【Market Overview】Geopolitical tensions eased, providing a boost to market sentiment. On Monday, it was announced that plans for a new military strike against Iran had been paused, with expressions of a "significant opportunity" for an agreement on limiting Iran's nuclear program. As long as conflict is avoided, market anxiety subsides, contributing to the Hang Seng Index's rise of 0.48% today. The market's stability was primarily underpinned by the financial sector, particularly insurance. Cross-shareholdings among major insurers have become commonplace. According to PICC GROUP's (01339) 2025 annual report, New China Life Insurance acquired approximately 159 million shares, representing a 0.36% stake, becoming the fifth and sixth largest circulating shareholders entirely through new holdings in 2025. Its shares rose over 7% today. The securities sector also gained. Following detailed announcements on May 18 regarding the share swap and merger absorption of Dongxing Securities and Cinda Securities by China International Capital Corporation, CMSC (06099) rose over 6%. Heavyweight TENCENT (00700) performed strongly today, up over 2%. Following its Q1 results, the company held an investor video conference with its management. Management expressed optimism about the company's AI progress and confidence in the performance improvements of its Hunyuan 3.0 model. The market anticipates TENCENT is well-positioned regarding computing power and memory constraints. AI remains the dominant sector. Upcoming catalysts include Google's latest conference and NVIDIA's earnings report tomorrow. Following ChangXin Memory Technology's updated listing prospectus on the STAR Market, another domestic memory giant, Yangtze Memory Technologies Co., is also progressing with its listing process. GIGADEVICE (03986), which was initially adjusting, was subsequently lifted by fund inflows, closing up over 2%. GlobalFoundries today launched the world's first SCALE silicon photonics co-packaged optics (CPO) engine compatible with the OCI MSA protocol, accelerating the commercialization of CPO. CIG (06166), a core CPO supplier for NVIDIA, saw its shares, deeply tied to next-gen AI computing architecture with its 1.6T optical modules and silicon photonics technology, surge over 13% in late trading, lifted by significant capital. NSING TECH (02701) recently announced a multi-year Arm Total Access technology licensing subscription cooperation with Arm China. The core logic of Arm Total Access lies in using the flexibility of "one subscription, multiple uses" to achieve extreme compression of product development cycles. The company's main model, the N32H493, is a dedicated master control chip adapted for 800G and 1.6T high-speed optical modules. This MCU is steadily progressing through product introduction at multiple optical module manufacturers, filling the gap in domestic high-end optical module master control chips. Its shares rose nearly 9% today. Naxin Micro (02676) rose over 2%. Maifushi (02556), mentioned in yesterday's stock picks, rose nearly 6% again. The ultimate requirement for AI is power. On Monday local time, U.S. utility giant NextEra Energy announced a $66.8 billion acquisition of Dominion Energy. This merger will create one of the world's largest electric utility companies, with a total scale far exceeding the sum of the second and third largest U.S. power companies. Domestically, new energy power is also being actively promoted. Shanghai: Deeply promote the construction of a new power system, aiming to build four 10-million-kilowatt-level green power bases. Related stocks, China Singyes Solar Technologies (01735) rose over 5%, and CGN New Energy Holdings (01811) rose over 4%. Other power stocks like Huaneng Power International (00902) and Huadian Power International (01071) both rose over 2%. On May 18, China officially initiated a multi-center clinical trial for the first fully implantable 128-channel brain-computer interface system. Led by Beijing Tiantan Hospital, Capital Medical University, the trial plans to initially enroll 32 patients, marking the entry of China's self-developed high-throughput invasive brain-computer interface technology into the clinical translation stage, offering new rehabilitation methods for quadriplegic patients. Brain Intelligence-B (06681), whose core product, a brain function information management platform software system, has been commercialized for eight indications across four main types of cognitive disorders and is advancing strategic cooperation in Japan and Southeast Asia, surged over 34%. Other stocks like MicroPort NeuroTech (02172) and Nanjing Panda Electronics (00553) rose over 3% after early gains. Shanghai: Looking towards the "15th Five-Year Plan" period, it will promote the intelligent transformation of manufacturing. It aims to deploy 100,000 humanoid robots into factories by the end of the "15th Five-Year Plan." Additionally, Chinese robotics startup Linkerbot is reportedly considering a Hong Kong listing. Hong Kong-listed Zhaowei Machinery & Electronics (02692) has shown the strongest recent momentum in the robotics sector, partly due to its dexterous hand concept, rising over 3% again. The shareholding concept strengthened. Exchange information on May 18 showed that Unitree Robotics' application for an initial public offering has entered the review process. The operational data disclosed in the IPO materials of Hangzhou Yunchushen Technology Co., Ltd. on the STAR Market further signals the acceleration of commercialization in the robotics industry. Soundwill Holdings (00697), holding a 4.0871% stake in Unitree through an industry fund as its eighth-largest shareholder, has invested over 2 billion yuan in the broader robotics sector, covering more than 20 leading companies. The valuation of related funds has increased approximately fourfold, with unrealized gains of about 8 billion yuan. As the IPO processes of these two major robotics companies accelerate, market expectations for its investment returns are rising; its shares rose nearly 8%. Luoyang Bearing is currently sprinting for a ChiNext IPO. Zhongchuang Zhiling (00564), formerly known as "ZMJ," holds a 99.9975% stake in ZMJ Industrial Investment, which in turn holds a 15% stake in Luoyang Bearing. Its shares rose over 5% today. "Letter to Grandma" continues to refresh market expectations. Data from Lighthouse Professional Edition on May 18 showed that the film's total box office forecast has been raised for 19 consecutive days to over 1.6 billion yuan, continuously setting a new record for consecutive days of upward revisions. Damai Entertainment (01060), as a co-producer and main distributor, is conservatively estimated by institutions to earn an additional 170 million yuan in the second half of the year, with a neutral estimate close to 200 million. The company will report earnings on May 27; guidance will be key. Its shares rose nearly 5% today. 【Sector Focus】On May 19, 2026, the National Healthcare Security Administration and the Ministry of Finance jointly issued the "Notice on Further Strengthening the Supervision and Management of the Use of Individual Accounts for Employees' Basic Medical Insurance in Designated Retail Pharmacies" (Medical Insurance Office [2026] No. 7). While comprehensively establishing a white-list system for individual account payments at designated retail pharmacies nationwide, the document, for the first time in the form of a joint issuance by national ministries, explicitly allows individual account funds to pay for influenza vaccine expenses incurred at designated medical institutions. The influenza vaccination rate for the entire population in China is less than 4%, far below the approximately 50% level in the U.S. and well short of the 75% threshold needed to establish herd immunity. Related studies indicate that about 92,000 people die annually in China from respiratory diseases caused by influenza, while influenza vaccination can effectively reduce the risk of illness by 40%-60% and the risk of severe death by 80%. Currently, there are 8 enterprises producing quadrivalent influenza vaccines and over 10 producing trivalent influenza vaccines in China, with an overall market size of only 3-4 billion yuan. Main beneficiaries in Hong Kong stocks include: CanSino Biologics (06185), Clover Biopharmaceuticals-B (02197), and the largest distributor of influenza vaccines, Sinopharm Group (01099). 【Stock Pick】Semiconductor Manufacturing International Corporation (00981): AI Drives Upward Momentum in Chip Industry Chain; Capacity Utilization Improves The company's Q1 2026 operating revenue was 17.617 billion yuan, a year-on-year increase of 8.07% and a sequential increase of 0.7%. Net profit attributable to shareholders was 1.361 billion yuan, a year-on-year increase of 0.36%. Gross margin was 20.1%, a sequential increase of 0.9 percentage points, all better than market expectations. The comprehensive price for its wafer foundry business increased 2.5% sequentially. Review: SMIC achieved year-on-year growth in both revenue and net profit. The company is the only domestic producer with mass production of advanced processes. Its 14nm FinFET process is in stable mass production (yield ≈92.7%) with a monthly output of approximately 92,000 wafers. Its mature processes are globally top-tier, covering 28/40/55/90nm with yields of 95%–98%. AI is driving increased prosperity in the chip industry chain. With sufficient capacity—3 eight-inch fabs and 7 twelve-inch fabs—the company's monthly capacity increased from 1.0588 million wafers (in eight-inch equivalent) in Q4 2025 to 1.0783 million wafers in Q1 2026. Capacity utilization for Q1 was 93.1%, compared to 95.7% in the previous quarter and 89.6% in the same period last year. Capital expenditure was 10.8 billion yuan, with hot processes (14/28nm) requiring capacity to be locked three months in advance. To capture local manufacturing demand, SMIC is steadily advancing its capacity expansion plans, with capacity utilization improving. It added approximately 50,000 units of twelve-inch monthly capacity in 2025 and plans to add 40,000 units in 2026. Annual capital expenditure reached $8.1 billion, with 2026 plans roughly flat compared to 2025. Capacity utilization was 95.7%, a year-on-year increase of 10.2 percentage points and essentially flat sequentially. While capacity continues to grow, high capacity utilization indicates strong downstream demand. On the demand side, while low-end demand in the consumer electronics market, primarily mobile phones and computers, remains weak, the company is actively adjusting its mature process platforms. Leveraging its technological reserves and leading advantages in segments like BCD, analog, memory, MCU, and mid-to-high-end display drivers, it maintains a favorable position in this industry cycle. The explosion of AI chips has led to shortages in power management, driver, and transmission chips, with capacity utilization exceeding 95%, continuous price increases, and ongoing improvement in gross margins. The company's capacity expansion is proceeding orderly, with ample orders on hand. Supply shortages are expanding, order visibility covers all of 2026, with some long-term orders extending into 2027. Signing long-term agreements with customers locks in future demand, providing the company with stable growth momentum.
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