Highlights

• Chinese equities rebounded strongly in July, with the HSI and MSCI China Index rising 13.1% mom and 8.6% mom, respectively, recouping the losses of the previous two months.
   
• August may see renewed volatility as the Fed turns more hawkish, but we stay constructive, due to undemanding valuations (MSCI China Index is trading at 10.7x 12-month forward PE) and supportive macro policy setting.
   
• We add ASMPT, EVE Energy, Foxconn Industrial Internet, Hesai and Trip.com to our BUY list, take profits on Midea, Plover Bay and Wuxi AppTech, and cut losses on Minth and Zijin Mining.

Analysis

• Chinese equities rebounded strongly in July, with the HSI and MSCI China Index rising 13.1% mom and 8.6% mom, respectively, recouping the losses of the previous two months. The rally was underpinned by a return of liquidity to the market, with southbound net inflows of HK$62.9b in July, compared with June’s HK$27.1b. The best performer among our picks of the month was BUY rated BYD (1211 HK), which advanced 30.0% mom and since inclusion.
   
• Constructive on Chinese equities in August. Domestic policy support should outweigh external risk; positive catalysts include the 30 July Politburo meeting and the PBOC's 1 August work conference, both of which signalled stronger counter-cyclical support. Moreover, the MSCI China Index is still trading at undemanding valuations of 10.7x 12-month forward PE, below its historical average of 11.4x. The key risk is a more hawkish Fed, with futures now pricing a 67% chance of a 25bp hike by September.
   
• We add ASMPT (0522 HK), EVE Energy (300014 CH), FII (601138 CH), Hesai (2525 HK) and Trip.com (9961 HK) to our BUY list. We take profits on Midea (000333 CH), Plover Bay (1523 HK) and WuXi AppTec (2359 HK), and cut losses on Minth (425 HK) and Zijin Mining (2899 HK).

Action

• Add EVE Energy (300014 CH) to our BUY list, ahead of its 1H26 results and monthly battery shipment updates.
   
• Add Foxconn Industrial Internet (601138 CH) to our BUY list, on 3Q26 guidance, AI server share gains and CPO switch volume orders.
   
• Add Hesai (2525 HK) to our BUY list, on quarterly shipment data, 2Q26 results, and new contract signings with auto OEMs and robotics companies.
   
• Add Trip.com (9961 HK) to our BUY list, on accelerating international market growth, recovery in outbound and inbound travel, and benefits from visa-free policies.
   
• Take profits on Midea (000333 CH), Plover Bay (1523 HK) and Wuxi AppTech (2359 HK).
   
• Cut losses on Minth (425 HK) and Zijin Mining (2899 HK).
   
• Maintain BUY on Alibaba (9988 HK), BYD (1211 HK), Cowell (1415 HK), BeOne Medicines (6160 HK), NetEase (9999 HK) and Shuanghuan Driveline
  (002472 CH).