《CITIC Securities Derivatives Special - Warrant & CBBC Continuous Talk》Is AI Hardware Peaking or Pulling Back? The Truth Behind SK Hynix Deleveraging! Tencent & Alibaba Show Technical Signals | Capital

Olga: Welcome back to our show. I'm happy to have Sam join us live again today, hello. How do you feel this week compared to last week?
Sam: Hello, everyone. It's been another week. Honestly, the changes aren't as big as imagined, but quite a few things did happen this week. Overall, the situation is similar to last week.

Is the AI hardware rally over?

Olga: What everyone felt most strongly this week is whether the AI hardware adjustment is over. Some previously strong sectors are now pulling back.
Sam: Yes, the Hang Seng Index is still around 24,000, not up much. But memory and AI hardware have indeed corrected quite a bit. However, at the time of recording, some sectors have already rebounded by over ten percentage points. For example, (1888, Kingboard Holdings / PCB concept) has also seen a noticeable recovery.
Olga: How would you judge this? Is it just a correction, or has the real decline begun?
Sam: The key lies in how confident you are that it can hit new highs again. If you think it's just a correction, it means it can go up again after the adjustment. But if you think it's a decline, it means it might not recover after a short-term bounce. Based on current information, unless there are new breakthrough positive catalysts later, it's difficult for these high-flying stocks to fully return to their previous highs.
Olga: You just mentioned the relationship between commodity prices and stock prices. Could you elaborate on that?
Sam: Sure. Many people overlook one thing: stock prices often peak before commodity prices. The previous EV and lithium battery cycles were like this. Stock prices fell first, but commodity prices remained high. Many thought it was just a correction, but later commodity prices fell too, and stock prices kept going down.
Olga: So, current AI memory, PCB, RAM, etc., could potentially replay that cycle?
Sam: Yes, that's what everyone needs to be wary of. Many people now say memory prices haven't fallen yet, GPU prices haven't fallen yet, so the stock price correction should just be a buying opportunity. But if history repeats, it might turn into you thinking it's a correction, only to get stuck holding the bag for a long time. Currently, the volatility in these types of stocks is too high, making operations very difficult. Many friends think a correction is an opportunity, but if the volatility exceeds your tolerance, it's easy to make wrong decisions. So, you don't necessarily have to force profits on these stocks.
Olga: You kept mentioning "deleveraging." Is it really that serious now?
Sam: Yes, it's a very obvious deleveraging process. Stock prices are essentially a game of supply and demand, not just reflecting company value. A lot of the buying at current high levels comes from leverage. Once leverage decreases, purchasing power shrinks significantly, making it hard for stock prices to return to their original levels.

SK Hynix's deleveraging issue

Olga: What about a previously strong stock like (SK Hynix)?
Sam: The SK Hynix situation itself is quite representative. The market often looks for reasons when it falls, but what's truly important is that high-flying stocks have already started deleveraging. This situation is often not just a simple technical correction.
Olga: Some friends ask, has this round peaked?
Sam: I don't think we can draw a simple conclusion yet, but we definitely need to prioritize risk. For stocks that have risen too much previously, the volatility is now so high that it's beyond what ordinary investors can easily manage. This easily leads to an emotional cycle of chasing highs, selling low, and chasing highs again.
Olga: You've been reminding everyone not to be too greedy. Is this also because leveraged products easily lead to bad decisions?
Sam: Exactly. Leverage itself is a neutral tool. The problem is many people don't manage their position sizing well, amplifying risks they shouldn't have taken. Look at tools like leveraged ETFs, warrants, and bull/bear contracts. Their design purpose isn't to make people rush for huge gains, but to let you participate in the market with smaller capital.

Tencent, Alibaba earnings. Is Xiaomi really improving?

Olga: Are there any more optimistic signals in the Hong Kong market recently?
Sam: Yes, for example, Tencent (700) has shown some technical improvement, like the 10-day moving average crossing above the 50-day moving average. This has some reference value in the charts of the past three years. Such signals don't necessarily lead to big gains every time, but they usually help the market.
Olga: Do you also watch Alibaba?
Sam: Yes, Alibaba's technical pattern has also improved, just a bit slower than Tencent. If the overall Hong Kong market can continue upward, Alibaba has a chance to become one of the leading stocks.
Olga: But you also mentioned there are still some concerns, like external markets and inflation?
Sam: Yes, that point can't be ignored. Things like geopolitics, strait tensions, and inflation pressure could all affect global capital flows. Capital might flow out of AI hardware and memory into software, dividend stocks, pharmaceuticals, or even just stay in cash for now.

Why are pharmaceutical stocks strong recently?

Olga: Speaking of pharmaceuticals, WuXi Biologics (2359) has been very strong recently. Can this be used as a sentiment indicator?
Sam: Yes. If a CXO/CRO stock like WuXi Biologics strengthens, it usually indicates downstream pharmaceutical demand and overall sentiment aren't bad. It's now near a three-year high, which is worth noting in itself, as it often serves as a bellwether for the entire pharmaceutical sector.
Olga: Besides WuXi, are there other pharmaceutical stocks to watch?
Sam: Yes, like Pharmaron (3759) has also surged strongly this wave, rebounding significantly from low levels. This kind of stock, which isn't the leader but has high elasticity, often indicates active sector capital.
Olga: Back to the overall Hong Kong market, how do you view this round of rebound?
Sam: I'd say it's much more optimistic than the second quarter now, but we still need to distinguish whether it's a short-term rebound or a mid-term trend reversal. If it's just an ultra-short-term rebound, the Hang Seng Index around 24,300 might already be near a consolidation range. To look higher, we need to see if capital is truly flowing back to platform stocks and internet stocks.
Olga: What about Xiaomi (1810)? Many viewers are concerned.
Sam: I'm a bit reserved about Xiaomi. It has rebounded quite a bit short-term, but from a fund manager's perspective, capital might not prioritize it now. In comparison, large platform stocks like Alibaba and Tencent might have more direct appeal.
Olga: You mentioned some securities products earlier. Could you summarize them again?
Sam: Sure. For example, if bullish on the Hang Seng Index, you can pay attention to Hang Seng bull warrants like (57887). If bullish on Tencent, note (13368). If bullish on Alibaba, note related products like (13799). For Xiaomi, refer to (15138). For ZhiPu-related, it's (14721).
Olga: Finally, how would you summarize this round?
Sam: I'd say the market is in a very critical observation period now: AI hardware, memory, Hong Kong platform stocks, pharmaceutical stocks, all might see capital reallocation. The most important thing during this time isn't chasing every rebound, but judging which opportunities you can manage with a better risk-reward ratio.