HAITONG INT'L Zhang Yidong: Hong Kong AI market is expected to return to an upward trend and further expand to a wider AI industry chain.

Analyst Zhang Yidong of HAITONG INT'L released a research report stating that the uncertainty of the July unlocking was landing as expected and converting into actual market volatility. Overall, the unlocking does not pose a systematic risk to the Hong Kong stock technology market, and the adjustments in the "chilly winds of summer" in June and July are entering the aftermath stage. Secondly, the unlocking risk in July is gradually materializing, and key related companies are entering the phase of fundamental pricing. The pricing logic of AI large model companies after unlocking will shift from unlocking events, scarcity, and small float chip games to commercial realization and quality verification of profitability. In August, with the easing of overseas macro and micro liquidity shocks, coupled with the strengthening of southbound connectivity, the AI market is expected to return to an upward trend and further spread from AI scarce assets to a broader AI industry chain. HAITONG INT'L main points are as follows: Despite the large-scale unlocking in July combined with adjustments in major overseas stock markets, forming an impact on the Hong Kong stock market, the bank believes that the chilly winds of summer have reached the aftermath stage. In the context of the long-term positive trend of AI, due to short-term macro liquidity (hawkish Fed), micro liquidity (deleveraging of the Korean stock market, impact of unlocking on the Hong Kong stock market, etc.) resulting in risk-off, it is difficult to end the AI bull market, instead providing an opportunity for the subsequent diffusion of the AI market to a broader industry chain. Early warning verified: July unlocking risk materializes as expected, and presents structural differentiation. There is a significant difference in the unlocking pressure faced by two companies, with the contraction of stock prices and risk appetite before the unlocking window, volatility and individual stock differentiation during the window, reflecting that funds have differentiated pricing based on different chip structures and future fundamental expectations. Emotions: Since July, the risk premium of Hong Kong stocks has been rising, turnover has increased, and the bearish sentiment at the emotional level has been fairly priced. The mean risk premium of the Hang Seng Index in July has rebounded from June, with a marginal restoration of risk appetite, turnover rate of the Hang Seng Technology Index during and after the unlocking window has increased, active funds in the market have increased, and the willingness to bottom fishing has slightly recovered. After the unlocking day, the trading volume spiked and quickly dropped, indicating that the concentrated trading pressure is easing. The emotional bottom of the sector and the two core targets have most likely formed in the unlocking window, and the previous decline is essentially the early release of bearish news, but the subsequent trend still depends on fund acceptance and fundamental catalysts. Funding: Pressure impact is being digested by structural forces. Southbound funding acceptance determines the post-unlocking trend differentiation. KNOWLEDGE ATLAS (02513) was included in the Hong Kong Stock Connect on June 8th. As of July 14th, mainland funds held approximately 14.55 million shares of KNOWLEDGE ATLAS through the Stock Connect. Estimated based on the circulating shares before unlocking 17.35 million shares + unlocking 25.68 million shares * 30% sell-off ratio = 25.05 million circulating shares, Southbound holdings account for approximately 58% of the float. Since the unlocking day on July 8, KNOWLEDGE ATLAS has received large net inflows of Southbound funds for six consecutive trading days (accumulated net inflows of approximately 22 billion Hong Kong dollars), receiving continuous and clear incremental fund support. There is hope for an improvement in the external liquidity environment, focusing on the repricing of long-term interest rates in the second half of the year. US Treasury long-term interest rates are the discount anchor that determines the pricing of high-growth stocks in the Hong Kong stock market. US inflation data weakened marginally in June, alleviating concerns about a rate hike by the Federal Reserve in July. With the settling of the interest rate meeting at the end of July, by early August, external liquidity shocks faced by Hong Kong tech growth assets (i.e. the risk of unexpected rises in US treasury long-term interest rates) are expected to be further eased. Attention on unlocking will also weaken, and the pricing focus of AI large model companies is expected to shift from short-term market liquidity to internal variables such as interim reports, AI's ARR, large model launches, and inclusion in the Stock Connect. In July, the global AI trading congestion is expected to return to a rational level after adjustments, and the short-term adjustment of the AI market seems more like an opportunity than a danger. After the recent adjustments, the trading congestion in global AI-related tech stocks has eased, with the VXN (Nasdaq implied volatility) - VIX (S&P implied volatility) spread falling from highs. As of mid-July, global AI trading has not completely emerged from a high-volatility state, and the aftermath of the short-term adjustment is still present. However, the subsequent market adjustment seems more like an opportunity than a danger, allowing for patient positioning in the AI industry chain. The long-term trend in the AI industry remains optimistic, as AI technology will drive corporate profit growth, transform, and empower more segmented industries, with leading tech companies recently expressing a clear intention to continue increasing AI capital expenditures. Risk warning: Geopolitical risks, changes in the global liquidity environment, international capital flows, and actual selling behavior after stock unlocking.