Domestic Macro - Demand Side - As of July 31, the retail sales of passenger cars in China reached 1.444 million units in July, a year-on-year increase of 7.6%, but a month-on-month decrease of 21.0%[2] - The average number of domestic flights in July was 14,500, a month-on-month increase of 13.1% and a year-on-year increase of 2.3%[2] - The Baltic Dry Index (BDI) averaged 1,819.3 in July, a month-on-month increase of 8.6% but a year-on-year decrease of 5.0%[2] Domestic Macro - Production Side - The manufacturing PMI for July fell to 50.5%, down from 51% in June, indicating a slight contraction in manufacturing activity[3] - The new orders index dropped to 49.4%, down from 50.2%, while the new export orders index fell to 47.1% from 47.7%[3] - The construction PMI decreased by 2.2 percentage points to 50.6% in July, reflecting a slowdown in construction activity[3] Price Performance - As of August 1, the average wholesale price of pork decreased by 0.84% week-on-week, while the futures price of live pigs increased by 0.50%[4] - The average wholesale price of 28 key monitored vegetables rose by 0.64%, while the average price of 6 monitored fruits fell by 0.06%[4] - The Producer Price Index (PPI) saw a strong increase in crude oil prices, with WTI and Brent crude rising by 2.78% and 3.48% respectively[4] Fiscal and Investment - This week, the issuance of local special bonds accelerated, with an additional 350 billion yuan in special government bonds and 2.53 trillion yuan in special bonds issued, marking a 63.3% progress rate[7] - The issuance of local general bonds reached a progress rate of 63.9%[7] Monetary and Liquidity - The yield curve for government bonds is trending downward, with the 10-year government bond yield at 1.7059%, down 3 basis points from the previous week[9] - The central bank's reverse repurchase operation resulted in a net injection of 6.9 billion yuan this week[9]

Group 1: Market Overview - The Hong Kong stock market experienced a decline from July 28 to August 1, with the Hang Seng Index falling by 3.47% to 24,507.81 points, the Hang Seng Tech Index dropping by 4.94% to 5,397.40 points, and the Hang Seng China Enterprises Index decreasing by 3.78% to 8,804.42 points [4][38]. - Among the sectors, only the healthcare and communication services sectors saw gains, with increases of 2.29% and 0.07% respectively, while materials, consumer discretionary, and industrial sectors faced significant declines of 5.53%, 4.28%, and 4.08% respectively [7][38]. Group 2: Fund Flow and Liquidity - The average daily trading volume on the Hong Kong Stock Exchange was HKD 282.73 billion, a decrease of HKD 5.208 billion from the previous week. The average daily short-selling amount increased by 40.03% to HKD 30.83 billion, representing 10.88% of the total trading volume [12][38]. - Southbound funds recorded a net inflow of HKD 59.02 billion, marking an increase of HKD 26.669 billion from the previous week, the highest weekly net inflow since mid-April [12][38]. Group 3: Valuation and Risk Premium - As of August 1, the PE and PB ratios for the Hang Seng Index were 11.13 times and 1.16 times, respectively, down by 1.66% and 2.23% from the previous week, placing them at the 81st percentile since 2019 [19][21]. - The risk premium for the Hang Seng Index was calculated at 4.76%, which is -1.95 standard deviations from the 3-year rolling mean, indicating a low-risk environment [21][26]. Group 4: Sector Insights - The healthcare sector showed strong performance with positive mid-year earnings reports, while the automotive sector reported a retail increase of 9% year-on-year in July, despite a month-on-month decline of 19% [10][11]. - The energy sector's dividend yield exceeded 7%, while utilities, real estate, finance, communication services, and industrial sectors all had yields above 4%, suggesting these sectors may provide stable returns for investors [29][38]. Group 5: Future Outlook - The report suggests that the Hong Kong stock market is expected to trend upwards with rapid sector rotation. It recommends focusing on high-dividend stocks for stable returns amid ongoing uncertainties from U.S. tariff policies and domestic policy support for sectors like innovative pharmaceuticals and AI [41][38].

Group 1: US AI Action Plan - The US AI Action Plan aims to establish global leadership in AI, focusing on "innovation-driven" and "deregulation" strategies to enhance market vitality and reduce development barriers[5] - Key policies include accelerating AI innovation, building AI infrastructure, and leading global AI order, with over 90 specific administrative orders outlined[6] - The plan emphasizes the importance of ensuring American workers benefit from AI advancements, creating high-paying jobs through infrastructure development[5] Group 2: Risks and Challenges for China - The US views China as its strongest competitor in AI, leading to risks such as deepening technology blockades and increased supply chain vulnerabilities, particularly in AI chip markets where Nvidia holds a 66% market share in China[9] - China's AI development may face fragmentation in industry standards and open-source barriers as the US promotes a "full-stack AI package" to expand its technological influence globally[13] - The US's focus on AI infrastructure and energy competition may create a technological gap between the US and China, impacting China's AI capabilities[16] Group 3: Global AI Governance and Cooperation - China has proposed the "Global AI Governance Action Plan," advocating for an inclusive and sustainable global AI governance system, emphasizing cooperation among developing countries[19] - The plan includes 13 key tasks, such as technology innovation and data governance, aiming to establish a unified international rule-making framework[20] - Local policies in China are accelerating the development of regional data industry systems, with Jiangxi province targeting a 20% annual growth in data markets by 2027[21] Group 4: AI Infrastructure Investments - Major US companies, including Google and Meta, are investing significantly in AI infrastructure, with Google planning to invest $25 billion in data centers and AI facilities across 13 states[33] - Trump's administration announced a $90 billion investment plan for AI and energy infrastructure, focusing on new data centers and power generation facilities[31] - The National Science Foundation (NSF) is collaborating with Voltage Park to provide 1 million hours of high-end GPU cloud computing resources for AI research[35]

Macro Overview - The manufacturing PMI for July is reported at 49.3%, a decrease of 0.4 percentage points from the previous month, indicating a slight decline in manufacturing activity [2] - The production index stands at 50.5%, while the new order index has dropped to 49.4%, reflecting a contraction in new orders [3] - Extreme weather conditions in July, including heavy rainfall and high temperatures, have negatively impacted production intensity [3] - The price indices for factory output and raw material purchases have increased, indicating rising costs for manufacturers [4] - Inventory levels are still low, with both finished goods and raw materials inventory indices declining [5] Industry Insights Technology Sector - The report emphasizes the importance of technology innovation in driving new productive forces, with a focus on cultivating internationally competitive emerging pillar industries [20] - Investment recommendations include focusing on artificial intelligence, particularly in three main areas: core infrastructure, overseas leaders, and AI application leaders [23] Banking Sector - The banking sector is expected to benefit from continued supportive macro policies, with an emphasis on stabilizing employment and economic expectations [25] - The government has issued 15.8 trillion yuan in bonds this year, with 5.2 trillion yuan being special bonds, which will support infrastructure and related financing needs [25] - The report suggests that retail banking and technology finance are likely to benefit from policies aimed at expanding domestic demand [26] Textile and Apparel Sector - The report highlights the government's focus on expanding domestic demand and service consumption, which is expected to benefit the textile and apparel industry [30] - The textile export figures show a slight increase, but the sector faces uncertainties due to ongoing U.S.-China tariff disputes [31] - The use of new materials in textiles is becoming more widespread, driving industry transformation and upgrades [32] Communication Sector - The communication industry is positioned for growth, driven by technology innovation and the development of new productive forces [35] - The report identifies key areas of focus, including operators, artificial intelligence, and space computing, which are expected to enhance the industry's growth potential [38]

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Group 1: PMI Overview - In July 2025, the manufacturing PMI decreased to 49.3%, down 0.4 percentage points from the previous month, indicating a decline in manufacturing activity[1] - The construction business activity index was at 50.6%, down from 52.8%, while the services business activity index remained stable at 50.0%, slightly down from 50.1%[1] Group 2: Production and Demand Factors - The production index for July was 50.5%, down from 51%, while the new orders index fell to 49.4% from 50.2%, indicating a contraction in new orders[2] - Extreme weather events in July, including heavy rains and heatwaves, impacted outdoor construction activities, contributing to the decline in production and new orders[2] - Passenger car sales dropped by 21.9% month-on-month in July, reflecting weakened consumer demand post the June shopping festival[2] Group 3: Price Indices and Inventory - The PMI output price index rose by 2.1 percentage points to 48.3%, and the raw material purchase price index increased by 3.1 percentage points to 51.5%, indicating rising input costs[3] - The gap between raw material prices and finished product prices widened to 3.2 percentage points, up from 2.2 percentage points, which is detrimental to corporate profit recovery[3] - The inventory indices for finished goods and raw materials both declined, with finished goods at 47.4% and raw materials at 47.7%, indicating a contraction in inventory levels[4] Group 4: Business Sentiment and Future Outlook - Small enterprises faced significant pressure, with their PMI dropping to 46.4%, while large and medium enterprises saw slight increases[4] - The outlook for future demand remains cautious, with businesses responding primarily to short-term orders and maintaining low inventory levels[5] - The political bureau meeting emphasized consolidating economic recovery and addressing prominent issues, with a focus on nurturing emerging industries and avoiding debt-driven growth[5]

Investment Rating - The report maintains a "Recommended" rating for the communication industry, indicating a positive outlook for the sector's performance relative to the benchmark index [3]. Core Insights - The rapid development of artificial intelligence (AI) is intensifying competition for traffic entry points, with significant investments in hardware driving further efficiency in AI applications. Major cloud service providers are increasing their investments in computing power, driven by the competition for massive traffic and advertising revenue [1]. - Meta's Q2 2025 revenue reached $47.52 billion, a 22% year-over-year increase, with earnings per share of $7.14, up 38%. Microsoft reported Q4 FY2025 adjusted earnings per share of $3.65, exceeding expectations, with quarterly revenue of $76.44 billion, an 18% increase [1]. - The report highlights that both Meta and Microsoft attribute their performance improvements primarily to growth in cloud services, with significant increases in advertising impressions and prices contributing to revenue growth [1]. Summary by Sections AI and Cloud Services - The report emphasizes that the AI-driven growth in cloud services is a key factor behind the strong performance of major tech companies. Microsoft's Azure cloud computing revenue exceeded $75 billion, reflecting a 34% year-over-year increase, with capital expenditures projected at $30 billion for Q1 FY2026 [1]. - The ongoing investments in AI by cloud providers are expected to yield substantial returns, as the demand for computing power continues to outstrip supply [1]. Hardware and Infrastructure - The report suggests that the current phase of rapid development in the computing power sector is driven by the competition for traffic entry points and the expansive market potential for AI applications. The demand for computing infrastructure is anticipated to grow steadily as companies invest in AI models and customized services [2]. - Recommended companies to watch include those in fiber optics, optical modules, and copper cables, indicating a focus on hardware growth in the communication sector [2].

Group 1: US AI Action Plan - The US AI Action Plan aims to establish global leadership in AI, focusing on "innovation-driven" and "deregulation" strategies to enhance market vitality and reduce development barriers[5] - Key policies include accelerating AI innovation, building AI infrastructure, and leading global AI order, with over 90 specific administrative orders outlined[6] - The plan emphasizes the importance of ensuring American workers benefit from AI advancements, creating high-paying jobs through infrastructure development[5] Group 2: Risks and Challenges for China - China faces risks of deepening technology blockades, with Nvidia holding a 66% market share in China's AI chip market, indicating reliance on US technology[9] - The US aims to export a "full-stack AI package" to allies, potentially sidelining Chinese technologies and creating a fragmented global AI ecosystem[13] - Infrastructure gaps in AI capabilities may widen, as the US accelerates data center and energy infrastructure development to meet AI demands[16] Group 3: Global AI Governance and Cooperation - China released the "Global AI Governance Action Plan," advocating for an inclusive and sustainable global AI governance framework, emphasizing cooperation among developing countries[19] - The plan includes 13 key tasks, such as technology innovation and data governance, aiming to unify international rules and enhance participation from the Global South[20] - Local policies in China are rapidly emerging to build regional data industry systems, with Jiangxi aiming for a 20% annual growth in data industries by 2027[21] Group 4: AI Infrastructure Investments - Major US companies, including Google and Meta, are investing significantly in AI infrastructure, with Google planning to invest $25 billion in data centers and AI facilities[33] - Trump's administration announced a $90 billion investment plan for AI and energy infrastructure, focusing on new data centers and power generation facilities[31] - The establishment of the National AI Research Resource (NAIRR) aims to provide open AI research resources, enhancing collaboration in scientific fields[35]

Investment Rating - The report assigns a "Neutral" rating for the company, indicating a relative performance within the range of -5% to 5% compared to the benchmark index [14]. Core Insights - The company is projected to achieve a revenue of 84,491.87 million yuan in 2024, with a growth rate of 8.12%. However, the growth rate is expected to decline significantly in the following years, with only 0.74% growth anticipated by 2026 [2][10]. - The net profit attributable to the parent company is forecasted to be 32,496.17 million yuan in 2024, reflecting a profit growth rate of 19.28%. This growth rate is also expected to slow down, reaching only 2.98% by 2027 [2][10]. - The gross profit margin is expected to improve from 59.13% in 2024 to 62.56% in 2027, indicating a positive trend in profitability [2][10]. Financial Summary Income Statement - Revenue is projected to grow from 84,491.87 million yuan in 2024 to 87,118.15 million yuan in 2027, with a peak growth rate of 8.12% in 2024 [2][10]. - The operating profit is expected to increase from 39,645.36 million yuan in 2024 to 44,833.14 million yuan in 2027 [10]. - The net profit is forecasted to rise from 32,496.17 million yuan in 2024 to 36,830.74 million yuan in 2027 [10]. Balance Sheet - Total assets are projected to remain stable, with a slight increase from 566,071.98 million yuan in 2024 to 567,724.45 million yuan in 2027 [9]. - The total liabilities are expected to decrease from 344,116.09 million yuan in 2024 to 314,053.34 million yuan in 2027, indicating improved financial health [9]. Cash Flow Statement - Operating cash flow is expected to grow from 59,648.47 million yuan in 2024 to 62,408.32 million yuan in 2027 [9]. - The net cash increase is projected to be negative in the first two years, with a slight positive cash flow expected in 2026 and 2027 [9]. Market Data - As of July 30, 2025, the closing price of the stock is 28.70 yuan, with a market capitalization of 689 billion yuan [4]. - The company has a total share capital of 2,446,822,000 shares, with 2,400,726,000 shares in circulation [4]. Key Financial Ratios - The Price-to-Earnings (P/E) ratio is projected to decrease from 21.61 in 2024 to 19.07 in 2027, indicating a potential undervaluation over time [10]. - The Return on Equity (ROE) is expected to remain stable around 15% over the forecast period [10].

Group 1: Federal Reserve's Stance - The Federal Reserve maintained the federal funds rate at 4.25%-4.50% during the July FOMC meeting, aligning with market expectations[2] - The statement shifted from "solid growth" to "moderated," indicating acknowledgment of economic slowdown[5] - Two officials voted against the decision, suggesting increased internal calls for rate cuts[5] Group 2: Economic Outlook - The expectation for a rate cut has been adjusted to one cut in Q4 2025 due to anticipated tariff increases and moderate inflation recovery[4] - Inflation is projected to rise to around 3.4% in early Q4, which may hinder rate cuts[18] - The labor market is expected to show limited decline, with unemployment rates remaining below 4.4% due to slowed immigration[18] Group 3: Market Reactions - Market perceptions shifted towards a hawkish stance, with the probability of a September rate cut dropping to 41.2%[25] - The US dollar index rose by 1.06% to 99.9684, while 10-year Treasury yields increased by 4.57 basis points to 4.368%[25] - Equity markets experienced a pullback following the FOMC meeting, indicating cautious investor sentiment[25]