South Korea's market experienced a significant downturn today, with the KOSPI index closing down 670 points, a drop of 8.95%. SK hynix (SKHY) shares plummeted 15.4%, marking their largest single-day decline on record. This triggered a sharp fall in the leveraged ETF tracking the stock, which plunged 33% and has now retreated 69.07% from its historical high on June 25. The sell-off spilled over to the A-share market, leading to widespread limit-down losses. In contrast, Hong Kong's main index managed a slight gain of 0.16% at the close, although its technology sector was also heavily impacted.
Tensions between the US and Iran have escalated. In recent actions, US forces targeted approximately 140 Iranian military objectives. Iran retaliated with missile and drone strikes on US-related targets in Bahrain, Kuwait, Qatar, Jordan, and Oman, prompting further US airstrikes on Iran. The resumption of hostilities comes as both sides have had time to regroup, creating conditions for renewed conflict. In Iran, following Ayatollah Khamenei's funeral, calls for revenge have grown louder, and the new leadership likely seeks to establish authority through action. For former President Trump, facing an election and personal financial scandals, conflict could serve as a diversion. Coupled with intensifying actions in the Russia-Ukraine theater, this round of conflict is expected to be severe for both sides. The most significant market impact is the renewed closure of the Strait of Hormuz. According to the latest IEA monthly report, while global oil supply recovered by 4.1 million barrels per day in June after the strait reopened, a deficit of 9.4 million barrels per day remains compared to pre-war levels. Oil prices surged again, with WTI and Brent crude futures up over 4% in early trading. Stocks like Baiqin Oilfield Services (02178) and Shandong Molong (00568) rose over 16% and 11%, respectively.
The technology sector decline is a global phenomenon. Over the weekend, NVIDIA's CEO Jensen Huang, along with the CFO and core executives, attended a closed-door, non-deal roadshow hosted by Morgan Stanley in California. They directly addressed four major market concerns: product delays, in-house ASIC development eroding market share, peak growth, and a concentrated customer base. Despite Huang's personal efforts to reassure the market, investor worries persist. In recent weeks, tech giants have faced selling pressure on their substantial bond issuances. The six major AI super giants have issued $244 billion in bonds this year, compared to $108 billion for all of last year and just $17 billion in 2024. A Korean investment bank publicly turned bearish on SK hynix. As a leader in memory chips and a core component of the AI computing power supply chain, its weakness is a significant blow to the market. The key issue in Korea is excessive leverage, and this event is part of a deleveraging process. An IIF monthly report showed foreign investors withdrew heavily from Korean and Taiwanese stock markets in June, which have high tech weightings, leading to a net outflow of $46.1 billion from emerging market equities. J.P. Morgan Asset Management stated it is reducing reliance on three Asian tech giants by allocating more to mainland Chinese and Indian assets.
Current skepticism towards the tech sector stems from a shift in the "second half" of the AI race. The core demand is no longer blindly pursuing the most powerful model, but rather finding the model best suited for a specific task within reasonable costs, with necessary data, and in specific deployment environments. Benchmark partner Peter Fenton noted: "Over 90% of tokens will be generated by open-source models, not just to save costs. In some cases, smaller models fine-tuned for specific tasks may run faster and perform better than large general-purpose models." From this perspective, companies like DeepSeek, Zhipu AI (02513), Alibaba's (09988) Tongyi Qianwen series, and vertical specialists like Kling have significant room for development.
Last Friday's successful rocket launch and recovery is a negative for SpaceX, whose stock has fallen about 28% from its post-"epic IPO" closing high above $200. Veteran investor George Noble pointed out that SpaceX's current valuation is disconnected from fundamentals, warning of an impending insider selling wave and suggesting a reasonable stock price of only $30. This is a double-edged sword; if expectations for SpaceX are lowered, how will domestic counterparts be valued?
Following the tech sell-off, capital has two main choices. One is to continue focusing on pharmaceuticals. The traditional Chinese medicine sector mentioned in last Friday's sector focus performed relatively well, with mentioned stocks China Traditional Chinese Medicine (00570) and Shineway Pharma (02877) rising over 2%. Today, a major BD deal emerged in AI drug discovery. Insilico Medicine (03696) announced a strategic R&D collaboration with Chinazon Pharmaceutical in the CNS field, potentially receiving up to 1.2 billion yuan in milestone payments and sales royalties. Its shares rose nearly 5% today. Luye Pharma (02186) reported positive results from its Chinese Phase II clinical study for innovative drug LY03015 in treating tardive dyskinesia. Results showed a 76.5% response rate on the AIMS scale in the 20mg group at week 6, nearly double the historical data for first-line treatments. The drug is expected to overcome several clinical pain points of existing VMAT2 inhibitors, with strong potential to replace current drugs post-launch. Its shares rose over 8% today.
The other choice is to target consumer stocks. The State Council's approval of the "15th Five-Year Plan for Expanding Consumption" is primarily boosting sectors like catering and food. Yum China (09987) will hold its Q2 earnings call on July 30, where more transaction details will be disclosed. The market is focused on integration progress post-acquisition. If the deal proceeds smoothly, the company will transition from the exclusive franchisee of Pizza Hut in mainland China to the brand owner, gaining greater strategic flexibility. Its shares rose over 3% today.
Condiments: Catering demand is still recovering, while household demand is relatively stable. The industry remains in a bottoming-out phase. CICC released a report estimating that Yihai International's (01579) 1H26 revenue could increase 13.4% year-on-year, beating market expectations, mainly due to better-than-expected performance from related parties. Net profit is expected to grow 15-16% YoY, meeting expectations. The report states that considering the clear long-term growth drivers for third-party business and a dividend payout ratio over 90% implying a circa 7% 2026 dividend yield, the stock offers strong investment appeal. It rose nearly 5% today.
Snacks: Snack discount store numbers continue rapid expansion, and penetration of healthy categories keeps rising, maintaining high sector景气. Busyming (01768) rose nearly 3%.
It was reported that JD Retail recently compressed its management hierarchy, removing the managerial status of all C4 and C5 level personnel, who now report directly to C3. This reduction by two management levels significantly cuts the number of leader nodes. This directly stimulated JD Industrial (07618). China's MRO industry规模 is 3.7 trillion yuan, but current digitalized MRO procurement penetration is only about 9.5%,低于美国的15%及办公物资的38%, with future growth有望保持双位数. The company's core competitive advantage stems from the strong supply chain and customer service capabilities built by its "Taipu" digital infrastructure. Backed by the JD Group's empowerment in capital chain, logistics, and SME customer traffic, it creates a difficult-to-replicate competitive barrier. "Riding on others' ships to go出海" is also a key看点, as JD Industrial's supply chain follows wherever large cooperative enterprises build factories. Its shares rose nearly 5% today.
Sector in Focus
Entering July, the A-share listed bank sector迎来一轮密集的 "dividend rain". Wind data shows that as of July 12, 16 banks have announced dividends to be distributed in July, involving over 181.8 billion yuan. For the entire 2025, a total of 41 banks in the sector are expected to distribute约645.6 billion yuan in dividends, setting a new record for the banking industry. Boosted by this positive news, despite sharp adjustments in the A-share market in July, the Shenwan Bank Index has gained over 6% month-to-date (as of July 13 close). Relevant Hong Kong stocks include ICBC (01398), Bank of China (Hong Kong) (02388), Postal Savings Bank of China (01658), Bank of Communications (03328), China Construction Bank (00939), and Agricultural Bank of China (01288).
Stock Spotlight
TCL ELECTRONICS (01070): Interim Results Preview Exceeds Expectations; Partners with Sony to Accelerate High-End Market Strategy
The company released its 2026 first-half业绩预告, with adjusted net profit attributable to shareholders estimated between HK$1.48 billion and HK$1.65 billion, representing a year-on-year increase of approximately 40% to 56%. Second-quarter profit was HK$1.185 billion, up 32% year-on-year. Recently, the company signed an agreement with Huizhou Zhongkai Hi-tech Industrial Development Zone to increase capital and expand production, adding an annual capacity of 10 million smart TVs. Upon completion, the Zhongkai base's annual capacity will exceed 50 million units.
Analysis: The improved profitability of TCL Electronics' small and medium-sized display business has driven steady overall profit growth. The Huizhou expansion makes it the world's largest TV production base.同时, TCL王牌电器注册资本增幅约80%至31亿港元. The company holds nearly 70% global market share in LCD panels, with self-developed and self-produced MiniLED backlight and quantum dot materials, and over 70% upstream panel self-supply. In 26Q1, its large-size display domestic revenue was HK$4.60 billion, up 3.9% year-on-year, while overseas revenue was HK$12.11 billion, up 23.2% (North America +32.2%, Europe +29.9%, Asia Pacific/Latin America/Middle East & Africa +16.4%), showing simultaneous development across multiple global regions. In terms of product mix, the company's 26Q1 MiniLED shipment volume doubled year-on-year, with domestic shipment share rising 1.8 percentage points to 19.4% and overseas share rising 10 percentage points to 15.7%. Driven by product mix upgrades and larger screen sizes, the 26Q1 gross margin for large-size displays domestically was 20.1% (+1.9 ppts) and overseas was 16.6% (+3.7 ppts). Innovation business revenue was HK$8.96 billion, up 8.1% year-on-year,其中光伏收入+13%, with新增装机量超1.3GW. Benefiting from business规模扩大, operational quality improvement, and逐步见效海外市场拓展, the gross margin for the photovoltaic business improved year-on-year to 9.4%. 26Q1 internet business revenue grew 13.2% to HK$740 million, with overall gross margin improving 10.6 ppts to 65.0%. The proportion of high-end overseas orders is increasing, with the share of high-end models shipped rising from 10% in 2022 to 32.6% in 2026Q1, and the shipment volume of high-end models doubling compared to two years ago. On March 31, 2026, the company and Sony signed a legally binding final agreement for strategic cooperation in the home entertainment field. In the future, they will jointly build a new ecosystem for the global home entertainment industry through a joint venture, further deepening the group's strategic布局 in the global mid-to-high-end market.同时, leveraging TCL's supply chain advantages, the joint venture is expected to achieve rapid cost reduction and profit improvement, injecting new performance growth momentum into TCL Electronics. As a global leader in the color TV industry, TCL Electronics continues to enhance its mid-to-high-end and global operational capabilities, driving steady market share expansion in the TV business. It is also solidifying growth drivers beyond its main business, such as photovoltaics,全品类营销, and internet services. The strategic cooperation with Sony is a major future看点. In March this year, TCL and Sony established a joint venture, which is expected to potentially surpass competitors to become全球第一 in combined market share after operations begin in 2027.
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