertilizer prices have broken through $700 per ton. Sinofert Holdings (00297) rose over 6%. Due to rising costs and tight supply, glass fiber manufacturers are planning a second wave of price hikes, with proposed monthly increases of 10% to 15%. China National Building Material (03323), which holds 60.24% of Sinoma Science & Technology and 29.22% of China Jushi, stands to benefit directly and saw its stock rise over 10%.
On the consumer side, the bidding results for the duty-free projects at Beijing and Shanghai's major airports were announced. China Tourism Group Duty Free (01880) lost part of its operating rights, leading to a drop of over 10% today. Current consumption trends are shifting towards the most basic necessities. For instance, WH Group (00288) benefits from the streamlining of its hog breeding capacity to 11.5 million head, which aids margin improvement. Combined with favorable hog prices (expected to rise 9% in 2025) and lower feed costs, these factors should support a double-digit increase in operating profit for the company in Q4 2025. Foshan Haitian Flavouring & Food Co., Ltd. (03288) has built a scale- and digital-intelligence-driven ultra-efficient supply chain, a nationwide high-efficiency distribution network, and a strong product matrix and brand power. In the long-cycle condiment industry, this creates sustainable cost and efficiency advantages, significant channel influence, and a stable profit moat.
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