Market sentiment was briefly lifted by Micron's earnings report, but this was insufficient to counter the negative impact of month-end effects and the continued decline of heavyweight stocks, leading the Hang Seng Index to fall below the 23,000-point level last week. Tensions between the US and Iran have flared up again, with US Central Command stating on social media on the 27th that US forces conducted a new round of strikes on multiple targets in Iran that day, primarily in retaliation for attacks on ships in the Strait of Hormuz. Currently, this has not escalated into a large-scale conflict, and oil prices have shown no significant reaction.
The US June non-farm payrolls report is scheduled for release on July 2nd. Stronger-than-expected data could reinforce expectations for Federal Reserve rate hikes. China's official Manufacturing PMI for June will be published on June 30th, with the market hoping for a slight rebound above the 50-point expansion/contraction threshold.
This week, the market is expected to focus on seeking a bottom, with the extent of the move largely dependent on whether the aforementioned fundamentals turn more positive. The technology sector remains a key focus. According to foreign media reports, Apple is lobbying the US government to gain approval for purchasing memory chips from Chinese manufacturer ChangXin Memory Technology (CXMT). Power semiconductors have initiated another round of stepwise price increases, with some manufacturers indicating that "orders for AI-related power supplies are overflowing, and production capacity cannot keep up." Areas such as memory, MCU, and SoC may see renewed catalysts.
Data from the National Bureau of Statistics shows that profits in the electronics industry grew by 103.9% from January to May, contributing 43.1% to the profit growth of all industrial enterprises above a designated size. Close to half of the profit increment for industrial enterprises in the first half of the year came from the electronics sector. A report by CCTV Finance highlighted that China's mechanical and electrical products are accelerating their expansion overseas, with some companies seeing a hundredfold surge in exports of 800G and above optical modules. Optical communication and sectors with price increases are expected to remain active.
The most severe heatwave in European history is triggering a rush for air conditioners. Among them, MIDEA GROUP (HKG: 00300)'s PortaSplit mobile split-type air conditioner, designed specifically for Europe, is sold out in multiple countries, with second-hand prices reaching 2-3 times the original price. The overall air conditioner penetration rate in Europe is only about 20%, far below the nearly 90% in the US.
Domestic catalysts also exist: "National subsidies" continue, with the third batch of 2024 funds, totaling 62.5 billion yuan from ultra-long-term special treasury bonds, allocated recently to support consumer goods trade-in programs, bringing opportunities for the home appliance sector.
Featured Stock of the Week
MIDEA GROUP (HKG: 00300) primarily conducts its European air conditioning business through its Building Technology (MBT Climate) division. In 2025, Midea's MBT Climate achieved revenue of 1 billion euros in the European market. Furthermore, the group's total overseas revenue reached 195.9 billion yuan in 2025, a year-on-year increase of 16%. As its second-largest overseas market, Europe is a crucial growth engine.
Entering 2026, influenced by extreme heatwaves in Europe, MIDEA GROUP's air conditioner sales in the European market have experienced explosive growth. In key Western European markets (France, Spain, Germany, the UK), air conditioner sales have increased by over 70% year-on-year.
Amid this European heatwave buying frenzy, MIDEA GROUP is expected to gain a direct revenue increment ranging from approximately 180 million to 250 million euros, representing the largest absolute increase among the three major Chinese air conditioner giants.
The portable split-type unit (PortaSplit) launched by MIDEA GROUP for the European market in 2024 has become an absolute hit, accounting for as much as 42% of its European air conditioner shipments. Market estimates suggest annual sales of just this product in Europe could reach 300,000 units, corresponding to potential revenue exceeding 200 million euros.
Industry Perspective
Semiconductor capital expenditure (capex) is expected to achieve accelerated growth for two consecutive years. (1) The epic upcycle in memory for 2026, coupled with technological breakthroughs in DRAM and NAND, is leading domestic memory into an optimistic expansion cycle. This year, both DRAM and NAND are expected to achieve expansion levels of over 6 (units). Transitioning to 2027, the expansion scale is set to reach new heights, with both potentially achieving double-digit (10+) expansion levels.
(2) The growth rate for advanced logic expansion is also significant. Guided by the "1 Law," breakthroughs in more advanced process nodes are anticipated in the second half of 2026. As the core player, SMIC (HKG: 00981) continues to lead the large-scale expansion of domestic advanced logic chips. Meanwhile, as a rising star, Grace Semiconductor's rapid yield improvement also enhances the robustness of the expansion. This year, expansion for 14nm and below nodes is expected to reach a level of over 60,000 wafers.
(3) Driven by strong downstream demand and high-growth expansion, several companies in domestic semiconductor equipment, equipment components, and materials have achieved domestic breakthroughs, ushering in a "Davis double" scenario of high-quality business (good B) and high-quality assets (good a).
The continuous advancement of domestic computing power chips is driving the development of domestic advanced packaging. Domestic computing power companies like Cambricon are consistently delivering on shipment volumes and earnings, while also rapidly achieving technological iteration, naturally boosting demand for domestic advanced packaging. Particularly, next-generation advanced GPU products like the 950, 960, and 690 will be paired with CoWoS-L packaging, which is in short supply domestically. Therefore, packaging and testing companies that have laid out and possess CoWoS-L capacity are particularly valuable. According to brokerage estimates, total shipments of domestic GPUs next year are projected to be 7.5 million units, corresponding to a total CoWoS market of about 35 billion yuan, indicating a vast market space.
Advanced logic expansion is accelerating. The core player SMIC (HKG: 00981) directly benefits from the "T Law," expanding the total addressable market (TAM). Rising stars like Grace Semiconductor have exceeded expectations in yield improvement, with their n+2 expansion pace also surpassing expectations. The advanced logic layout of potential new entrants like Yandong Microelectronics is equally impressive in speed. The entire Fab sector is poised for a potential value re-rating.
Key Hong Kong stock focuses: SMIC (HKG: 00981), HUA HONG GRACE (HKG: 01347).
Market Data Analysis
Data from HKEX shows the total number of open contracts for the Hang Seng Index Futures (June) is 33,120, with a net open interest of 15,040. The settlement date for the June Hang Seng Index Futures is June 29, 2026. Index futures settle this Monday. With the Hang Seng Index at the 22,672-point level and the bear warrant concentration area near the central axis, Hong Kong stocks possess momentum for a rebound.
Last week, AI-related trading clearly receded as investors reassessed whether AI infrastructure can deliver on return expectations and whether semiconductor price increases will fuel broader inflation. Hong Kong stocks are expected to follow the fluctuations of the US market.
Final Thoughts
Currently, even the high-dividend sectors in the Hong Kong market are experiencing outflows from southbound capital. Under存量博弈 (stock game) conditions, a broad decline is evident. Short-selling across the market remains at high levels, with sentiment weak in the short term. Market recovery still requires dual improvements in liquidity and earnings expectations. Additionally, July share unlocks and institutional quarter-end portfolio adjustments remain potential disturbances.
However, sector differentiation also conceals structural opportunities. The innovative drug rally in the US stock market has the potential to spill over to Hong Kong stocks.
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