Washington is reportedly drafting a rule to ban the import of Chinese-made next-generation data center components, a move targeting the backbone of artificial intelligence (AI) development. In response, China's embassy in the US has urged the administration to heed the "rational voices" of business communities on both sides and cease its smear campaign against Chinese firms. The embassy further warned that Beijing will take "all necessary measures" to counter any actions that severely harm its interests.
CICC analysts noted that optical modules, which primarily perform electro-optical signal conversion, do not store business data, making their risk profile and attack potential fundamentally different from active equipment. The analysts questioned whether the FCC's security logic, as cited by unnamed sources, is valid or if the proposed restrictions meet the principle of necessity. They added that similar narratives have circulated since 2020, yet Chinese manufacturers' market share has actually increased, despite US policies favoring domestic supply chains. "In the short term, this is about trading sentiment; in the medium term, it's about the scope of the rules; and in the long term, it's about product quality, yield, and delivery. Policy can change the shipping address, but it may not change who makes the best optical modules," CICC concluded.
Overnight Market Overview
US stocks rallied on Tuesday, with both the Dow Jones Industrial Average and the S&P 500 closing at record highs. The Dow surged 907.47 points, or 1.71%, to 54,085.88. The S&P 500 jumped 136.02 points, or 1.79%, to 7,736.52, while the Nasdaq Composite soared 671.09 points, or 2.59%, to 26,584.99. Major tech stocks were mostly higher, with Nvidia rising over 2% and Apple gaining nearly 2%. AI hardware stocks soared, with the Philadelphia Semiconductor Index surging 6.55%. Applied Optoelectronics jumped over 19%, ARM surged over 17%, and Marvell Technology and Coherent each gained over 12%. Intel and SanDisk advanced over 10%, Corning rose over 9%, Lumentum gained nearly 9%, SK Hynix added over 8%, and Micron Technology and Qualcomm climbed over 7%. Most Chinese ADRs fell, with the Nasdaq Golden Dragon China Index declining 0.35%. The Hang Seng Index ADR rose, closing at 25,953.07, implying a 100.15-point gain, or 0.39%, from the Hong Kong close. WTI crude oil futures for the front-month contract fell $5.20 to $75.14 per barrel, a 6.47% drop. COMEX gold futures for the front-month contract rose $43.70, or 1.07%, to $4,134.2 per ounce.
Key Developments to Watch
Tencent's Hunyuan AI unit has officially released the latest version of its speech recognition model, Hy ASR 3.0 preview. The model is now available via API services on Tencent Cloud's official website and can be broadly applied to scenarios such as intelligent customer service, content understanding, and voice search. The Yuanbao app, which co-developed the model, has already integrated it, allowing users to press and hold to speak for improved capabilities in dialect recognition, contextual error correction, and stable transcription in complex environments. The feature is free and open to the public. Other products, including WorkBuddy, are also in the process of integrating the new model.
Dajin Heavy Industry (01081) has announced that its subsidiary, Tangshan Dajin Hai Gong Marine Engineering, has signed a construction contract for two bulk carriers with a Norwegian shipowner. The vessels, each with a deadweight tonnage of 211,000 DWT, will be approximately 299.95 meters in length, 50 meters in width, and 25 meters in depth. The total contract value is approximately RMB 1 billion and will be delivered in batches by 2029.
Estun (02715) has agreed to acquire all remaining shares of Nanjing Estun Co., Ltd., a subsidiary, for a total consideration of RMB 406 million. The deal involves the purchase of 83.26% of the target company's equity from existing shareholders. Upon completion, the target company will become a wholly-owned subsidiary, and its financial results will be consolidated into the group's financial statements.
BASICSEMI (09971) has entered into a strategic partnership with Hanyes Technology to accelerate the development and mass production of 8-inch silicon carbide wafers. Leveraging BASICSEMI's advanced product technology and market advantages, along with Hanyes' high-quality, large-scale wafer manufacturing capabilities, the two companies aim to jointly advance new process platforms and production scale-up, enhancing the market share of silicon carbide products in sectors such as new energy vehicles and AI data centers. Additionally, the partnership will explore core process and application technologies for new compound semiconductors in cutting-edge applications.
Techtronic Industries (00669) has reported its interim results for the six months ended June 30, 2026. The company's sales reached a record $8.3 billion, a 5.9% increase on a reported basis, with a positive currency impact of 1.9 percentage points. Net profit attributable to shareholders was $738 million, up 17.52% year-on-year. Basic earnings per share were 40.5 US cents. The board has declared an interim dividend of 150.00 HK cents (approximately 19.31 US cents) per share.
Zibuyu (02420) has issued a profit alert, expecting net profit for the interim period to be between RMB 130 million and RMB 150 million, representing a year-on-year increase of approximately 23% to 42%. The strong performance was driven by robust growth in its main Amazon channel, as well as a several-fold increase in business from other channels like TikTok. The company's brand momentum and new product launches have also contributed to a significant rise in revenue.
SKYWORTH GROUP (00751) has issued a profit alert, expecting its interim profit after tax to increase by no less than 170% year-on-year. The anticipated growth is attributed to two main factors. First, the value of certain listed and unlisted equity securities held by the group has increased significantly due to a surge in the semiconductor industry's market valuation at the end of the period, resulting in a non-cash, unrealized gain of approximately RMB 530 million from financial assets measured at fair value through profit or loss. Second, the smart systems technology business segment saw an increase in the sales volume, revenue scale, and gross profit margin of its smart terminal products compared to the same period last year.
WYNN MACAU (01128) has reported that its controlling shareholder, Wynn Resorts, Limited, recorded Macau operations revenue of $163 million for the second quarter, a 26.93% increase year-on-year. Wynn Resorts CEO Craig Billings commented, "Our second-quarter results were very strong, with Las Vegas setting an all-time record for adjusted property EBITDAR in May, while Macau also performed well, reflecting the continued robust demand across our business. I am very proud of the performance of both teams."
Stock in Focus: ND PAPER (02689)
Major paper producers have recently announced a new round of price hikes, with several large firms issuing price increase notices. On July 29, ND Paper's three major bases released price adjustment letters. Dongguan ND Paper and Taicang ND Paper announced price increases for corrugating medium, recycled linerboard, and certain grades of kraftliner. Beihai ND Paper announced a price increase for its top-quality V kraftliner. The price increases are all RMB 50 per ton. Huafu Securities believes that with the upcoming Mid-Autumn Festival, National Day, and e-commerce promotions, downstream pre-stocking demand is expected to continue to heat up, providing support for paper prices. Bohai Securities maintains its view that rising paper prices will drive improvements in paper companies' earnings, and expects the profitability of packaging paper-related companies to improve in the second quarter of 2026.
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