Northbound funds | A net sell-off of 2.906 billion by North Water, large models gain additional investment from North Water, and a divergence appears in the performance of the two major foundries before the earnings reports.

On August 12, the Hong Kong stock market saw a net sell-off of HKD 2.906 billion from northbound funds. Among these, the Shanghai-Hong Kong Stock Connect had a net sell-off of HKD 1.882 billion, while the Shenzhen-Hong Kong Stock Connect recorded a net sell-off of HKD 1.024 billion. The stocks with the highest net purchases from northbound funds were MINIMAX-W (00100), Tencent (00700), and Semiconductor Manufacturing International Corporation (00981). The stocks with the highest net sell-offs were BABA-W (09988), KB LAMINATES (01888), and Hua Hong Grace Semiconductor (01347). Active trading stocks under Shanghai-Hong Kong Stock Connect Active trading stocks under Shenzhen-Hong Kong Stock Connect MINIMAX-W (00100) and Z.AI (02513) saw net purchases of HKD 709 million and HKD 416 million, respectively. Morgan Stanley believes that the large model industry in China is undergoing a structural shift from price competition to intelligent competition: DeepSeek has announced a significant increase in API prices, while Kimi K3 and Qwen 3.8-Max enter the era of large parameters with 2.8 trillion and 2.4 trillion parameters, respectively, and the licensing terms for open-source models are becoming stricter. These three changes collectively point to a healthier commercialization environment: rational pricing, broadened monetization paths, and heightened entry barriers. Tencent (00700) saw a net purchase of HKD 683 million. Tencent announced its second-quarter earnings after the market closed. During this period, revenue grew by 11% year-on-year to RMB 204.8 billion, slightly exceeding Bloomberg's consensus estimate of RMB 202.8 billion. Net profit grew by 0.7% year-on-year to RMB 56 billion, falling short of the market expectation of RMB 58.4 billion. During this period, capital expenditures surged to RMB 52.8 billion, far above the expected RMB 32.1 billion, resulting in a negative free cash flow of RMB 13.8 billion for the quarter. Semiconductor Manufacturing International Corporation (00981) experienced a net purchase of HKD 456 million, while Hua Hong Grace Semiconductor (01347) faced a net sell-off of HKD 495 million. The two major foundry manufacturers, SMIC and Hua Hong, plan to release their second-quarter financial results on August 13. Zhung Yin International previously pointed out that Hua Hong is valued higher due to its greater exposure in the AI power simulation sector, better profit expansion trajectory, and the potential value from the asset injection of Huazhong Wei; on the other hand, SMIC has been downgraded to a "hold" rating due to a relatively moderate growth trend and the ongoing burden of expansion and acquisitions on its balance sheet. XIAOMI-W (01810) saw a net purchase of HKD 176 million. On August 11, Xiaomi officially launched the REDMI K100 Pro series smartphones, which attracted attention in the display technology field with its new generation of super-pixel screens. Xiaomi Group President Lu Weibing stated that through collaboration with the Tsinghua team to turn laboratory theories into final engineered mass production, Xiaomi is the third company worldwide and the first in China capable of self-researching from the luminescent material layer. KB LAMINATES (01888) faced a net sell-off of HKD 979 million. UBS noted that even if the traditional copper-clad laminate upcycle comes to an end, it does not expect the company's profits to decline as sharply as in past cycles because the company is expanding into AI-related upstream materials and copper-clad laminate businesses, which will bring new structural growth momentum, while its vertically integrated business model is also a major differential advantage. The firm believes that the stock's decline of about 60% from its peak in June presents an attractive opportunity. In addition, MEITUAN-W (03690) saw a net purchase of HKD 106 million. In contrast, GigaDevice Semiconductor Inc. (03986), YOFC (06869), and BABA-W (09988) recorded net sell-offs of HKD 129 million, HKD 244 million, and HKD 1.46 billion, respectively.