[Market Overview] The market initially reacted to expectations surrounding the U.S. presidential visit, but turned lower after its conclusion due to a lack of significant positive news, leading the Hang Seng Index to fall below 26,000 points last week. Over the weekend, the Ministry of Commerce announced preliminary outcomes from China-U.S. economic and trade consultations. Key achievements include expanding agricultural trade, continued negotiations on tariff reductions, and breakthroughs in the aviation sector involving Chinese purchases of American aircraft with U.S. guarantees on engine and parts supply. Additionally, a reciprocal visit is planned for this autumn, indicating a favorable window for major power relations. Concurrently, the upcoming state visit by the Russian President on May 19-20 is expected to deepen comprehensive China-Russia cooperation, with potential new breakthroughs in trade and economic areas. Market attention has refocused on U.S.-Iran tensions, with U.S. sources suggesting the Pentagon is preparing for potential military action, possibly resuming strikes as early as this week. While this issue remains volatile, as long as no direct conflict occurs, its marginal pressure on markets diminishes. The Loan Prime Rate (LPR) announcement is scheduled for the 20th. Under normal circumstances, it is expected to remain unchanged, given the rebound in U.S. April inflation to 3.8% and the 10-year Treasury yield rising to 4.53%, its highest since May 2025. A rate cut would be a positive surprise. Overall, negative factors were largely digested last week, making a market rebound this week highly probable barring unforeseen events.
Technology continues to catalyze the market. NVIDIA's earnings report after Wednesday's close could reignite tech enthusiasm if results exceed expectations. Furthermore, the market anticipates new Gemini 3 or even 4.0 models and AI glasses hardware at Google's I/O 2026 conference this week. Shanghai Telecom has launched a Token-based billing package: 1 yuan for 250,000 token points, payable via phone bills, receiving significant media coverage over the weekend regarding the impending "computing power network." The inaugural major industry initiative, the "StarHub Plan," under the Shanghai Space Computing Industry Ecosystem Partnership, has been announced. Computing power-related sectors like data centers are expected to remain in focus. With less than 30 days until the 2026 FIFA World Cup kickoff, China Central Television and FIFA have jointly announced the acquisition of broadcast rights for the 2026 and 2030 tournaments. The proximity of the event, coupled with the launch of Tmall's 618 shopping festival, makes related beneficiary sectors worth watching. The State Council executive meeting has reviewed and passed the "15th Five-Year Plan for Urban Renewal," with state-owned and central government-backed real estate developers likely to benefit the most, alongside supporting infrastructure sectors. SpaceX has set a target listing date of June 12, potentially releasing its prospectus as early as next Wednesday. This theme has been discussed previously and may see renewed activity.
[Stock Pick of the Week] CHINA XLX FERT (01866) announced its Q1 2026 results, reporting revenue of RMB 68.22 billion, a 17% year-on-year increase. Net profit attributable to owners of the parent was RMB 2.996 billion, up 52% year-on-year, with basic earnings per share of 24.1 cents. The significant profit growth was primarily driven by increased volume and prices of core products, boosting overall gross margin. On one hand, the commissioning of the Jiujiang Phase II project and the trial production phase of the Xinxiang base's chemical new materials project have released new capacity, expanding sales scale while further solidifying cost competitiveness. On the other hand, continuous optimization of the product mix has led to a steady rise in average selling prices. For instance, international urea and melamine prices have surged significantly, creating a substantial price gap between domestic and international markets. U.S.-Iran tensions are severely impacting global energy and fertilizer supply. The Middle East, a major nitrogen fertilizer production region with access to cheap natural gas, accounts for 12% of global urea production and 35% of global urea exports. Qatar's LNG represents about 20% of global supply, and disruptions in natural gas supply also threaten nitrogen fertilizer production in Asia. International urea prices have risen from $390/ton at the start of the year to $780/ton in early April, a 100% increase. In 2025, China exported 4.894 million tons of urea, a 17.8-fold year-on-year increase but still far below the historical peak of over 13 million tons. The average export price for urea in 2025 was $410.2/ton, up 14.3% year-on-year and over RMB 1,000/ton higher than domestic prices. 2025 urea exports showed a distinct pattern of being low in the first half and high in the second half. From January to April, export channels were effectively closed to ensure domestic supply for spring farming. In May, the first batch of 1 million tons of export quotas was officially allocated to major enterprises, with subsequent export volumes rising month by month. The group continues to optimize its equity structure, steadily advancing the acquisition of minority shareholdings. In Q1, it completed the acquisition of approximately 10.66 million shares from minority shareholders, increasing the parent company's ownership proportion by 0.55 percentage points to 83.32%, thereby strengthening governance efficiency and better safeguarding the interests of all shareholders.
[Industry Insight] Jensen Huang has clearly stated that Tokens are becoming a new commodity, where the throughput and Token generation speed of AI factories will directly determine revenue. The Vera Rubin architecture achieves a 35x improvement in Token throughput compared to Hopper. Global computing power demand is projected to exceed $1 trillion by 2027. This signifies the official commencement of a business model shift from computing power billing to Token-based billing, leading to a restructuring of the industry chain's pricing logic. This month, the State Council executive meeting placed computing power networks on par with public infrastructure like water and electricity. Currently, the three major telecom operators have successively proposed strategic visions for Token-based operations, with gradual market-level implementation by provincial/municipal branches over the last one to two months. Recently, China Telecom also initiated tenders related to "token factories," indicating operators are gradually transitioning towards Token-based operations. Over the weekend, Shanghai Telecom announced the official launch of Token computing power services for its users, becoming the first operator in Shanghai to release a Token-based billing package. According to Communications World Network, China Mobile Jiangsu's AI Token package saw external Token daily sales and usage exceed 800 million within a month of launch. Investment opportunities exist across computing power infrastructure/IDC (Token production), Token circulation, and Token application. In Hong Kong stocks, focus on Alibaba (09988), the three major telecom operators, and XunCe (03317).
[Market Data] HKEX data shows the total number of open contracts for Hang Seng Index Futures (May) is 134,098, with a net open interest of 47,553. The settlement date for Hang Seng Index Futures is May 28, 2026. With the Hang Seng Index at 25,963, the bear warrant concentration zone deviates from the central axis, while the bull warrant concentration zone below is closer to it, indicating short-selling pressure in Hong Kong stocks. The decoupling of U.S. stocks from U.S. Treasuries increases the pressure for a U.S. stock correction, with data suggesting a bearish outlook for the Hang Seng Index this week.
[Closing Thoughts] High U.S. Treasury yields coupled with cost pressures transmitted from oil prices may suppress the performance of growth stocks. While upstream materials like lithium and copper are experiencing volume and price increases, caution is warranted regarding downstream acceptance. Conversely, computing power-related stocks are still in a volume-driven growth phase. Sectors benefiting from rising price centers, such as energy (oil shipping, coal, lithium batteries), and chemicals, demonstrate resilience. Structural opportunities also exist in commercial vehicles where the capacity cycle is bottoming, power grid equipment, and consumer segments undergoing inventory recovery. The current market still requires clarity in the macro environment, making it more prudent to focus on directions with low volatility and high certainty.
