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Greater China Strategy-Alpha Picks September Conviction Calls / China Internet AI Capex
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Strategy | Alpha Picks: September Conviction Calls
Chinese equities consolidated in August, with the HSI and MSCI China Index dipping 1.2% mom and 0.4% mom, respectively. We remain positive on TMT and IT hardware, and add Han’s Laser, Innovent, NAURA and Tencent to our BUY list. We take profit on BeOne Medicines, and cut losses on EVE Energy, Hesai and Trip.com.
Sector Update | Internet
AI/AI cloud remained the bright spot in 2Q26, with Alibaba and Baidu delivering 45%/50% yoy revenue growths in AI cloud respectively and Tencent reporting healthy cloud growth on AI demand. However, the surging capex and Alibaba’s HK$80b (US$10.3b) placement shifts the AI debate from project returns to funding duration and capital structure. The investment cycle is pressuring near-term FCF, but stronger utilisation, proprietary chips and higher-margin AI services should improve compute economics over time. Maintain MARKET WEIGHT. Top BUY: Alibaba.
Top Stories
Strategy | Alpha Picks: September Conviction Calls
Chinese equities consolidated in August, with the HSI and MSCI China Index dipping 1.2% mom and 0.4% mom, respectively. We remain positive on TMT and IT hardware, and add Han’s Laser, Innovent, NAURA and Tencent to our BUY list. We take profit on BeOne Medicines, and cut losses on EVE Energy, Hesai and Trip.com.
Sector Update | Internet
AI/AI cloud remained the bright spot in 2Q26, with Alibaba and Baidu delivering 45%/50% yoy revenue growths in AI cloud respectively and Tencent reporting healthy cloud growth on AI demand. However, the surging capex and Alibaba’s HK$80b (US$10.3b) placement shifts the AI debate from project returns to funding duration and capital structure. The investment cycle is pressuring near-term FCF, but stronger utilisation, proprietary chips and higher-margin AI services should improve compute economics over time. Maintain MARKET WEIGHT. Top BUY: Alibaba.
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Key Indices
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