Auto stocks and domestic consumption stocks faced pressure, dragging the Hang Seng Index down by 87 points. AI hardware stocks bucked the trend and performed well. Investors seeking to participate in the development of large Chinese state-owned enterprises while prioritizing stable cash flows may consider the Hang Seng China Enterprises Index covered call strategy, which goes ex-dividend in five days.

The US July PCE inflation came in higher than expected, reigniting market concerns about Federal Reserve rate hikes. External markets were weak, with investors also awaiting Fed Chair Walsh's speech at the central bank symposium. The Hang Seng Index opened 121 points higher and briefly rose to 25,800 points before reversing course, hitting a low of 25,500 points. It finally closed at 25,565 points, down 87 points or 0.34%. Mainboard turnover for the day reached HK$233.5 billion. The SOE Index fell 43 points or 0.51% to close at 8,490 points. The Hang Seng Tech Index dipped 5 points or 0.13% to close at 4,620 points. Southbound capital saw a net inflow of HK$3.18 billion.

Baidu (9888 $BIDU-W (09888.HK)$ ) announced that it will complete its transition from a secondary listing to a dual-primary listing on September 1. Market expectations are high that the company could be included in the Stock Connect scheme as early as early September. Its share price rose 5.34% to close at HK$95.75, marking three consecutive days of gains. Market attention remains focused on the subsequent progress of its subsidiaries and business units, including Baidu Companion, Intelligent Cloud, Kunlun Chip, and autonomous driving. Alibaba $BABA-W (09988.HK)$ (9988) fell 0.94% to close at HK$115.5. The company launched the international version of "QwenWork," expanding its one-stop office AI agent services to overseas markets. It integrates web and desktop operations, web application development, and multimodal generation capabilities. The initial phase targets markets in Asia, the Middle East, and Latin America. Alibaba's Qwen Office also launched Qwen3.8-Flash, improving generation speed and reducing token consumption. Tencent $TENCENT (00700.HK)$ (0700) rose 0.54% to close at HK$447.8; Meituan $MEITUAN-W (03690.HK)$ (3690) fell 0.7% ahead of its earnings release, closing at HK$77.5; JD.com ( $JD-SW (09618.HK)$ 9618) dropped 0.88% to close at HK$112.1; Kuaishou $KUAISHOU-W (01024.HK)$ (1024) edged up 0.12% to close at HK$33.66.

NVIDIA $NVIDIA (NVDA.US)$ reported quarterly revenue rising 106% year-on-year to USD 96.2 billion, with data center revenue surging 117% to USD 89 billion. It projected Q3 revenue of approximately USD 108 billion, all beating market expectations, which drove Hong Kong-listed semiconductor, PCB, and optical communication stocks higher against the broader market trend. SMIC $SMIC (00981.HK)$ gained 2.3% to close at HK$71.3; Hua Hong Semiconductor $HUA HONG GRACE (01347.HK)$ jumped 4.51% to close at HK$122.8; Tianshu Zhixin $ILUVATAR COREX (09903.HK)$ soared 10.54% to close at HK$404.8; Montage Technology $MONTAGE TECH (06809.HK)$ climbed 12.3% to close at HK$301.2; GigaDevice $GIGADEVICE (03986.HK)$ Rose 7.05%, closing at HK$516; Kingboard Laminates ( $KB LAMINATES (01888.HK)$ ) rose 10.51%, closing at HK$43.94; Kingboard Group $KINGBOARD HLDG (00148.HK)$ rose 7.2%, closing at HK$53.15; Victory Giant Technology $VGT (02476.HK)$ rose 6.93%, closing at HK$253; Zhongji Innolight $ZJ INNOLIGHT (03308.HK)$ rose 3.05% after being included in the Stock Connect, closing at HK$1,046; YOFC ( $YOFC (06869.HK)$ rose 10.31%, closing at HK$179.8; Cambridge Industries ( $CIG (06166.HK)$ rose 5.22%, closing at HK$104.8. Montage Technology and Biren Technology $BIREN TECH (06082.HK)$ will announce their interim results tomorrow, with the market continuing to focus on the earnings and order performance of the AI hardware supply chain.

AI model stocks performed actively. Zhipu AI $Z.AI (02513.HK)$ confirmed that the anonymous model Ox Alpha is the new generation of the GLM series and plans to release model weights openly. GLM-5.3-Flash has gone live and been open-sourced, with its stock price rising 12.62% to close at HK$1,160; MiniMax $MINIMAX-W (00100.HK)$ Interim revenue increased 2.83-fold to US$117 million. Although higher R&D expenses widened the adjusted loss, Citi raised the target price due to strong revenue and annualized recurring income performance. The stock rose 3.83% to close at HK$314.6; SenseTime $SENSETIME-W (00020.HK)$ recorded its first IFRS profit for the first half of the year, but the stock fell 3.06% to close at HK$1.425.

Hansoh Pharmaceutical $HANSOH PHARMA (03692.HK)$ (innovative drug revenue performed well, leading multiple major banks to raise target prices. The stock surged 16.01% to close at HK$36.82, making it the best-performing blue-chip stock of the day; Akeso $AKESO (09926.HK)$ rose 7.43% to close at HK$101.2; Sunny Optical $SUNNY OPTICAL (02382.HK)$ saw first-half net profit increase by approximately 10%, with the stock rising 2.4% to close at HK$64.1.

Auto stocks weakened in the afternoon amid the "Draft Amendment to the Road Traffic Safety Law." The draft proposes that if a vehicle with autonomous driving functions commits a violation while the feature is active, the automaker or importer shall bear responsibility for handling it. Xiaomi $XIAOMI-W (01810.HK)$ fell 3.44% to close at HK$27.48, marking the worst performance among blue-chip stocks; XPeng $XPENG-W (09868.HK)$ dropped 3.34% to close at HK$45.12; Nio $NIO-SW (09866.HK)$ declined 2.91% to close at HK$34.06; Leapmotor $LEAPMOTOR (09863.HK)$ BYD fell 1.95% to close at HK$39.32; $BYD COMPANY (01211.HK)$ Great Wall Motor fell 1.46% to close at HK$91.25; $GWMOTOR (02333.HK)$ Li Auto fell 4.08% to close at HK$7.885; $LI AUTO-W (02015.HK)$ rose 1.04% after the earnings release, closing at HK$48.6.

Domestic consumption and mainland property stocks were generally under pressure. China Resources Beer $CHINA RES BEER (00291.HK)$ fell 3.18% to close at HK$19.77; Budweiser Brewing Company APAC Limited $BUD APAC (01876.HK)$ fell 3% to close at HK$6.145; Nongfu Spring $NONGFU SPRING (09633.HK)$ fell 2.59% to close at HK$42.94; Tingyi (Cayman Islands) Holding Corp. $TINGYI (00322.HK)$ fell 2.06% to close at HK$12.84; Shenzhou International Group Holdings Ltd. $SHENZHOU INTL (02313.HK)$ fell 2.64% to close at HK$36.94. Longfor $LONGFOR GROUP (00960.HK)$ Down 3.05%, closing at HK$6.68; China Vanke $CHINA VANKE (02202.HK)$ Down 0.61%, closing at HK$2.43.

The market is focused on the US dollar's trend, the US budget deficit, and the impact of Christopher Waller's remarks on gold prices and interest rate expectations. Although gold prices are supported by currency depreciation and fiscal concerns, they remain volatile amid fluctuations in the US dollar and bond yields, leading to divergent performance among resource stocks. CMOC Group Limited $CMOC (03993.HK)$ Down 3.1%, closing at HK$17.53; Zijin Mining International $ZIJIN GOLD INTL (02259.HK)$Down 0.56%, closing at HK$155.9.

Hong Kong stocks opened higher but retreated today, with selling pressure persisting in the mainland property, automotive, and domestic consumption sectors. The Hang Seng China Enterprises Index Covered Call Active ETF ( $Hang Seng HSCEI Covered Call Active ETF (03519.HK)$ closed at HK$8.53, down 0.52%, following the HSCEI's pullback. The fund will go ex-dividend on September 1, with a distribution of HK$0.16 per unit, maintaining its monthly distribution schedule. Ticker 3519 is based on assets related to the Hang Seng China Enterprises Index (HSCEI) and actively sells call options to collect premiums, thereby aiming to generate potential monthly cash flow for the fund. Its returns derive from price changes in HSCEI constituent stocks and option premium income. The fund does not simply track the rise and fall of the HSCEI, so its actual performance may differ from the index.

Today, the HSCEI was weighed down by declines in automotive, mainland property, and consumer stocks. Longfor Group (0960) fell 3.05%, Xiaomi (1810) dropped 3.44%, and China Resources Beer (0291) declined 3.18%, putting downward pressure on 3519. On the other hand, HSCEI constituents in the financial and telecommunications sectors remained relatively stable, with Tencent (0700) rising 0.54% and Baidu (9888) gaining 5.34%, helping to mitigate the index's losses. In sideways, moderately rising, or highly volatile markets, the covered call strategy's collected premiums can serve as additional income and provide some buffer against price declines. However, if the HSCEI rises significantly, the sold call options will limit part of the fund's upside potential; conversely, in a sharp market drop, the option premiums may not fully offset the fund's losses. Investors wishing to participate in this dividend distribution must hold fund units before the ex-dividend date of September 1. Note that distributions are not equivalent to fixed interest; the fund manager may discretionarily decide the distribution amount and frequency based on market conditions, option premium income, and portfolio performance. When investing, it is advisable to monitor unit prices, net asset value (NAV), and cumulative distributions rather than focusing solely on single payouts. This fund is more suitable for investors who wish to participate in the development of large Chinese enterprises while prioritizing regular cash flow.

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