**Market Commentary**

Driven by the strong performance of A-shares, Hong Kong stocks continued their upward momentum last week. On Friday, Federal Reserve Chairman Powell delivered dovish remarks at the Jackson Hole central bank symposium, stating that downside risks to the employment market are rising, and labor force growth has significantly slowed this year. Tariffs have begun to push up prices of certain goods, and the impact of tariffs on CPI is now clear, with the basic assumption being a one-time effect. Long-term inflation expectations remain well anchored, and we will not let inflation become a persistent problem. Since monetary policy is in restrictive territory, we may need to adjust our policy stance. The attitude shift is obvious, and a September rate cut is almost a foregone conclusion. How many rate cuts will follow after September depends on upcoming inflation data, including this week's U.S. July Personal Consumption Expenditures Price Index (PCE) which needs further confirmation.

This week marks the final week of August, with the Shanghai Cooperation Organization summit at month-end, followed by the military parade. Therefore, the stock market needs a stable environment, but caution is warranted regarding volatility in the final days if gains become excessive.

Currently, the market's biggest hotspot is undoubtedly the domestic chip substitution wave catalyzed by DeepSeek V3.1. Note that NVIDIA will announce its fiscal 2026 second quarter earnings on August 27 Eastern Time, providing insight into global AI prosperity. However, this won't affect China's AI development overall. The Ministry of Industry and Information Technology stated: orderly guidance for computing power facility construction, accelerating breakthroughs in key core technologies such as GPU chips. China's intelligent computing power scale growth will exceed 40% this year. Chip stocks are expected to see continued catalysts.

NVIDIA's Jensen Huang will release "new robot brain" products on August 25. If robots' brain shortcomings are addressed, development will accelerate. Focus on the Unitree industrial chain.

The "Interim Measures for Total Volume Control Management of Rare Earth Mining and Rare Earth Smelting and Separation" has been released, stipulating that the state implements total volume control management for rare earth mining and smelting separation. This marks a new stage in national management of rare earth strategic resources. Attention can be paid to rare earths and copper resources heavily used in AI.

China Photovoltaic Industry Association: Firmly resist malicious competition at prices below cost, transitioning from homogeneous low-efficiency competition to high-quality, high-level competition. Looking forward to results from the industry's anti-involution efforts.

**Stock of the Week**

SENSETIME-W (00020): SenseTime Technology ranks first in China's computer vision application market for the ninth consecutive year with a 22.8% market share. Recently, SenseTime's "Sunrise" large model interactive platform has been integrated with AI glasses, becoming users' "second brain." The company's technology stack innovation index ranks second globally and first domestically, particularly leading Alibaba Cloud and Baidu Intelligent Cloud in resource utilization optimization and model compression.

Its "Sunrise" large model matches GPT-4 in multimodal capabilities, with model calls increasing 300% year-over-year in Q2 2025, and customer willingness to pay in finance and government sectors increasing sixfold. The company's intelligent cockpit visual AI software has maintained the global No. 1 market share for five consecutive years (reaching 38% in Q1 2025). SenseAuto ranks third in the urban NOA market with a 7.2% share, and its end-to-end solution UniAD has completed high-difficulty real vehicle tests with over 2.6 million units delivered.

The company holds over 1,200 patents, with its self-developed AI chip "SenseCore" achieving energy efficiency comparable to international mainstream levels. Solid-state battery R&D has entered pilot testing (energy density 350Wh/kg) with planned mass production in 2027.

Global expansion: overseas revenue proportion increased from 18% in 2023 to 27% in 2024, but Q1 2025 growth slowed to 15%. Attention needed for geopolitical risks (such as EU-US AI regulatory policies). The company collaborates with the Chinese Academy of Sciences on semi-solid-state battery development and holds stakes in SinoHytec (hydrogen fuel cell stacks). In 2024, it participated in establishing the Shanghai AI Ecosystem Fund (10 billion yuan scale), focusing on large model industrial chain layout.

Optimistic about catalysts from major tech companies' intensive AI+AR glasses releases and improvements in AI+AR glasses interaction capabilities through large model multimodal iterations.

**Industry Observation**

AI glasses terminal shipments continue to be revised upward, with the industry poised for explosive growth. Innovation remains the core growth direction in consumer electronics, with AI glasses currently being a key industry innovation. Meta remains the absolute industry leader, with its products accounting for the vast majority of industry shipments. Its next-generation AI glasses are expected to launch in H1 2026, potentially driving a new industry boom.

According to industry chain research feedback, global AI glasses shipments could exceed 20 million units in 2026, showing rapid industry growth. Intensive releases of new AI glasses products provide continuous industry catalysts. Since December 2024, brands including DaPeng, Thunder Bird, Rokid, Liweilai Technology, Shanji, Razer, and Xiaomi have held AI glasses launch events, introducing their new AI glasses products. Rapid product iteration continues to improve product maturity.

From the current perspective, Rokid Glass is expected to officially launch soon. Samsung, Amazon, Meta, ByteDance, Huawei and other brands all have product plans for the second half of the year, indicating a clear industry upward trend.

Recently, GoerTek announced that its subsidiary GoerTek Optical will acquire 100% equity of Shanghai Aulnay Micro-Nano Optical related companies under Sunny Optical through share issuance. After completion, Sunny Optical will hold approximately 1/3 of GoerTek Optical's shares, with GoerTek's original shareholders holding about 66.67%. Institutions believe the core of their cooperation is integrating "GoerTek's AR platformization capabilities + Shanghai Aulnay's optical waveguide capabilities." This creates high technical complementarity, combined with external customer demand, establishing a solid foundation for cooperation.

Key Hong Kong stock focuses: SUNNY OPTICAL (02382), CONANT OPTICAL (02276).

**Market Data Analysis**

Hong Kong Exchange data shows Hang Seng Index futures (August) total outstanding contracts at 122,596, with net outstanding at 48,829. Hang Seng Index futures settlement date is August 28, 2024. This week marks futures settlement.

With the Hang Seng Index at the 25,339 level, bear warrant concentration near the central axis gives the index bullish momentum. Fed Chairman Powell announced that U.S. monetary policy is about to reach a turning point, with a new rate-cutting cycle about to begin. This week's Hang Seng Index outlook is bullish.

**Commentary**

Hong Kong stocks outperformed A-shares in the first half. As mentioned previously, institutional and retail investor surveys show market sentiment hasn't overheated, with A-share bull market still in relatively early stages. Hong Kong stocks outperforming A-shares may change significantly in the remainder of this year. Of course, Powell's rate cut hints provide more obvious marginal improvements for Hong Kong stocks. Previous Hong Kong market liquidity pressures from the currency peg's weak-side assurance and HIBOR rate increases are now improving. There's some divergence in AH premium-discount spreads, with some H-share sectors still showing significant discounts, allowing steady incremental funds to continue flowing south.