To The Moon

Hong Kong's three major stock indices all fell during midday trading on August 4. As of the break, the Hang Seng Index dropped 0.49% to 25,882.43 points, the Hang Seng Tech Index slipped 0.19%, and the Hang Seng China Enterprises Index declined 0.85%.

In sector movements, tech stocks were mostly lower, with Bilibili falling over 1%, and Xiaomi and NetEase each dropping nearly 1%. Conversely, Alibaba rose over 1%. The optical communication sector saw a sharp rally, with Zhongji Innolight surging over 16%. Biopharmaceutical stocks were strong, as WuXi AppTec gained over 10%. Pork stocks weakened, with Muyuan Foodstuff declining over 3%. Auto stocks fell broadly, with XPeng dropping over 4%.

The optical communication sector's rally was driven by strong sentiment in the AI hardware segment on US markets overnight, particularly for optical communication and certain memory chip stocks. Kioxia ADR surged about 14%, while Lumentum and Coherent both rose over 9%. SanDisk and Corning gained over 6%, and Credo advanced over 5%. Additionally, Lumentum CEO noted that the company operates five InP wafer fabs, but shipments still lag behind customer demand by over 30%. SemiAnalysis also pointed out that supply of continuous-wave distributed feedback (CW DFB) InP lasers, used in near-package optical interconnects, is particularly tight.

Biopharmaceutical stocks were buoyed by WuXi AppTec's half-year report released overnight, which raised its full-year 2026 guidance. The company now expects overall revenue of 58.5 billion to 60.5 billion yuan, up from the previous 51.3 billion to 53 billion yuan, and forecasts 35% to 39% year-over-year growth in revenue from continuing operations, compared to the earlier 18% to 22% projection.

Pork stocks weakened as the national average price of lean pigs fell to around 10.32 yuan per kilogram as of August 3. The live hog futures main contract for September 2026 closed at 10,690 yuan per ton, losing over 1,000 points from its July 20 high and declining more than 15% from early July, hitting a new contract low. Pig prices are now consistently below the industry's average production cost, pushing breeding enterprises into widespread losses.

Auto stocks declined broadly, with XPeng falling over 4%. The divergence among new energy vehicle makers intensified after they reported July sales figures. Leapmotor surpassed 100,000 units in monthly sales, setting a new industry benchmark. XPeng delivered 38,027 vehicles in July, up 4% year-over-year but down 5.23% month-over-month. Li Auto delivered 30,468 vehicles in July, down about 0.86% year-over-year and 1.38% month-over-month.