Zhitong Hong Kong Stock Exchange Unravels | Beijing Introduces a New Competitive Landscape to Encourage the Development of the Electronic Economy and Battery Industry

[Anatomy Dashboard]

Hong Kong stocks performed well today. The Hang Seng Index rose 1.28%. Despite adjustments in technology stocks, several giants have stabilized the situation.

There was a marked escalation of US military operations. On the 21st local time, the US military dispatched a B-1 long-range bomber to attack the targets of the Islamic Revolutionary Guard Corps of Iran. Sources revealed that the US is currently sending additional military strength to the Middle East to provide more military options for Trump to expand the conflict with Iran. Trump threatened to attack Iran's infrastructure, and the Houthis threatened to block the main Red Sea route. Haifeng International (01308) rose more than 3% to a record high. As shipping was blocked, the supply of electrolytic aluminum continued to deteriorate, with China Aluminum (02600) and China Hongqiao (01378) both rising by more than 4%.

Technology stocks performed poorly again today. With the release of Google's earnings report, total revenue for the second quarter was 119.8 billion US dollars, up 24% year on year; operating profit reached 40.8 billion US dollars, up 30% year on year. In order to seize the high ground of AI, capital expenditure reached 44.9 billion US dollars in a single quarter, causing free cash flow to rarely turn negative (-5.9 billion US dollars). The company also raised its 2026 capital expenditure guidance to approximately US$200 billion. It seems like the capital expenditure is quite large, but the key problem is that AI is burning too much money, and what it earns is not enough to spend. Where does the continuous investment come from later? There can only be all kinds of financing. If they can't make ends meet, investors probably won't dare to invest blindly, so this capital expenditure is a bit like drawing cake. Next, let's take a look at the financial reports of other giants. In addition, Changxin wanted to go public last week, and the pressure on the financial level is also increasing.

Domestic support for AI has been stepped up. Recently, the Beijing Municipal Development and Reform Commission and other departments jointly issued “Beijing's Certain Measures to Accelerate Smart Agent-led Development”. Among them, it was mentioned to encourage the development of the token (token) economy and increase support for computing power vouchers, etc. Regional innovation entities that are in a position to do so are encouraged to explore the promotion and application of smart devices such as issuing tokens and smart service vouchers. Token's first share, Xunce (03317), directly undertook the benefits and surged more than 13%.

Semiconductor materials have ushered in a breakthrough. Binhua Co., Ltd. (06745) announced that the quality of high-purity hydrogen fluoride products used in semiconductors has reached 6N grade (99.9999%), which is expected to break the 80% overseas monopoly situation. However, the current production capacity of 6N hydrogen fluoride is low, only 50 tons. If you look at 2 million per ton, it is 100 million. Later, the main speculation is sentiment. Looking at the chemical performance of the main industry, it has surged more than 23% today.

The battery industry bid farewell to the era of inclusive tax exemptions and entered a new era of refined tax regulation “supporting the good and eliminating the bad and innovation-oriented”. There has been a major adjustment in battery consumption tax. On the tax side: Starting September 1, 2026, lithium-ion batteries, lithium-ion batteries, nickel-metal hydride batteries, and all-vanadium liquid flow batteries, the consumption tax rate will be levied at a 2% rate; from September 1, 2027, the tax rate will increase to 4%. Duty free side: From September 1, 2026 to December 31, 2028, perovskite batteries, laminated batteries, and gallium arsenide batteries in sodium-ion batteries, solid-state batteries, fuel cells, and photovoltaic cells are exempt from consumption tax. Beneficiaries include Zhongwei New Materials (02579): It has built a production capacity of 8,000 tons/year of sodium-electric materials, covering pilot/small-scale mass production of layered oxide precursors and polyanionic precursors. Shipments at the kiloton level have been achieved in 2025, leading the shipping scale industry. Its next-generation products have been mass-produced, and second-generation products have passed small test certification.

The 2%-4% tax burden of the New Deal will break down the meager profits of small and medium-sized battery manufacturers, eliminate low-end production capacity, and the industry will bid farewell to low prices, while downstream battery manufacturers and energy storage companies will stock up batteries in advance to avoid additional tax burdens starting in September and drive phased demand for lithium carbonate and lithium battery materials. The production schedule is also optimistic. The agency expects the total production schedule of China's entire lithium battery market (energy storage+power+consumption) in August to be about 304 GWh, an increase of 7.4% over the previous month. In August 2026, the global market power+energy storage+consumer battery production was around 317 GWh, an increase of 7.1% over the previous month. This growth rate exceeded the 3%-5% range predicted at the beginning of the month, and the industry's previous peak season expectations have initially come to fruition. Supply side: Recently, several lithium mining companies announced production cuts and maintenance. According to public information, Jiuling Lithium issued a notice on July 16 that its three lithium salt plants, Yifeng Jiuling, Fengcheng Jiuling, and Feiyu New Energy, will carry out equipment maintenance and technical reforms in stages, which is expected to affect the production capacity of 4,000 tons of battery-grade lithium carbonate.

Under comprehensive stimulus, the median price of battery-grade lithium carbonate was 145,500 yuan/ton on July 23, up 3,500 yuan/ton from the previous day. The net profit of leading Ganfeng Lithium (01772) increased 787.07% to 965.9% in the first half of the year. BlackRock's long H-share position in Ganfeng Lithium rose from 8.26% to 9.26% on July 16. Today, it surged more than 10%; Tianqi Lithium (09696) expects net profit attributable to shareholders of listed companies to reach the highest year-on-year increase of 4934.91% in the first half of the year, up nearly 7% today; the Ningde Era (03750) revised production schedules for August and September, respectively. The original 110/120 is now 115/125, and the market responded positively, rising nearly 3%.

The National Development and Reform Commission and the National Energy Administration issued the “Fifteenth Five-Year Plan for Renewable Energy Development”, which mentions that during the “15th Five-Year Plan” period, the country will start an additional 100 million kilowatts of offshore wind power, and the cumulative installed capacity will reach more than 100 million kilowatts in 2030. The beneficiaries, Weisheng Holdings (03393) and Sega New Energy (06656), both increased by more than 5%.

On July 23, according to media reports, China has begun reissuing entry permits for autonomous taxis (Robotaxis). Currently, some cities are gradually resuming issuing licenses, but the specific list and schedule of cities are not yet clear. Cao Cao Chuxing (02643) and My Little Pony Zhixing (02025) increased by more than 9% and 5% respectively.

According to data from the First Commercial Vehicle Network, from January to June 2026, China's heavy truck industry sold a total of 668,900 vehicles, a cumulative increase of 23% over the previous year. Among them, the heavy truck market sold a total of about 116,600 vehicles in June, an increase of about 19% over the same period last year. Sinotruk (03808) said that production and sales in the first half of the year increased significantly compared to the same period last year; management raised the export sales guide for the 2026 fiscal year from 180,000 to 190,000 units to 200,000 to 220,000 units, and expected the net export profit of each vehicle to improve year by year. Today it's up almost 11%.

Meituan (03690) released the trillion parameter model LongCat-2.0. The model was released at the end of June this year and is open source. It became the industry's first trillion parameter model to complete a full process of training and inference on a 50,000 card domestic computing power cluster. The total parameters are 1.6T, the pre-training data scale exceeds 30T tokens, and supports 1M ultra-long contexts natively. This big model directly empowers the vertical scene of local life and business: the entire industry has no competitors, has an exclusive moat, and has risen by more than 4% today.

[Section Focus]

According to industry data, Macau's total gaming revenue for the first 19 days of July is estimated at around MOP 12.05 billion. The average daily gambling revenue for the latest week was about MOP 679 million, which is about 9% higher than the previous week's MOP 621 million, showing a recovery trend. The disruption caused by global soccer matches has largely subsided.

The media quoted local hoteliers as saying that, benefiting from the central government's multiple policies benefiting Australia, visitors to Australia continued their good growth trend. During the summer vacation period from July to August, the overall hotel occupancy rate is expected to reach 90%, and housing prices fluctuate steadily within a reasonable range. Summer is a peak season, which is expected to stimulate Macau stocks. The main varieties are: Sands China (01928), Wynn Macau (01128), MGM China (02282), Galaxy Entertainment (00027), and Melco International (00200).

[Individual Stock Mining]

Hongqiao, China (01378): The share of electrolytic aluminum continues to increase, and the preliminary increase in the interim report is impressive

According to Citigroup's latest research report, aluminum prices are expected to bottom out within the next month, then gradually rise to the range of 3,300 to 3,500 US dollars per ton from September to December. The company announced Yingxi that net profit for the first half of the year is expected to increase by about 39% year-on-year.

Comment: The pre-increase in the company's mid-report performance was impressive, mainly driven by the rise in sales prices of aluminum alloy products. The large production capacity is superimposed on a dual regional layout, and the share continues to increase. The company's compliant electrolytic aluminum production capacity is 6.46 million tons (14.8% nationwide, 9.4% global), 21 million tons of alumina, and 970,000 tons of aluminum deep processing, with a capacity utilization rate of over 97% year-round.

The company's joint venture mine in Guinea mines 50-60 million tons of bauxite per year, builds its own port for shipping logistics, and is 100% self-sufficient for bauxite; Indonesia has a 2 million ton overseas alumina plant with a total domestic alumina production capacity of 21 million tons, a self-sufficiency rate of over 150%, and the surplus alumina is exported worldwide. The Shandong base is equipped with its own coal-fired electricity. Yunnan lays out hydropower and aluminum (accounting for 31% of hydropower production capacity), with 2 GW of self-built photovoltaics; self-owned electricity makes the cost of electricity per ton of aluminum more than 800 yuan lower than that of its peers.

Demand for new energy has opened up room for long-term growth. The amount of aluminum used in bicycles for new energy vehicles has increased by more than 30% compared to fuel vehicles; the amount of photovoltaic frames, energy storage battery foil, and UHV cables continues to be released; the company has expanded production of aluminum foil for batteries and aluminum sheets for automobiles, and the gross margin of high-end processed products is 10-15 points higher than that of raw aluminum.

Overseas orders continued to increase. Overseas electrolytic aluminum factories in Southeast Asia and the Middle East signed annual long-term agreements to export 6.4 million tons of alumina in 2025 (+16% year over year). Large domestic traders and processing enterprises of electrolytic aluminum lock prices for long orders every year, lock in more than 70% of basic sales volume, and sell only 30% in stock flexibly.

High-end deep processing is in short supply, 1) Food aluminum cans: All leading domestic packaging companies cooperate for a long time, production capacity is full, and the order schedule is 3 to 6 months. 2) Lightweight aluminum for automobiles: Annual framework supply agreement between BYD and Tesla, supporting the continuous expansion of production of body panels and structural parts. 3) Photovoltaics and energy storage aluminum: Domestic leading components and framework orders from energy storage companies increase year by year with PV installed capacity. 4) Power battery aluminum foil: New production capacity will be gradually released from 2025 to 2026 to meet the long-term supply demand for lithium battery faucets.

Since its listing, the company has continued to pay dividends every year, with a cumulative dividend of 50.4 billion yuan from 2011 to 2025, with an average annual dividend rate of 36%, and a dividend rate of 63%; operating cash flow of 39 billion yuan in 2025, abundant monetary capital on account, continuous share repurchases, and stable shareholder returns.

Bulk raw aluminum depended on annual growth, and deep-processed high-value-added products were in short supply. The company's new energy sector orders are increasing year by year, which is the core source of performance growth over the next 3 years.