Hong Kong's stock market navigated April relatively smoothly after the March panic, buoyed by repeated pauses in former President Trump's actions, leading to a rare upward trend. The Hang Seng Index fluctuated between 24,901.77 and 26,529.49 points during the month. While March significantly unsettled the market, April showed signs of stabilization. The most critical factor was the absence of further escalatory actions from Trump, resulting in an extended period of calm. Consequently, stock markets naturally trended towards a rebound. U.S. stocks demonstrated a particularly strong recovery last month, with technology and AI-related stocks leading the charge. Mirroring overseas giants, domestic optical module companies performed exceptionally well. Cambridge Technology (06166) surged up to 130%, while PCB manufacturers like Kingboard Laminates (01888) and Guanghe Technology (01989) also saw their shares double at their peak. The lithium battery sector rallied collectively, driven by both supply and demand factors, with Longpan Technology (02465) climbing nearly 83%. On the consumer side, Auntea Shanghai (02589) rose over 130%, supported by its controlling shareholder extending a lock-up period and successful overseas expansion.

Within the pharmaceutical sector, April's top pick, WuXi AppTec (02359), led the market with a strong financial report, soaring up to 26%. Pioneer Haixi Xin Yao (02637) jumped 89% due to progress with a key innovative oral drug for fundus disease. The key question is whether April's stabilizing monthly performance signifies a mere rebound or a pause within a broader downtrend. Regarding this, most institutional views for May are generally optimistic. House Speaker, Republican Mike Johnson, stated in an interview that Congressional intervention in U.S. military action against Iran was unnecessary as the country is not currently "in a state of war." Defense Secretary Hergeseth testified on April 30th that the temporary ceasefire with Iran, effective April 8th, meant the 60-day legal timeframe for presidential military action was "paused or suspended," indicating high-level support for the administration's approach.

The core issue impacting the global economy is the blockade of the Strait of Hormuz by Iran, with the U.S. continuing its blockade of Iranian ports. If Iran is forced to halt oil and gas production due to lack of storage capacity, permanent damage to oil field productivity could occur, potentially leading to irreversible losses of up to 500,000 barrels per day. However, this Iranian capacity loss could be offset by OPEC increasing production. Even without OPEC cooperation, the UAE, having left the organization, can freely boost output, making this gap less concerning. The real impact lies in the physical blockade of the Strait of Hormuz, creating an actual supply deficit of approximately 15 million barrels per day. UN Secretary-General Guterres warned that if the strait remains closed until mid-year, global growth could slow to 2.5% with inflation rising to 5.4%. Long-term negative ripple effects could be significant, though short-term impacts remain less apparent and dynamic. Regarding the effectiveness of the U.S. blockade, Iranian officials claim 40% of trade can shift to land routes, with up to 15% of transit freight potentially moving to the International North-South Transport Corridor. Trump subsequently proposed a new plan for a maritime coalition to reopen the strait, but its feasibility appears low. Currently, both sides maintain communication and express willingness to continue negotiations. Prolonged stalemate isn't necessarily negative, as it allows economic activity to continue. For Trump, boosting currently low approval ratings is a priority. A strong stock market, stability, and controlled oil prices are all beneficial. From multiple perspectives, military action would likely be detrimental unless it achieves major success. Therefore, the safest approach for the U.S. is to maintain the blockade and verbal pressure, with Iran likely complying.

Regarding the Federal Reserve, in the latest FOMC vote, eight members, including Chair Powell himself, supported the policy statement, with four dissenting. This was the highest number of dissents in a Fed policy meeting since 1992. Powell indicated he would remain as a Governor. This suggests the newly nominated Chair, Warsh, faces a relatively complex situation, though the Fed's overall independence is expected to continue. The U.S. PCE price index recorded its highest monthly increase since 2022 in March, with the annual rate climbing to 3.5%. Gasoline prices have continued to rise, reaching their highest level since 2022. Controlling inflation will be challenging without managing oil prices, highlighting the importance of upcoming non-farm payroll data. However, the Fed's earliest potential action is not expected until mid-June.

Sino-U.S. tensions often intensify ahead of high-level engagements. Recently, the National Development and Reform Commission officially halted the Manus acquisition. Given that Manus's early R&D, data, and talent originated in China, its attempt to restructure and list overseas was non-compliant. While this move is justified, the U.S. side appears to be deliberately seeking leverage. On April 28th, foreign media reported the U.S. requested several chip equipment companies to halt some shipments to Hua Hong Semiconductor, indicating a spread of restrictions from advanced to mature process nodes. Furthermore, on April 30th EST, the FCC passed measures to revoke certifications from bodies in countries without "mutual recognition agreements" and ban entities on the so-called "Covered List" from U.S. telecom operations. A key variable is Trump's visit to China, postponed from early May to mid-May. Based on current information, the visit remains scheduled. Positive interactions continue, with Foreign Minister Wang Yi speaking with U.S. Secretary of State Rubio on April 30th, emphasizing the stabilizing role of leader-to-leader diplomacy. Later that evening, Chinese Vice Premier He Lifeng held a video call with U.S. Treasury Secretary Bessent and Trade Representative Greer, conducting candid and constructive discussions on implementing summit consensus and resolving trade concerns.

Domestically, the late-April key meeting, while not introducing stimulus policies, conveyed relatively positive signals. The economic assessment noted a strong start but a foundation requiring consolidation, emphasizing revitalizing existing assets and targeted efforts over strong stimulus. Macro policy involves proactive fiscal measures and appropriately loose monetary policy, maintaining ample liquidity with the window for RRR and interest rate cuts still open. For real estate, the focus is on stability and urban renewal. Industrial policy prioritizes new productive forces, technological self-reliance, AI+, and supply chain security. The impact of Middle East conflicts on China is relatively limited, with the economy demonstrating resilience due to an energy structure dominated by coal and green electricity, ample reserves, and low sensitivity to oil prices. Furthermore, a complete manufacturing and raw material supply chain provides strong risk resistance. Notably, DeepSeek's latest V4 model significantly exceeded expectations. Adapted for the Ascend 950, it marks a full transition from NVIDIA's CUDA to Huawei's CANN, signaling domestic computing power's shift from "usable" to "user-friendly." Projections indicate domestic training GPU utilization will reach 16.8% by 2029, with inference GPU utilization at 37.9%, driving demand across the domestic AI chip, server, switch, and semiconductor equipment supply chain.

Overall, if Trump's mid-May visit to China is confirmed, the likelihood of offensive actions beforehand is low, suggesting a continued period of stable market development. Otherwise, another postponement could introduce risks. However, a final wave of action is still probable, though its timing is uncertain.

**May 2026 Investment Strategy: Seeking the Market's Common Ground** The April top stock picks outperformed the market. The Hang Seng Index's maximum gain in April was 7%, while the average maximum gain for the ten picks was 14.9%. The specific maximum monthly gains were: WuXi AppTec (02359) +26%, CALB (03931) +24.1%, TCL Electronics (01070) +22.7%, Akeso (09926) +19.8%, East Buy (01797) +16.9%, Chifeng Gold (06693) +11.2%, Yuejiang (02432) +10.7%, Guangdong Investment (00270) +9.2%, Nongfu Spring (09633) +6.3%, and Yadea (01585) +1.6%. Although the strongest performers weren't captured, April's gains were relatively balanced, with most picks achieving over 10%, aligning with a steady, defensive strategy.

Compared to April's volatility, May's market conditions should be more manageable. While still a structural market, expectations are clearer. The overall May strategy is to seek the market's common ground. The release of DS V4 is a milestone event, fully adapted to Huawei's Ascend ecosystem, signifying a breakthrough in NVIDIA's ecosystem monopoly. Undoubtedly, the most significant theme in May is AI and technology, attracting substantial capital due to application catalysts, capital expenditure, domestic substitution, Sino-U.S. dynamics, and earnings potential, particularly in wafer manufacturing and the rising PCB segment. Additionally, multiple AI, data, digital economy, and computing-related exhibitions/forums in cities like Shanghai and Guangzhou serve as key catalysts. Commercial aerospace also presents positive developments. SpaceX privately submitted IPO materials to the SEC on April 2nd, planning a $75 billion raise, with roadshows expected in early June, potentially the largest global IPO. Domestically, the CZ-10B is prepared for launch, and the Blue Arrow ZQ-3Y2 is ready for delivery, with rocket recovery technology likely achieved in Q2. Focus on related concept stocks and space-based photovoltaics.

In pharmaceuticals, the ASCO 2026 annual meeting from May 29th to June 2nd will feature key clinical data releases from several HK/Chinese biopharma companies, stimulating interest in innovative drugs. Beyond mentions in key meetings regarding stabilizing the property market and advancing urban renewal, major cities have recently synchronized stimulus policies. Shenzhen, Guangzhou, and Tianjin issued notices optimizing real estate policies, focusing on lifting sales restrictions, increasing provident fund loan quotas, acquiring existing subsidized housing, and various subsidies, which should aid inventory reduction and benefit leading developers.

With the FIFA World Cup commencing on June 11th, the market is expected to price this in during May. Related consumer stocks, like breweries, will benefit, especially as the sector enters its peak season, prompting action from leading companies. The Middle East conflict is unlikely to cease shortly, suggesting continued strength in energy stocks, particularly elastic coal plays. In new energy, focus on companies combining power and storage batteries.

**Specific Picks:** Chip: SMIC (00981) PCB: VGT (02476) Lithium Battery: REPT BATTERO (00666) Wind Power: Goldwind (02208) Photovoltaics: DRINDA (02865) IT: VSTECS (00856) Pharmaceuticals: INNOVENT BIO (01801) Coal: Yankuang Energy (01171) Beer: China Resources Beer (00291) Real Estate: China Resources Land (01109)

**Detailed List:** 1. **SMIC (00981)**: Q4 2025 revenue reached $2.489 billion, up 12.8% YoY and 4.5% QoQ, exceeding guidance. Consumer electronics contributed 47.3% of revenue. Gross margin was 19.2%. Full-year 2025 sales hit a record $9.327 billion, with net profit up 39.0% to $685 million. The company guides for flat Q1 2026 revenue. Capacity expansion is ongoing, with 95.7% utilization indicating strong demand. As China's leading foundry, it benefits from supply chain repatriation and local manufacturing trends. 2. **VGT (02476)**: Q1 2026 revenue was RMB 5.519 billion, up 27.99% YoY; net profit reached RMB 1.288 billion, up 39.95% YoY. Gross and net margins improved to 34.46% and 23.34% respectively, driven by product mix optimization. The company is actively building inventory for high demand. AI-driven demand for high-end PCBs is a key growth driver. Significant capex supports rapid capacity expansion, with new facilities expected to boost future revenue. 3. **REPT BATTERO (00666)**: 2025 revenue grew 36.7% to RMB 24.33 billion, with energy storage revenue surging 86.8%. Battery shipments increased 89% to 82.7GWh. High capacity utilization and scale effects led to a gross margin improvement of 7.1 ppts to 11.2%. The company is well-positioned in the high-growth residential storage segment. Capacity is planned to expand to ~120GWh/150GWh in 2026/27. The promotion of DC-side integrated products may further boost margins. 4. **Goldwind (02208)**: The company plans an A-share buyback up to RMB 500 million, benefiting H-shares via valuation repair. Q1 performance exceeded expectations, with external orders of 50.7GW. Core advantages include technological and scale barriers, global presence, and a product mix favoring large turbines (>6MW). The green methanol business is launching, and its stake in Blue Arrow Aerospace offers catalysts. 5. **DRINDA (02865)**: Despite a 2025 net loss, Q1 2026 showed improvement with a net profit of RMB 14 million and gross margin rising to 13.54%. The company is actively expanding overseas, with international sales contribution rising to 50.66%. It is entering commercial aerospace through investments, aiming to develop a second growth curve in space photovoltaics and satellite manufacturing. 6. **VSTECS (00856)**: 2025 revenue rose 10% to RMB 97.63 billion, with net profit up 35% to RMB 1.35 billion. Its business spans enterprise systems, consumer electronics, and cloud computing. Enterprise systems grew 29.5%, becoming a new engine. Southeast Asia is a key growth driver. Its cloud subsidiary, aligned with DeepSeek and major cloud providers, is the fastest-growing segment. 7. **INNOVENT BIO (01801)**: 2025 total revenue grew 38.4% to RMB 13.042 billion, achieving an IFRS net profit of RMB 814 million. It secured record BD deals exceeding $22 billion. Key assets are advancing to global Phase III trials. A strong pipeline includes next-generation ADCs and novel mechanisms, supporting a positive outlook. 8. **Yankuang Energy (01171)**: Q1 2026 revenue increased 1.8% to RMB 34.59 billion, with net profit up 42.1%, partly due to a asset disposal. Coal business faced price and cost pressures, but its exposure to international prices is beneficial. The chemical business saw volume growth. A planned acquisition of an Australian coking coal mine could enhance quality and profitability. 9. **China Resources Beer (00291)**: 2025 beer volume grew 1.4%, with premiumization continuing; Heineken and other premium brands saw strong growth. Adjusted beer EBITDA rose 17.4%. The白酒 business faced challenges but is being developed as a second growth curve. Cost control efforts are paying off. The core beer business remains solid. 10. **China Resources Land (01109)**: Q1 2026 contracted sales declined, but investment property operations remain strong, with rental income growing 14.0% YoY in Q1. The company focuses on core cities, maintains a strong financial position with low debt costs, and demonstrates significant credit advantages.