Market dynamics at month-end are often volatile. On the final trading day of May, the two markets diverged: A-shares weakened, while Hong Kong stocks, after several consecutive days of decline, finally rebounded, closing up 0.70%. The current market movement is largely decoupled from external news. The ongoing "Rashomon" narrative between the US and Iran, if used as a trading signal, would be utterly confusing. Simply put, who can definitively predict the direction of oil or gold prices? It seems disseminated news consistently favors US stocks, a privilege seemingly reserved for the "White House stock gods." A peculiar pattern is that pre-market news often appears negative, while post-market news turns positive. Therefore, the most critical factor influencing the stock market is arguably its own inherent operational logic.
The primary issue in the current market is the excessive crowding in technology stocks. Even in markets like South Korea, AI and tech investments have reached limits. As of Thursday, global investors net sold $63.6 billion worth of South Korean stocks, the largest monthly sell-off since data became available in 1999. High-valuation tech stocks are prone to sell-offs on any hint of negative news. Last night, a wave of share reduction announcements hit the semiconductor sector. National Integrated Circuit Industry Investment Fund reduced its stake in Shanghai Sinyang Semiconductor Materials Co., Ltd. (688126.SH) by 1%, lowering its holding to 12.89%. Shareholder Shanghai Rongying conducted a block transfer of 12.228 million shares in Montage Technology (688008.SH), reducing its stake from 6.84% to 5.78%. Hong Kong Exchange disclosures showed the National Integrated Circuit Industry Investment Fund reduced its long position in Semiconductor Manufacturing International Corporation (00981) from 8.08% to 7.99%. The stock fell over 5% today, dragging down related names.
However, there are exceptions. On May 26th, the "Security and Reliability Evaluation Results Announcement (No. 2, 2026)" was officially released, marking the first inclusion of AI training and inference chips into this evaluation system. Nine domestic chips, including Biren Technology's (06082) Birent™ 166, were rated Security and Reliability Level I. This signifies these products have obtained the compliance "pass" for larger-scale industry deployment. Additionally, the company was included in the Hang Seng Composite Index, with changes taking effect after market close on June 5th and from June 8th, leading to a surge of over 14% today.
Dell's stellar earnings report also provided a boost. The company raised its full-year revenue forecast to $165-169 billion from a previous $138-142 billion. Revenue from AI servers skyrocketed 757% year-over-year to $16.1 billion. Dell also raised its AI server revenue forecast for fiscal 2027 from approximately $500 billion to about $600 billion. Dell is fully capitalizing on the AI红利 (dividend), particularly the surging demand for AI servers. Lenovo Group (00992), sharing a similar theme with Dell and partnered with NVIDIA, has access to various chips (excluding low-end cards supplied domestically), boasts high gross margins, and derives 70% of its revenue overseas. Its recent launch of three new Lenovo Baiying AI host models—300, mini100, and Pro700—propelled the stock nearly 22% higher. Lenovo Holdings (03396) also rose over 12%.
Other stocks newly hitching a ride on the AI express also showed strength. For instance, Sunny Optical Technology (02382): Beyond securing orders for high-unit-price variable aperture lenses for the 2H26 new iPhone models, accounting for nearly 50% of related business, the company's foray into the optical communications field represents a significant growth avenue. Its silicon photonics chip technology has achieved phased breakthroughs in R&D of core optoelectronic integrated devices like high-speed optical modulators and optical switches. It has realized sub-micron level coupling alignment between optical chips, lasers, and optical fibers, ensuring high yield and consistency in optical module packaging. Preparing to enter the AI server CPO/silicon photonics coupling component market, it stands a chance to secure optical component orders for OpenAI devices, surging nearly 14% today.
Another example, AAC Technologies (02018), entered the first-generation desktop robot motor product market, with mass production expected within the year. Through the acquisition of Yuandi Technology, it accelerated its strategic layout in AI liquid cooling heat dissipation. Its centralized liquid cooling CDU has achieved mass production and commenced global batch deliveries, with a monthly delivery capacity of 400 units. Its centralized CDU liquid cooling solutions are applied in projects like Shanghai Unicom Lingang Computing Center, Guangzhou Turing AI New Intelligence Computing Center, Zhuhai Beijing Normal University Supercomputing Center, and Shenzhen Pengding Computing Center. Its distributed CDU liquid cooling solutions serve clients like Moore Thread, Ruijie Networks, Inspur Information, ZTE, Cloud Edge Information, and Kunlunxin. The stock rose nearly 4% today.
The strength in the above-mentioned stocks actually serves as indirect proof that the AI theme is not entirely extinguished but is continuously evolving. This includes the power sector highlighted in yesterday's sector focus, which saw significant gains today, such as Huaneng Power International (00902) rising nearly 7%. Superficially, this is about power shortages, but fundamentally, it's driven by speculation on AI's power demand.
The most notable change in today's market was the collective surge of "old guard" consumer stocks. Yesterday's mention of Duan Yongping's substantial purchase of Pop Mart (09992) sparked market enthusiasm today, driving the stock over 7% higher. A catalyst was a statement from Wall Street brokerage Bernstein circulating online last night. Bernstein's Hong Kong-based Asia consumer stocks analyst Melinda Hu announced that, effective May 26, 2026, coverage of the Chinese consumer sector would be terminated due to the departure of a senior analyst. The statement listed companies for which coverage would end: ANTA Sports (02020), Giant Biogene (02367), Gree Electric Appliances (000651.SZ), Marubi (603983.SH), Haier Smart Home (600690.SH), Haier Group (06690), Jiajiayue Group (603708.SH), Li Ning (02331), Midea Group (00300), Midea Group (000333.SZ), Pop Mart (09992), Proya (603605.SH), Shiseido (4911.JP), Shiseido (SSDOY), Suning.com (002024.SZ), Gaoxin Retail (06808), Yonghui Superstores (601933.SH), and Yunnan Baiyao (000538.SZ). Interestingly, all the listed stocks rose today. This includes China Tourism Group Duty Free (01880), highlighted yesterday, which also rose over 7%. It seems these long-depressed stocks experienced a resonance effect amid weaker tech sentiment, coupled with the upcoming 618 shopping festival and various topical discussions. Several other consumer stocks also rose in Hong Kong today. Whether this strength persists will depend on fundamentals.
Real estate stocks also showed collective movement; details are in the sector focus. The American Society of Clinical Oncology (ASCO) Annual Meeting is being held from May 29 to June 2, 2026, at McCormick Place in Chicago. Companies with expectations for this meeting include Akeso (09926) and Kelun-Biotech (06990). Additionally, Innovent Biologics (01801) and Pfizer jointly announced a global strategic licensing and collaboration agreement for 12 early-stage and pioneering oncology R&D projects with breakthrough potential. Innovent will receive an upfront payment of $650 million and potential milestone payments up to $9.85 billion, making the total deal value up to $10.5 billion. Furthermore, Innovent will receive future sales royalties for related products, leading to a surge of over 11%.
**Sector Focus** The State Council issued the "15th Five-Year Plan for Urban Renewal." The plan proposes comprehensively assessing the inventory of urban存量资产 (存量 assets) and resources, promoting the分类处置 (categorized disposal) of supplied but undeveloped land and projects under construction. By 2030, significant progress is expected in urban renewal actions, with initial results in transforming urban development and construction methods. The plan targets a market capacity of approximately 15 to 20 trillion RMB / an investment scale exceeding 10 trillion RMB. Key tasks include: renovating 500,000 units of dilapidated housing, renewing 115,000 old residential communities, renovating 4,000 urban villages, and constructing 365,000 kilometers of underground pipelines. This isn't a entirely new theme, but the timing is favorable. This move benefits developers in core cities, such as Country Garden (02007), Sunac China (01918), China Resources Land (01109), China Vanke Co., Ltd. (02202), C&D International Group (01908), Yuexiu Property (00123), and China Lesso Group (02128), which is involved in underground pipeline network renovation.
**Stock Selection** HUADIAN POWER (01071): Record-High Power Load Presents Opportunity for Thermal Power Sector; Core Business Profit Surges From the evening of May 25th to 27th, the Southern Power Grid's power load hit record highs for three consecutive days, peaking at 272.5 million kilowatts. On the evening of the 27th, Guangdong Power Grid's load reached a yearly high for the first time, exceeding 166 million kilowatts, climbing to 170 million kilowatts by noon on the 28th. The company's Q1 2026 revenue was 30.473 billion RMB, with adjusted net profit of 1.783 billion RMB. Commentary: Recent record-high power loads present a阶段性机会 (phased opportunity) for the thermal power sector. HUADIAN POWER's thermal power installed capacity ranks in the domestic first tier, with core business profit showing substantial growth. Affected by new energy and power demand, annual coal-fired power utilization hours have declined noticeably. Total installed capacity is approximately 74.42 million kilowatts; thermal power (coal + gas) accounts for over 95%; 90% of coal-fired capacity consists of large units above 300MW, with 600MW ultra-supercritical units comprising about 50%, resulting in significantly better coal consumption than the industry average. Gas-fired power capacity exceeds 20GW, ranking前列 (at the forefront) in the industry, with high value for peak shaving and frequency regulation. The company holds a 26.78% stake in Huadian New Energy (wind, solar, hydro, storage), benefiting from the energy transition红利 (dividend). Its布局 (layout) spans 15 provinces/municipalities, focusing on high-load centers like Shandong, Jiangsu, Guangdong, and North China, being close to load centers, resulting in lower transmission losses and higher electricity prices. In 2025, its供电煤耗 (coal consumption for power supply) was 283.05 grams/kWh, down 4.48 grams year-on-year, significantly below the national average. All 115 coal-fired units have ultra-low emissions, leading to low environmental costs and policy risks. The high proportion of large, efficient units gives it industry-leading per-unit electricity costs and greater profit elasticity during coal price fluctuations. The company plans to acquire power generation assets from its controlling shareholder, potentially increasing asset scale and EPS. Shareholder Shandong Guohui intends to absorb and merge Shandong Development. According to China Huadian Group, it is accelerating the injection of优质资产 (quality assets) into the capital market, focusing on building a new energy listed platform, and advancing HUADIAN POWER's M&A restructuring and infrastructure investment trust fund projects. In 2025, it completed its largest-ever asset injection: acquiring 8 thermal power plants, adding 16.06 million kilowatts of capacity, further improving asset quality. The group prioritizes the company for its "沙戈荒" (desert-Gobi-wasteland) mega-bases, offshore wind power, and energy storage projects, ensuring转型 (transformation) support. Current spot coal prices are already below long-term contract prices; a decline in coal prices is expected to bring significant业绩弹性 (earnings elasticity). The爆发 (explosion) of AI computing power is driving a激增 (surge) in data center electricity consumption (projected at 700 billion kWh by 2030), making computing-power协同 (synergy) a new growth point. The profitability of the company's thermal power assets is expected to be maintained, and coupled with potential injections of group thermal power assets, operating performance有望持续增长 (is expected to sustain growth).
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