Last week's discussion highlighted the market's tendency to absorb negative news before rebounding, a pattern that played out in the Hong Kong market with a dip followed by a late-week rally.
Several major events have concluded, including the smooth start of the World Cup and a strong 19%+ debut for SpaceX.
Former President Trump's role in facilitating dialogue, including a social media post about a potential agreement with Iran to reopen the Strait of Hormuz, has been significant.
While peace talks were widely discussed last Friday, the key focus this week is whether a formal agreement materializes.
Even without an agreement, the avoidance of conflict is positive; the distinction lies in the duration of post-war reconstruction logic and the strength of the economic recovery, expectations which have already boosted sectors like metals and aviation.
Against this backdrop of easing Middle East tensions, the overall market tone this week is positive.
The Federal Reserve's rate decision on Thursday is expected to result in no policy change, with attention focused on any new insights from Chair Kevin Warsh's press conference and the dot plot's view on future hikes.
The G7 summit in France this week may see leaders urge the US President to support a European-led mine-clearing mission in the Strait of Hormuz, with markets anticipating a potential agreement.
Anthropic's announcement on Friday that it was forced by the US government to restrict access to its Fable 5 and Mythos 5 AI models is expected to stimulate interest in domestic substitute models.
For instance, GLM 5.2 is a top-three global coding model, serving as the primary Anthropic substitute for major internet companies, with demand far exceeding supply.
ProShares has filed with the SEC to launch a 2x daily leveraged ETF tracking Innodisk, alongside filings for similar products on nine A-shares including Sunny Optical, Tianfu Communication, Industrial Fu Lian, Luxshare, CATL, GigaDevice, Hygon, and Cambricon, all warranting attention.
Metal sectors, particularly AI-related ones, are active; SK Hynix has completed production certification for 375-layer NAND using molybdenum instead of tungsten for word lines, opening new demand for molybdenum.
Copper also sees extensive AI applications.
The lithium battery sector benefits from strong energy storage demand and BYD's second-generation blade battery ramp-up, with leading battery makers' July production schedules expected to grow 5-10% month-over-month, indicating robust demand and a potential re-rating for leading stocks.
Featured Stock for the Week
DAMAI ENT (ASX: 01060) will release its film "Letter to Grandma" in Hong Kong, Macau, Singapore, Malaysia, and Brunei on June 18, with further international releases to follow.
The film's cumulative box office has already surpassed 16.7 billion yuan.
Huachuang Securities believes the film's success could boost the company's FY2027 performance, while Galaxy Securities notes DAMAI ENT's solid position as China's leading live entertainment company, with a stable ticketing business, growth from upstream content and overseas expansion, steady IP licensing, and positive reception for its new IP retail strategy.
Industry Analysis
Regarding the Fable 5/Mythos 5 service suspension, research indicates: 1) Domestic models will dominate core commercial scenarios in China due to cybersecurity and information boundaries.
2) Domestic models are rapidly catching up; major players like KNOWLEDGE ATLAS, Kimi, and MiniMax are expected to release large parameter models (1T-5T) within 2-4 quarters, closing the intelligence gap, with some like Seedance already surpassing overseas models in multimodal scenarios.
3) Domestic models offer better value; overseas flagship models cost over $20 per million tokens, while domestic models are generally under $5, though domestic companies' Annual Recurring Revenue (ARR) is still in early stages compared to Anthropic's growth trajectory.
Under the sovereign AI trend, leading overseas models face barriers to the mainland China market in the short term, while domestic models are penetrating overseas markets with their cost advantage, expanding their addressable market through increased domestic subscription penetration and overseas平价替代.
KNOWLEDGE ATLAS has focused on coding since GLM-4.5, with successive versions optimized in this area, building a strong engineering moat.
Its full release of GLM 5.2 last week supports 1 million context length, leading in long-range tasks, with an API launch next week to maintain its State-of-the-Art (SoTA) position in domestic coding.
Pricing for 5.2 is not yet announced but is expected to align with 5.1 levels; the company has raised API prices multiple times since the 5-series launch without reducing call volume, indicating low price elasticity.
Its upcoming A-share STAR Market IPO will fund foundational model R&D, and with its talent-data-algorithm flywheel, it is poised to maintain leading competitiveness.
MiniMax's Conch 3 is expected mid-June, with full modality remaining a core strength, and a major M3 version potentially solving issues like overly long reasoning chains may release this year.
The stock has declined recently, with a current market cap of $15.9B versus Kimi's $30B; the post-July lockup expiration and potential August inclusion in Stock Connect present a watch window.
Market Data Insights
HKEX data shows 136,960 total open contracts and 50,462 net open contracts for the June Hang Seng Index futures, expiring June 29, 2026.
With the Hang Seng Index at 24,718 and the bull/bear certificate concentration near the midline, the market appears hesitant.
Kevin Warsh's first FOMC meeting as Chair this week is not expected to bring a policy shift.
Market caution during the World Cup period means Hong Kong stocks may follow US volatility, with data suggesting a bearish tilt for the Hang Seng Index this week.
Closing Thoughts
The Hang Seng Tech Index fell 14.7% in the first half, with market sentiment at extreme lows since February 2024, short-selling ratios at a five-year high, and derivatives sentiment at extremes, suggesting short pressure is largely exhausted.
Overseas disruptions are easing post-SpaceX IPO, reducing capital outflow pressure.
Hong Kong's fundamentals are not materially deteriorating, foreign outflows are slowing marginally, and southbound flows continue into sectors like electronics, media, and banking, supporting the possibility of a market recovery in the latter half of the year.
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