Investment Rating - The report assigns an "Outperform" rating to several companies in the virtual asset sector, including Robinhood, Coinbase, Futu Holdings, UP Fintech Holding, and HashKey Holdings, with target prices set at 154.00, 288.00, 233.00, 17.20, and 8.80 respectively [1]. Core Insights - The virtual asset sector is expected to experience short-term volatility due to fluctuations in cryptocurrency prices and performance pressures, but the long-term growth logic remains clear. Regulatory easing is anticipated to open up business opportunities, and companies within the sector are diversifying their revenue structures, which could lead to improved gross margins [2][3]. - The report emphasizes the importance of focusing on high-quality targets with strong compliance barriers and diversified revenue streams, while dynamically optimizing positions based on market volatility and regulatory developments [2][3]. Summary by Sections 1. Stablecoin Industry Chain - The stablecoin industry can be divided into primary market issuance and custody, secondary market circulation (involving licensed trading platforms, brokers, and liquidity providers), and application scenarios primarily focused on trading and payments [7][10]. - Issuers earn interest income from reserve assets, while distributors, including trading platforms and brokers, generate revenue through transaction commissions [10][17]. 2. Valuation and Recommendations - The report highlights the significant discount of Chinese internet brokers (Futu, Tiger Brokers) compared to their US counterparts, making them attractive investment options. Futu is noted for its leading position in the internet brokerage space and strong competitive advantages in digital asset layout [3]. - HashKey is recommended due to its expected revenue CAGR of 68% from 2025 to 2027, benefiting from regulatory easing and product expansion [3]. 3. Market Trends - The report identifies a trend towards the mainstream adoption of digital assets, with financial activities migrating to blockchain platforms. The regulatory framework for digital assets is becoming clearer, and trading activities are expected to increasingly shift towards licensed onshore platforms [6][19]. - The report anticipates that institutional players will dominate digital asset trading volumes, with Hong Kong expected to lead in growth due to regulatory advancements [6][19]. 4. Company Analysis - Circle, a leading stablecoin issuer, derives 95% of its revenue from reserve asset income, highlighting the sensitivity of its business model to interest rates and the liquidity of USDC [29][32]. - The report outlines the revenue structure of Circle, noting concerns about its reliance on Coinbase for distribution and the impact of high distribution costs on profitability [29][35]. 5. Application Scenarios - The primary application scenarios for stablecoins are in cryptocurrency trading and cross-border payments, with trading accounting for 67% and remittances for 15% of stablecoin usage [19][22]. - The report emphasizes the growing importance of B2B payments in the stablecoin payment landscape, with significant growth expected in this area [22][23].

Liquidity Data - Year-to-date, global asset performance has become increasingly polarized, with Korea, Brazil, Taiwan, and Japan leading, while the Hang Seng Tech Index, India, and Nasdaq lagging[2] - The U.S. 10-year Treasury yield has dropped sharply by 13.6 basis points to 3.95% due to rising risk aversion[2] - In Hong Kong, short-selling turnover remains high at 20%, while southbound capital inflows have slowed to RMB 67 billion, with a turnover share of 19%[2][22] Selected Research Highlights - The "Spring Festival effect" is observed in both Hong Kong and A-shares, with a tendency for a rebound post-holiday[67] - Hong Kong IPO fundraising is expected to reach HKD 644.4 billion in 2025, significantly higher than HKD 192.2 billion in 2024, indicating improved market conditions[42] - Geopolitical conflicts are impacting oil prices and shipping, with potential implications for market stability[50] Market Trends - U.S. equities are showing extreme internal dispersion, with repricing reaching a near-term peak[67] - Recent U.S. inflation expectations have weakened, reducing their linkage to oil, copper, and the U.S. dollar index[67] - The People's Bank of China has cut the FX risk reserve ratio, which does not alter the medium- to long-term trend of the RMB[67]

Core Viewpoint - The Hong Kong stock market experienced a significant decline on the first trading day after the holiday, with major indices dropping sharply, indicating a bearish sentiment in the market [1][2]. Market Performance - The Hang Seng Index closed at 26,413.35, down 292.59 points or 1.10% [2]. - The Hang Seng Technology Index fell by 2.91% to 5,211.50 points, marking a new low in five months [4]. - The Hang Seng China Enterprises Index decreased by 1.22% to 8,959.56 points [2]. Sector Analysis - Technology stocks faced substantial losses, with major players like JD Health and Baidu dropping over 6%, while Tencent Music and Bilibili fell more than 5% [4][5]. - In contrast, AI applications and certain leading biotech companies saw gains, with some AI stocks like Zhiyuan and MiniMax experiencing significant increases in market capitalization [6]. Cryptocurrency Sector - Cryptocurrency-related stocks surged, with Star Chain Group rising over 122% [8]. - The Hong Kong Monetary Authority is evaluating applications for stablecoin issuer licenses, aiming to issue the first licenses by March [8]. Government Outlook - The Financial Secretary of Hong Kong expressed optimism about the market for the Year of the Horse, noting that historically, three out of four Horse years have seen double-digit percentage increases [9].

Core Viewpoint - The Hong Kong Securities and Futures Commission (SFC) has introduced a new regulatory framework allowing licensed virtual asset brokers to provide financing services to margin clients, contingent on sufficient collateral and robust investor protections. This marks a significant step in the regulation of the digital asset market following the "ASPIRe" roadmap released in February 2025 [1][2]. Group 1: Regulatory Changes - The SFC has lifted the previous ban on licensed corporations or registered institutions providing financial assistance for purchasing virtual assets, now permitting virtual asset brokers to offer credit for virtual asset trading under specific conditions [1][2]. - Only Bitcoin (BTC) and Ethereum (ETH) are accepted as collateral for virtual asset financing, with a minimum prudent discount rate of 60% applied [2]. - The SFC emphasizes the need for virtual asset brokers to continuously identify and monitor risks associated with their margin loan portfolios, ensuring operational capacity to respond to collateral fluctuations [2]. Group 2: Framework for Derivatives - The SFC has established a high-level framework for virtual asset trading platforms to offer perpetual contracts, which can only be sold to professional investors and must reference assets approved for retail clients or comply with international financial benchmark standards [3]. - Platforms are prohibited from providing any form of credit for margin, requiring that margin be paid in fiat currency, regulated stablecoins, or tokenized deposits [3]. - The framework mandates that platform operators are responsible for settling all transactions on their platforms, regardless of whether they are a party to those transactions [3]. Group 3: Market Development Initiatives - The SFC will launch a digital asset accelerator to facilitate systematic communication between the SFC and industry innovators, providing clear guidance to support innovation while ensuring regulatory compliance [4]. - The introduction of associated companies acting as market makers on licensed virtual asset trading platforms is expected to narrow bid-ask spreads and enhance fairness and transparency [3][4]. - The SFC aims to foster liquidity in the digital asset market through targeted reforms, product diversification, and precise support for innovation, positioning Hong Kong as a leading global digital asset hub [4].

Group 1 - The Chief Executive of Hong Kong, John Lee, announced that the first batch of stablecoin issuer licenses is expected to be issued in March [1] - The Hong Kong Monetary Authority (HKMA) has received 36 applications for stablecoin licenses from various entities, including banks, tech companies, and startups, as of September 30, 2025 [2] - The regulatory framework for stablecoins in Hong Kong aims to balance risk management and investor protection while promoting the development of the digital asset ecosystem [1][2] Group 2 - The HKMA is currently evaluating the received applications for stablecoin issuer licenses and emphasizes compliance with local regulations for cross-border activities [2] - Hong Kong's regulatory framework is designed to support the sustainable development of Web 3.0 and digital assets, enhancing financial transaction efficiency and inclusivity [1] - Future measures will be introduced to improve liquidity in Hong Kong's virtual asset market and diversify related products and services [1]

Core Insights - The total market value of Hong Kong's virtual asset spot ETFs has surged to $920 million, reflecting a 217% increase since their launch, signaling a clear industry explosion [2] - The recent joint document issued by Hong Kong's Financial Services and the Treasury Bureau and the Securities and Futures Commission marks a significant shift in the regulatory landscape for virtual assets, moving from a "testing phase" to a "defined development phase" [2][3] Regulatory Changes - The focus of regulation has shifted from merely monitoring virtual asset trading platforms to a comprehensive oversight of the entire industry chain, emphasizing the nature of financial activities rather than the type of company [3] - Compliance requirements have become more stringent, with a focus on the actual segregation of client assets and the implementation of risk controls, rather than just maintaining documentation and processes [3][4] - Virtual assets are now recognized as integral members of the financial system, moving away from being seen as outsiders [4] Compliance and Business Opportunities - The regulatory framework is not a blanket tightening but a "precise loosening," categorizing businesses into three levels based on risk: core financial activities, quasi-financial activities, and technology and infrastructure services [5][6] - The Real World Asset (RWA) market is identified as a significant opportunity, with a projected annual growth rate of 178% in Hong Kong by 2025 and a global market size expected to exceed $16 trillion by 2030 [8] - Successful case studies in Hong Kong demonstrate the potential of RWA, such as the transformation of innovative drug IP into RWA tokens and the financing of solar power projects through tokenization [8] Market Dynamics - Regulatory upgrades are seen as a market reshuffle, favoring institutions with traditional financial backgrounds that are willing to invest in long-term compliance [9] - The current environment in Hong Kong's digital port has attracted over 300 blockchain companies, with an annual growth rate of 25%, indicating a clear market trend [10]

Core Viewpoint - The Hong Kong Securities and Futures Professionals Association (HKSFPA) emphasizes that the virtual asset market in Hong Kong has entered a "post-licensing era," where liquidity and practical applications are more critical than mere licensing [1] Group 1: Recommendations for Government Budget - HKSFPA suggests a shift in the 2026-27 budget from "regulatory infrastructure" to "commercial promotion" [1] - Recommendations include accelerating token listing approvals and introducing international liquidity [1] - The association advocates for the development of a secondary market for Real World Assets (RWA) [1] Group 2: Integration and Activation of Funds - HKSFPA encourages licensed platforms to connect with traditional brokers through integrated accounts to activate existing funds [1] - The deepening of the Hong Kong Monetary Authority's Project Ensemble is recommended to promote the practical application of tokenized deposits and stablecoins [1] Group 3: Risks of Inaction - The opinion letter warns that a prolonged state of "licensed but inactive" could lead to mergers or exits of licensed platforms [1] - There is a risk that Hong Kong's status as a virtual asset hub may decline if proactive measures are not taken [1]

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The AI industry continues to show strong trends, with companies like MiniMax and Zhiyu AI passing hearings, indicating ongoing interest and investment in AI technologies [2] - The coffee and tea beverage sector remains vibrant, with brands actively opening new stores despite seasonal fluctuations [4] - E-commerce is facing pressure due to a challenging domestic consumption environment, leading to a lackluster performance [4] - Music streaming platforms are highlighted as valuable internet assets driven by domestic demand, suggesting a focus on subscription models [4] - The virtual asset market is experiencing limited catalysts, with ongoing market anxiety and weak capital inflows [4] - The automotive service sector is expanding, with significant milestones such as Tuhu's workshop count surpassing 8000 [4] - The report emphasizes the importance of cash flow in technology leaders, particularly in the AI sector, while cautioning against potential overinvestment [4] Summary by Sections 1.1 Consumer & Internet - Coffee and tea beverage sector shows a +0.18% increase in the Hang Seng non-essential consumption index, outperforming the Hang Seng index by -0.32 percentage points [9] - Notable stock performances include Mixue Group (+6.78%) and Luckin Coffee (+0.47%), while others like Bawang Tea and Xiaomian faced declines [9] 1.2 Platform & Technology 1.2.1 Streaming Platforms - The Hang Seng media index decreased by 0.59%, underperforming both the Hang Seng index and technology index [18] - Key stock performances include iQIYI (+3.24%) and Spotify (+0.38%), while Tencent Music saw a decline of -1.98% [18] 1.2.2 Virtual Assets & Internet Brokers - As of December 26, the global cryptocurrency market cap reached $30,205 billion, up 1.76% [22] - Bitcoin and Ethereum prices were $87,306 and $2,926.70, reflecting slight declines of -0.9% and -1.7% respectively [22] 1.2.3 Automotive Services - The Hang Seng composite index fell by -1.21%, with notable stock performances such as Zhongsheng Holdings (+2.25%) and Advance Auto Parts (-12.87%) [30] 1.2.4 O2O - The Hang Seng internet technology index dropped by -2.86%, with significant declines in stocks like Beike (-6.62%) and Didi Global (+4.57%) [34] 1.2.5 AI & Cloud - The Nasdaq internet index increased by +0.92%, with Nvidia (+5.27%) and TSMC (+4.81%) showing strong performances [39] 1.3 Media - The Shenwan first-level media index remained nearly flat with a -0.1803% change, with advertising marketing showing the largest gains [41] - Key stock performances include Xindong Company (+5.22%) and Perfect World (+3.09%) [41]

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The report highlights ongoing trends in the AI industry, with companies like MiniMax and Zhiyu AI passing hearings, indicating a strong interest in AI investments [2] - The education sector is experiencing slight pressure, with increased competition among small and medium institutions, while leading companies like Alpha are stabilizing [4] - The coffee and tea beverage industry maintains high enthusiasm, with brands actively opening new stores despite seasonal fluctuations [4] - E-commerce is under pressure due to the domestic consumption environment, with online retail sales for physical goods reaching 11.82 trillion yuan, a 5.7% increase year-on-year [4] - Music streaming platforms are seen as quality internet assets driven by domestic demand, suggesting continued investment interest [4] - The automotive service sector is witnessing a decline in sales for traditional luxury brands, while domestic luxury and new force brands are experiencing growth [4] - The internet medical sector is expanding, with companies like JD Health and Ant Group's AI health application gaining traction [4] - Concerns remain regarding the sustainability of capital expenditure and returns in the AI industry, but there is optimism about the long-term trends [4] Summary by Sections 1.1 Consumer & Internet - The non-essential consumption index fell by 2.98%, with notable stock performances from companies like HuShang Auntie (+4.27%) and Luckin Coffee (-3.62%) [9] - E-commerce index decreased by 2.86%, with Pinduoduo's stock rising by 24.51% while Alibaba's stock fell by 5.71% [13] 1.2 Platform & Technology - The media index dropped by 2.23%, with Netflix and Tencent Music experiencing slight declines [19] - The virtual asset market saw a decrease in total cryptocurrency market value to $296.84 billion, with Bitcoin and Ethereum prices falling by 2.4% and 3.5% respectively [25] - The automotive service sector's index fell by 1.21%, with significant declines in stocks like Advance Auto Parts (-12.87%) [34] 1.3 Media - The media index decreased by 0.1763%, with Perfect World (+10.68%) and Giant Network (+8.97%) showing positive performance [50] - The report emphasizes the importance of new game releases and innovations in the gaming sector, with a projected revenue of 350.79 billion yuan for the domestic gaming market by 2025 [4]

Core Insights - The United Arab Emirates (UAE) is positioning itself as a leader in the tokenized economy by focusing on real-world applications rather than getting hindered by regulatory indecision [1][2] - The UAE's approach views tokenization as a foundational element for future economic value creation, rather than a speculative financial niche [2] Regulatory Developments - In May, Dubai's Virtual Assets Regulatory Authority (VARA) updated its framework to include the issuance and distribution of real-world assets (RWAs) [3] - VARA introduced Asset-Referenced Virtual Assets (ARVAs), establishing a new legal category that recognizes tokenized real-world assets as regulated financial instruments [4] Implementation and Results - The Dubai Land Department, in collaboration with VARA and other entities, launched the first blockchain-based real estate registration entity, significantly reducing the time required for property transactions [5] - Tokenization enhances ownership efficiency and provides access to a global investor base for compliant and transparent transactions [6] Comparative Analysis - Unlike jurisdictions such as the U.S. and UK, which are still in pilot phases, Dubai has moved directly to institutionalizing tokenization [7] - Dubai's proactive approach serves as a model for other markets, emphasizing the importance of building first and regulating in real time to foster innovation [8]