**Market Overview**

Despite global uncertainties, both US and Chinese markets demonstrated resilience, with Hong Kong stocks breaking through the 26,000-point barrier today, closing up 1.01% and reaching annual highs.

Middle Eastern tensions escalated as the Israeli Defense Forces and Shin Bet confirmed a "precision strike" against senior Hamas members in Doha on September 9th. This action on Qatari soil raises questions about regional security and sovereignty. While US capital markets have grown accustomed to such geopolitical events, the focus remains on potential interest rate cuts. Recent US employment data revisions showed 911,000 fewer jobs than previously estimated over the 12 months ending in March, suggesting labor market weakness ahead of trade tensions and supporting expectations for Federal Reserve rate cuts next Wednesday.

Oil prices surged following Middle Eastern developments, while China announced significant breakthroughs in oil, gas, and uranium exploration. Equipment manufacturer Shandong Molong (00568) jumped nearly 8% on this news.

**Capital Flow Dynamics**

Global capital continues seeking safe havens, with Goldman Sachs Prime Services data showing hedge funds maintaining elevated risk appetite toward Asian equity markets for four consecutive months. August saw the highest net buying of Chinese stocks (including A-shares and Hong Kong stocks) since September 2024.

Domestic funds are accelerating Hong Kong stock exposure through the Hang Seng Tech Index ETF (159742), recording net inflows on four of the past five trading days. Over the past 20 days, cumulative net inflows reached 847 million yuan, driving ETF shares up 113.46% year-to-date.

**Sector Performance**

**Technology Sector**: Internet giants led gains with Tencent (00700), NetEase (09999), and Alibaba (09988) showing continued strength. Baidu gained 2.83% following the launch of its Wenxin Large Model X1.1, featuring 34.8% improvement in factuality, 12.5% enhancement in instruction following, and 9.6% boost in intelligent agents. Apple collaboration expectations further supported the stock.

**Financial Sector**: Banking stocks including China Construction Bank (00939) and Bank of China (03988) rose over 2%. Insurance companies China Pacific Insurance (02601) and China Life (02628) also gained more than 2%. Securities firms East Money Information (03958) and Shenwan Hongyuan (06806) climbed above 2%.

**Gaming Sector**: Following tech giants' momentum, Bilibili-W (09626) surged over 7% on expectations that "Three Kingdoms: Generals Card" will achieve million-level daily active users when launched during Chinese New Year 2026. GreedyGame (09890) rose nearly 4% after signing exclusive licensing for Garfield family IP with Chengdu Model Play.

**Cloud Computing**: Oracle's strong after-hours performance in the US reignited sector sentiment. The company projected 77% growth in cloud infrastructure revenue to $18 billion for fiscal 2026, with targets reaching $144 billion by fiscal 2030. Kingsoft Cloud gained over 8% in Hong Kong following a 14.59% overnight gain in US markets. Related stocks SMIC (00981) and Yangtze Optical Fibre (06869) rebounded, while Hong Teng Precision (06088) jumped nearly 13%.

**Real Estate**: The sector received catalytic support as Logan Group (03380) announced significant progress in offshore debt restructuring, with a revised creditor support agreement signed September 9th. The stock surged over 9%, lifting Sunac China (01918) nearly 5%. Sino-Ocean Group (03377) soared over 16% on strong earnings. KE Holdings-W (02423) continued strengthening after spending $6.9977 million to repurchase 1.0965 million shares on September 8th.

Hong Kong's Northern Metropolis development initiatives continued supporting property developers with significant land reserves, including Sun Hung Kai Properties (00016) and Henderson Land (00012).

**Sector Challenges**: Lithium stocks faced pressure as CATL's subsidiary Yichun Times announced faster-than-expected mine restart plans. Ganfeng Lithium (01772) and Tianqi Lithium (09696) both declined over 7% on increased supply concerns.

The local services competition intensified as Alibaba (09988) launched "Amap Street Ranking" to compete with Meituan's Dianping. Meituan (03690) countered by restarting quality food delivery services and announcing AI-powered services launch within a week. Meituan shares rose over 2%.

**Sector Focus: Pork Industry**

The Ministry of Agriculture and Rural Affairs will host a pig production capacity regulation meeting on September 16th in Beijing, with 25 industry leaders including Muyuan, Wens, and New Hope invited. The meeting will assess current production conditions and deploy capacity adjustment strategies.

The Ministry of Commerce's preliminary anti-dumping ruling on EU pork imports, finding dumping behavior causing substantial damage to domestic industry, should benefit local producers by reducing import competition.

Key stocks: WH GROUP (00288), COFCO Joycome (01610), and Dekang Agriculture (02419).

**Stock Spotlight: SMIC (00981) - Domestic Substitution Accelerating, Capacity Supply Shortage**

SMIC plans to issue A-shares to acquire the remaining 49% stake in SMIC Beijing, making it a wholly-owned subsidiary. Q2 2025 revenue reached $2.209 billion (+16.2% YoY, -1.7% QoQ), with net profit of $132 million (-19.5% YoY, -29.5% QoQ).

**Analysis**: SMIC is China's leading integrated circuit foundry with 8/12-inch wafer manufacturing capabilities. The company's processes span from 0.35μm to 14nm and below, with combined capacity exceeding 8 million 8-inch equivalent wafers across Shanghai, Beijing, Tianjin, and Shenzhen facilities in 2024.

SMIC achieved 6% global market share in 2024, ranking third globally and first domestically. Strong downstream demand has created supply shortages for 12-inch advanced process capacity. The company maintains high capital expenditure with approximately 54.347 billion yuan planned for 2025.

Technology advancement continues with mass production from 90nm to 14nm achieved, and N+1 process approaching 7nm levels for AI and IoT applications. The company operates 3 eight-inch and 7 twelve-inch production lines with 85.6% capacity utilization in 2024.

Benefiting from customer market share growth and geopolitical factors, the "local for local" industry trend should expand domestic semiconductor foundry market opportunities. The company expects to maintain approximately 50,000 12-inch wafer capacity additions annually over the next 3-5 years, with Q3 2025 demand remaining robust amid continued supply shortages.

As a major global semiconductor consumer, China's semiconductor demand still partially depends on imports. With domestic semiconductor design companies' growth, domestic foundry market share has room for further expansion.