**Market Overview**

Hong Kong stocks only rallied for one day in the last week of August before entering a correction phase, primarily driven by internal factors such as weakness in banking stocks and underperformance across internet giants. The escalation of conflicts in the Middle East, with Yemen's Houthis confirming on August 30 that their "Prime Minister" Ahmed and several "government ministers" were killed in recent Israeli airstrikes, is expected to trigger retaliatory actions.

This week features multiple significant events, including the September 3rd military parade and the conclusion of the Shanghai Cooperation Organization summit. Any developments exceeding expectations could trigger capital inflows. Regarding the US August non-farm payroll data, Goldman Sachs traders believe that Federal Reserve Chairman Powell has already given the green light for a September rate cut, but the August employment data will be a key factor in determining the magnitude and pace of rate cuts. Employment growth below 100,000 would help confirm a September rate cut.

Last week, the market experienced a technology surge stimulated by DeepSeek 3.1's use of domestic chips, though regulators subsequently cooled the enthusiasm. New catalysts are emerging as Alibaba has developed a new-generation AI inference chip through its subsidiary Pingtouge Semiconductor. This chip aims to fill the gap left by Nvidia GPU restrictions in the mid-range market and is designed to be compatible with Nvidia's CUDA ecosystem.

Additionally, the US plans to revoke authorizations for Intel, SK Hynix, and Samsung to receive American chip manufacturing equipment in China unless these companies obtain licenses. This is expected to provide new stimulus for domestic independent and controllable sectors.

In consumer electronics, focus will be on whether Huawei and Apple's new phone launches exceed expectations. A team led by Compass Point analyst Whitney Stanco indicated in a report that the US Trump administration is pushing for stakes in companies across various industries, with nuclear energy potentially being the next target. Meanwhile, the energy demand surge driven by the artificial intelligence boom has brought more attention to nuclear power, with partnerships between major tech companies and nuclear energy suppliers putting the industry in the spotlight.

**Weekly Stock Pick: Alibaba (BABA-W)**

Alibaba's fiscal 2025 first quarter results (Q2 2024 calendar year) released on August 29 showed that, excluding divested businesses, overall group revenue grew steadily by 10% year-over-year, with net profit increasing 76% year-over-year. Alibaba is firmly investing around two strategic focuses: AI+Cloud and mass consumption.

In late February, Alibaba announced a 380 billion yuan investment over three years to build cloud and AI hardware infrastructure. The company launched instant retail business in late April and announced a 50 billion yuan investment in the consumer sector in July.

Regarding AI+Cloud, the financial results showed that the group's Capex investment in AI+Cloud reached 38.6 billion yuan this quarter, up 220% year-over-year to a historic high. Alibaba Cloud revenue growth accelerated to 26%, reaching a three-year high, with AI-related product revenue achieving triple-digit year-over-year growth for eight consecutive quarters.

Brokerage analysts indicate that the outperformance is mainly reflected in two aspects: First, even though domestic inference demand has not yet started large-scale deployment, Alibaba Cloud still achieved 26% growth, suggesting potentially higher growth rates when domestic inference demand scales up. Second, while management did not provide 30% growth guidance, based on the company's leading position in the cloud market, there is confidence in accelerated subsequent growth.

The competitive advantages are evident in three areas: First, Alibaba Cloud ranks first in the public cloud sector and holds an absolute leading market share in AI cloud services according to third-party data. Second, Alibaba Cloud's general large language model has shown excellent performance after recent updates, ranking among the global top five in both domestic and international evaluations, with rapidly growing call volume data demonstrating strong competitive advantages in the AI era.

**Industry Watch**

During the weekend, Binance founder Changpeng Zhao's remarks in Hong Kong highlighted several key points: stablecoins have expanded the US dollar's global influence, with USDT purchases exceeding $100 billion in US Treasuries; AI+Web 3.0 transaction volume is expected to grow exponentially.

During exchanges at the University of Hong Kong, Zhao also demonstrated his ambitious vision to challenge USDT's position through Hong Kong stablecoins. He believes that when stablecoins scale up, they effectively become a "shadow settlement network" for fiat currencies. Hong Kong stablecoins could leverage mainland China support, providing a compliant channel for RMB internationalization - an opportunity only Hong Kong possesses.

He considers current RWA to be in a bubble, believing the real goldmine is moving stocks and bonds onto the blockchain. He also hinted at willingness to provide technology and traffic for this endeavor. Industry insiders speculate that Zhao may be seeking compliant status for Binance in Hong Kong. While Hong Kong regulators have not made public statements on this matter, Zhao's comments have certainly attracted significant market attention.

Johnny Ng, a member of the Hong Kong Stablecoin Bill Committee and Legislative Council, has also urged regulators to issue licenses as soon as possible. Blockchain and virtual asset-related industry trends are emerging, with North American companies like Circle and Bullish showing obvious virtual asset capitalization trends, making them among the most benefited assets from global liquidity.

Greater China institutional participation is also gradually increasing, actively seeking Hong Kong-listed related proxies. Focus on New Huo Technology (01611) and OSL GROUP (00863), which are still in early stages, as well as brokerage institutions like Futu Holdings (03588) and GUOTAI JUNAN I (01788).

**Market Data Analysis**

Hong Kong Exchanges data shows that Hang Seng Index futures (September) total outstanding contracts number 127,074, with net outstanding contracts at 52,985. The Hang Seng Index futures settlement date is September 29, 2024.

With the Hang Seng Index at 25,078 points, the bull-bear warrant concentration area deviates from the central axis, indicating index hesitation. European and American markets await Federal Reserve rate cuts. Following Alibaba's earnings announcement, major banks have generally raised target prices for the Hang Seng technology heavyweight. The Hang Seng Index outlook appears bullish this week.

**Editor's Commentary**

Following Alibaba's interim results, ADR surged 12.9% on Friday. Alibaba's interim results and AI outperformance will drive both AI technology industry chain logic development and overseas Chinese asset revaluation sentiment. The Hang Seng Tech Index and overseas Chinese internet stocks deserve key attention. Beyond Tencent-related assets, Alibaba-related assets will also undergo revaluation. Additionally, investors should actively seek "value depression" targets among overseas Chinese assets.