**Market Outlook**: The Federal Reserve has initiated its rate-cutting cycle with a 25 basis point reduction, and expectations point to at least two more cuts this year, generating positive market response. The Hang Seng Index maintained its strength last week. On Friday, Chinese and US leaders held a phone conversation discussing TikTok and various other issues. Following the China-US dialogue, reactions from all parties have been generally positive. A statement titled "China and the US Can Achieve Mutual Success and Common Prosperity" was published, while US stocks continue reaching new highs. Therefore, unfavorable factors have been eliminated, and the market is expected to resume its original rhythm. This Monday at 3 PM, the State Council Information Office will hold a themed press conference on financial industry development achievements during the 14th Five-Year Plan period, with key leaders from the People's Bank of China, National Financial Regulatory Administration, China Securities Regulatory Commission, and State Administration of Foreign Exchange in attendance. The market anticipates favorable policies from this event. Key attention should be paid to Monday's announcement of the September Loan Prime Rate (LPR). A reduction would provide stimulus to the real estate sector.
Focus is returning to the technology sector, with the State Council executive meeting discussing research on implementing domestic product standards and related policies in government procurement. The Alibaba 2025 Cloud Conference will be held in Hangzhou from September 24-26. The conference will gather over 2,000 guests from more than 50 countries worldwide to explore the latest trends in AI, cloud computing, and industrial applications. The independent and controllable AI direction continues to strengthen.
The National Healthcare Security Administration released the 11th batch of centralized procurement documents, optimizing price differential control anchors and no longer simply selecting the lowest bid: one-quarter of drug anchors increased by 34% compared to the lowest price, with maximum increases exceeding 170%. Innovative drugs deserve attention.
Elon Musk stated that Tesla plans to hold a meeting next week regarding artificial intelligence, autonomous driving systems, Optimus robots, and vehicle production, with market watching for potential stimulating news.
**Stock of the Week**: FIT HON TENG (06088) - As an important member of the Foxconn ecosystem, FIT HON TENG demonstrates significant progress in the AI field, particularly in backplane connectors, PCI cables, UQD, NAQD, and liquid cooling products, indicating high profit growth potential. The company's developed optical modules and 1.6T optical modules have been adopted by major clients including Microsoft, with expectations of significantly reducing valuation to around 8x, highlighting high growth potential. Through a patent cross-licensing agreement with Amphenol, FIT HON TENG successfully entered the backplane connector market, with expectations of substantial increases in market share and profits.
Despite challenges in traditional consumer electronics business, the deployment of new businesses such as liquid cooling systems holds high expectations. FIT HON TENG's deep cultivation in AI and product innovation, combined with close client cooperation, particularly expansion in the server field, is viewed as key to significant future performance growth, bringing considerable returns to investors.
Specifically: Backplane connections - early development of proprietary solutions with leading technical capabilities; Optical communications - completed 1.6T optical module product development and sample evaluation. FIT HON TENG's existing cabinet products have a unit value of $30,000-40,000 - Socket (excluding GPU, $1,000 per cabinet); PCIE Cable ($7,000-8,000); UQD ($10,000); Busbar ($15,000).
Company highlights: (1) Unit cabinet value increased from $30,000-40,000 to $130,000-140,000, with excellent cost control capabilities and expected net profit margin exceeding 20%; (2) Client relationships: As a sister company of Foxconn Industrial Internet, with FII currently securing a large share of NVIDIA cabinets, FIT HON TENG is well-positioned to gain significant market share backed by the Foxconn Group.
Institutional forecasts suggest 2026 core business of $150 million, existing AI products $200-250 million, totaling conservatively nearly $400 million. Backplane connections with a 10% market share could potentially contribute an additional $200 million in profit increment, corresponding to a current PE of 8.5x.
**Industry Analysis**: According to overseas sources, the Democratic Republic of Congo is considering extending its cobalt export ban for at least two more months, with officials working to finalize a quota system to replace the current export ban. Congo's Ministry of Mines believes cobalt prices need further recovery, and implementing a quota-based framework requires more time. This decision by the Ministry of Mines still requires presidential approval.
Congo's current export ban stems from dissatisfaction with low cobalt prices. After policy procedures are completed, subsequent cobalt exports may shift to a quota system, but this distant solution cannot address immediate needs. The raw material shortage problem is difficult to resolve in the short term, and cobalt prices are expected to continue at medium-high levels in the near term.
Cobalt import declines expanded in August. August imports of cobalt hydrometallurgical intermediate products totaled 5,241.4 tons, down 90% year-over-year and 62% month-over-month. The year-over-year decline widened compared to July, indicating that overseas in-transit inventory since the February 22 export ban has essentially arrived domestically. After seven months of destocking, current industry inventory is at low levels.
According to data as of September 19, cobalt sulfate inventory stands at 3,810 tons (approximately one month), down 32% year-over-year; cobalt tetroxide inventory at 5,100 tons (approximately half a month), up 2% year-over-year, maintaining low levels.
Cobalt shares similar logic with rare earths and tungsten - resource-dominant countries restricting supply of advantageous mineral varieties to boost international prices, ultimately maximizing resource value retention domestically. For cobalt specifically, unlike tungsten and rare earths where supply and processing are concentrated in China, Congo cannot domestically absorb its raw material output, making "price" more beneficial for resource value realization than "volume."
Cobalt has strategic uses in military and aerospace applications. US Department of Defense strategic stockpiling stems mainly from concerns about supply chain disruptions from Congo's mining ban policies, also endorsing cobalt's strategic minor metal status.
For equity investments, "strategic attribute" pricing has two aspects: (1) Fundamental logic - supply tightening leads to cobalt price increases, driving profitability improvements for non-Congo supply sources, boosting equities from an EPS perspective; (2) Valuation logic - dominant country long-term production control (such as quotas) extends price increase duration, raising equity PE multiples.
Key Hong Kong-listed stocks include CMOC (03993), CHINFMINING (01258), JINCHUAN INTL (02362), and MMG (01208).
**Market Data Analysis**: Hong Kong Exchanges data shows Hang Seng Index futures (September) total open contracts at 130,603, with net open positions at 43,015. Hang Seng Index futures settlement date is September 29, 2024. With the Hang Seng Index at 26,545 points, the dense bear warrant zone above approaches the central axis, providing upward momentum for the index.
Policymakers in the Fed dot plot expect median interest rates to reach 3.6% by year-end, compared to 3.9% expected three months ago - an additional 25 basis point reduction, fostering expectations of continued Fed rate cuts. This week's outlook for the Hang Seng Index is bullish.
**Market Commentary**: From a valuation logic perspective, Hong Kong stocks are vertically affected by factors including industry structural shifts toward growth leadership, significant narrowing of liquidity discounts, and mainland capital raising valuation centers at low costs. The reference value of traditional historical percentiles has weakened. Horizontally, Hong Kong stocks' AH premium over A-shares is in a reasonable range, and under trends of RMB appreciation and USD weakening, they remain cost-effective relative to global markets (at mid-level in PB-ROE framework).
Since September, analysts believe that with policy and liquidity support, Hong Kong stock valuation repair still has room (Hang Seng Index may challenge the 30,000-point threshold). Technology (internet, AI-related), innovative drugs, and energy sectors benefit from liquidity easing and industry prosperity improvements. Growth tracks related to "new quality productive forces" have long-term positioning value.
Market strategists suggest Hong Kong stocks are accumulating catch-up momentum, with震荡向上的慢牛行情有望延续 (oscillating upward slow bull market expected to continue). Core drivers come from Hang Seng Tech revaluation (valuations at historical lows) and global capital allocation demand (Hong Kong stocks maintain valuation advantages in global equity markets). Expectations point to Chinese stock markets entering a "super long bull run," with Hong Kong and A-shares forming a "mutually reinforcing" pattern.
Core support comes from China's distinctive financial development path, with stock markets forming positive feedback with high-quality economic development and Chinese-style modernization. Focus should remain on technology and innovative drugs, viewing market oscillations during bull markets as opportunities to buy quality assets. Investors can position in quality targets during dips while remaining alert to short-term volatility without excessive pessimism.