[ET Net News Agency, 19 August 2026] AI off-balance-sheet risks have triggered market concerns, long-term bond yields in multiple countries remain high, external semiconductor sectors have plummeted, and Asia-Pacific stock markets have fallen. Regarding Hong Kong stocks, the quarterly financial results of two major key technology enterprises saw profits halved and their share prices moving in opposite directions, while "China-concept" stocks led by Mainland Chinese bank stocks moved upwards. The HSI closed the half-session fluctuating up 62 points or 0.2% at 25,533, with main board turnover approaching HKD 129.3 billion. The Hang Seng China Enterprises Index reported 8,505, up 52 points or 0.6%. The Hang Seng TECH Index reported 4,700, down 38 points or 0.8%.
"Wan Kong Shing: Hong Kong stocks' strong momentum exceeds expectations, HSI expected to have a high chance of breaking above 26,000"
According to reports by the Wall Street Journal, nine AI and chip giants including Alphabet, Meta, Amazon, and NVIDIA have announced a combined capital expenditure totalling 600 billion USD over the past year, but in reality, there are still more off-balance-sheet debts involving AI investments, potentially totalling up to 3 trillion USD combined. Global stock markets have come under significant pressure, with Japanese stocks falling by over 2.5% and Korea stocks dropping 5.6%, but the trend of Hong Kong stocks was exceptionally resilient. After lacklustre financial results from Baidu (09888) and Xiaomi (01810), the HSI fell first and then rose during the half-session, maintaining its gains before the midday market break. Wan Kong Shing, the Chief Investment Officer of iFAST Global Markets, candidly told ET Net News Agency that Hong Kong stocks outperforming global stock markets to post gains was indeed unexpected. The recent trend of Hong Kong stocks has truly been relatively strong, and maintaining an upward trajectory amidst a collective downward trend in external markets is indeed strong. Therefore, it is expected that after the HSI steadily holds above 25,000 for consecutive days, support at that level can be expected to be substantial, but breaking through the 26,000 resistance will still not be small, and more news still needs to be awaited to provide momentum.
Wan Kong Shing added that because the market's expectations for the financial results of Xiaomi and even Baidu were consistently not large, although the financial results were relatively negative, no major discrepancies ultimately appeared. Therefore, the market is currently even more in a wait-and-see mode regarding the financial results of Alibaba (09988) making its debut tomorrow. Apart from being more heavyweight, its forward-looking perspective on the future development of AI is even higher, and the number of users and revenue of its AI business have indicative significance for the prosperity of AI in Mainland China. There are aspirations that Alibaba can become a shot in the arm driving Hong Kong stocks to break through 26,000.
Regarding AI enterprises' off-balance-sheet debts, Wan Kong Shing pointed out that it goes without saying that AI development cost demands are large, and massive off-balance-sheet debts are also not a problem that suddenly erupted. However, the problem is that global bond yields have shown an upward trend recently, and the Wall Street Journal report published at this time precisely raises the impact of rising bond yield costs on AI enterprises. If AI development cools down in the future, will massive bond yield costs become the final straw? As soon as this news came out, it triggered profit-taking in AI-related shares, mainly because AI stocks had rebounded recently, and before reaching halfway, such news erupted again, causing the valuation repair trend to be impacted. It is expected that there will be no shortage of such news in the future, which will limit the repair speed of AI stocks.
"Xiaomi pre-results oversold and post-results repair, but gross profit margin still expected to fail to improve in second half"
Xiaomi announced that its adjusted net profit for the second quarter fell by 42.6% year-on-year to HKD 6.219 billion, a small increase of 2.4% quarter-on-quarter, slightly lower than the expected HKD 6.31 billion. Revenue fell 6.1% year-on-year to HKD 108.922 billion, slightly higher than the expected HKD 108.33 billion; however, the gross profit margin was 19.8%, a decrease of 2.7 percentage points year-on-year. Nevertheless, President Lu Weibing strongly touted the second half at the results briefing, stating that flagship mobile phones will be launched intensively, along with the new Pengcheng series of vehicles which will also be launched in September, expressing confidence in growth for the second half. Subsequently, the market cast a vote of confidence in Lu Weibing, opening 3% higher this morning before gains expanded, surging 7% in the half-session and reclaiming the 20-day moving average. Wan Kong Shing directly pointed out that Xiaomi's financial results were not quite positive, and the rise in share price was mainly because Xiaomi had retraced for over half a month from the 32 HKD level prior to the results, with the magnitude already reaching 20%. As the financial results were not too bad, it attracted capital inflows to buy on dips.
Reviewing Xiaomi's second-quarter financial results, the rise in memory costs during the second quarter still seemed to affect Xiaomi's mobile phone profit performance, and judging from the gross profit margin aspect, both automobiles and mobile phones failed to shake off the impact. He expects that the rise in memory prices will continue to compress Xiaomi's gross profit margin in the second half of this year, and one can only say that there is currently a chance it is already the worst situation, but when it can shake off the trough remains an unknown. Whether the new Pengcheng series of vehicles can further offset mobile phone gross profit compression also requires further observation, and it is anticipated that share price upside towards the 30 HKD resistance will still not be small.
"China Telecom's AI capital expenditure also high, feared to follow China Unicom in suspending interim dividend"
Another results stock, China Unicom (00762), announced that its interim net profit fell 34.6% year-on-year to RMB 9.468 billion, with revenue rising slightly by 0.6% to RMB 201.364 billion. However, what most shocked the market was the group's announcement that it would not distribute an interim dividend, marking the first time in six years since the 2021 financial year that interim dividend distribution has been suspended. China Unicom explained that short-term pressure on profits was partly affected by changes in the pacing of value-added tax and labour cost inputs. Following the results, China Unicom triggered massive sell-offs, plunging nearly 8% in the half-session to hit a low of over a year. Wan Kong Shing bluntly stated that for a business as stable as the telecommunications industry not to distribute an interim dividend is truly a major disappointment to the market. Even though current valuations are not high, dividend yield appeal has diminished, and the future concerns triggered by the suspension of dividends severely impact China Unicom's valuation. The post-results outlook is hard to describe as optimistic, and it is even hard to tell whether the 2024 support at 5.6 HKD has hit rock bottom.
Wan Kong Shing further explained that apart from value-added tax related to services, China Unicom's suspension of interim dividends also stems from the group's substantial inputs into AI data centres. Peer company China Telecom (00728) has similarly heavy AI inputs, whereas industry leader China Mobile (00941) has relatively lower related inputs compared to the two. Therefore, China Mobile can still maintain the distribution of interim dividends. As for China Telecom releasing its results tomorrow, the chance of not distributing an interim dividend in order to reserve capital expenditure for AI development is also not small, and it is recommended that positioning in telecommunications stocks for dividends should rotate into China Mobile.
"Wan Kong Shing: Hong Kong stocks' strong momentum exceeds expectations, HSI expected to have a high chance of breaking above 26,000"
According to reports by the Wall Street Journal, nine AI and chip giants including Alphabet, Meta, Amazon, and NVIDIA have announced a combined capital expenditure totalling 600 billion USD over the past year, but in reality, there are still more off-balance-sheet debts involving AI investments, potentially totalling up to 3 trillion USD combined. Global stock markets have come under significant pressure, with Japanese stocks falling by over 2.5% and Korea stocks dropping 5.6%, but the trend of Hong Kong stocks was exceptionally resilient. After lacklustre financial results from Baidu (09888) and Xiaomi (01810), the HSI fell first and then rose during the half-session, maintaining its gains before the midday market break. Wan Kong Shing, the Chief Investment Officer of iFAST Global Markets, candidly told ET Net News Agency that Hong Kong stocks outperforming global stock markets to post gains was indeed unexpected. The recent trend of Hong Kong stocks has truly been relatively strong, and maintaining an upward trajectory amidst a collective downward trend in external markets is indeed strong. Therefore, it is expected that after the HSI steadily holds above 25,000 for consecutive days, support at that level can be expected to be substantial, but breaking through the 26,000 resistance will still not be small, and more news still needs to be awaited to provide momentum.
Wan Kong Shing added that because the market's expectations for the financial results of Xiaomi and even Baidu were consistently not large, although the financial results were relatively negative, no major discrepancies ultimately appeared. Therefore, the market is currently even more in a wait-and-see mode regarding the financial results of Alibaba (09988) making its debut tomorrow. Apart from being more heavyweight, its forward-looking perspective on the future development of AI is even higher, and the number of users and revenue of its AI business have indicative significance for the prosperity of AI in Mainland China. There are aspirations that Alibaba can become a shot in the arm driving Hong Kong stocks to break through 26,000.
Regarding AI enterprises' off-balance-sheet debts, Wan Kong Shing pointed out that it goes without saying that AI development cost demands are large, and massive off-balance-sheet debts are also not a problem that suddenly erupted. However, the problem is that global bond yields have shown an upward trend recently, and the Wall Street Journal report published at this time precisely raises the impact of rising bond yield costs on AI enterprises. If AI development cools down in the future, will massive bond yield costs become the final straw? As soon as this news came out, it triggered profit-taking in AI-related shares, mainly because AI stocks had rebounded recently, and before reaching halfway, such news erupted again, causing the valuation repair trend to be impacted. It is expected that there will be no shortage of such news in the future, which will limit the repair speed of AI stocks.
"Xiaomi pre-results oversold and post-results repair, but gross profit margin still expected to fail to improve in second half"
Xiaomi announced that its adjusted net profit for the second quarter fell by 42.6% year-on-year to HKD 6.219 billion, a small increase of 2.4% quarter-on-quarter, slightly lower than the expected HKD 6.31 billion. Revenue fell 6.1% year-on-year to HKD 108.922 billion, slightly higher than the expected HKD 108.33 billion; however, the gross profit margin was 19.8%, a decrease of 2.7 percentage points year-on-year. Nevertheless, President Lu Weibing strongly touted the second half at the results briefing, stating that flagship mobile phones will be launched intensively, along with the new Pengcheng series of vehicles which will also be launched in September, expressing confidence in growth for the second half. Subsequently, the market cast a vote of confidence in Lu Weibing, opening 3% higher this morning before gains expanded, surging 7% in the half-session and reclaiming the 20-day moving average. Wan Kong Shing directly pointed out that Xiaomi's financial results were not quite positive, and the rise in share price was mainly because Xiaomi had retraced for over half a month from the 32 HKD level prior to the results, with the magnitude already reaching 20%. As the financial results were not too bad, it attracted capital inflows to buy on dips.
Reviewing Xiaomi's second-quarter financial results, the rise in memory costs during the second quarter still seemed to affect Xiaomi's mobile phone profit performance, and judging from the gross profit margin aspect, both automobiles and mobile phones failed to shake off the impact. He expects that the rise in memory prices will continue to compress Xiaomi's gross profit margin in the second half of this year, and one can only say that there is currently a chance it is already the worst situation, but when it can shake off the trough remains an unknown. Whether the new Pengcheng series of vehicles can further offset mobile phone gross profit compression also requires further observation, and it is anticipated that share price upside towards the 30 HKD resistance will still not be small.
"China Telecom's AI capital expenditure also high, feared to follow China Unicom in suspending interim dividend"
Another results stock, China Unicom (00762), announced that its interim net profit fell 34.6% year-on-year to RMB 9.468 billion, with revenue rising slightly by 0.6% to RMB 201.364 billion. However, what most shocked the market was the group's announcement that it would not distribute an interim dividend, marking the first time in six years since the 2021 financial year that interim dividend distribution has been suspended. China Unicom explained that short-term pressure on profits was partly affected by changes in the pacing of value-added tax and labour cost inputs. Following the results, China Unicom triggered massive sell-offs, plunging nearly 8% in the half-session to hit a low of over a year. Wan Kong Shing bluntly stated that for a business as stable as the telecommunications industry not to distribute an interim dividend is truly a major disappointment to the market. Even though current valuations are not high, dividend yield appeal has diminished, and the future concerns triggered by the suspension of dividends severely impact China Unicom's valuation. The post-results outlook is hard to describe as optimistic, and it is even hard to tell whether the 2024 support at 5.6 HKD has hit rock bottom.
Wan Kong Shing further explained that apart from value-added tax related to services, China Unicom's suspension of interim dividends also stems from the group's substantial inputs into AI data centres. Peer company China Telecom (00728) has similarly heavy AI inputs, whereas industry leader China Mobile (00941) has relatively lower related inputs compared to the two. Therefore, China Mobile can still maintain the distribution of interim dividends. As for China Telecom releasing its results tomorrow, the chance of not distributing an interim dividend in order to reserve capital expenditure for AI development is also not small, and it is recommended that positioning in telecommunications stocks for dividends should rotate into China Mobile.
