Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>Over the past five trading days, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> multi-leg option strategies showcased a variety of approaches. Strategy highlights and volatility context are provided.</li>
<li>With short-term implied volatility below its median, long volatility strategies dominate, with a balanced mix of bullish and bearish positions. </li>
<li>Open interest spread across monthly and quarterly expiries, with some notable strategies taking advantage of longer expiration dates, and a steep negatively sloped skew $475.</li>
</ul>


Over the past five trading days, Tencent (700 HK) multi-leg option strategies showcased a variety of approaches. Strategy highlights and volatility context are provided.
With short-term implied volatility below its median, long volatility strategies dominate, with a balanced mix of bullish and bearish positions. 
Open interest spread across monthly and quarterly expiries, with some notable strategies taking advantage of longer expiration dates, and a steep negatively sloped skew $475.


Tencent (700 HK): Volatility Plays and Skew Top Trades

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>China exposure among GEM funds has rebounded to 26%, up from the 2024 low, but still far below the 37.5% peak. India has eased while Taiwan allocations hit new highs.</li>
<li>China remains a major EM underweight at -3.09% vs. benchmark, despite rising allocations. High Active funds stay the most underweight</li>
<li>Industrials see the strongest buying, while Utilities and Consumer sectors decline. Tencent and Alibaba dominate ownership, but many new names are entering the picture.</li>
</ul>


China exposure among GEM funds has rebounded to 26%, up from the 2024 low, but still far below the 37.5% peak. India has eased while Taiwan allocations hit new highs.
China remains a major EM underweight at -3.09% vs. benchmark, despite rising allocations. High Active funds stay the most underweight
Industrials see the strongest buying, while Utilities and Consumer sectors decline. Tencent and Alibaba dominate ownership, but many new names are entering the picture.


China & HK: Rebuild Slows Amid Heavy Sector and Stock Rotation

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Bottom-Up

<ul>
<li>China announced game approval for the March batch. The number of games approved remained at a higher level than 2023.</li>
<li>The pace of China game approval appears to have accelerated to the same level as pre-tightening. We see pick up in approval rate this month.</li>
<li>Both Tencent and Netease received approval for one game. In addition, Kingsoft received approval for its legendary Sword Heroes series.</li>
</ul>


China announced game approval for the March batch. The number of games approved remained at a higher level than 2023.
The pace of China game approval appears to have accelerated to the same level as pre-tightening. We see pick up in approval rate this month.
Both Tencent and Netease received approval for one game. In addition, Kingsoft received approval for its legendary Sword Heroes series.


Tencent/Netease: One Game Approved Each in March

Blue Lotus Non US Internet research, Blue Lotus Research Institute

Ying Pan

Blue Lotus Non US Internet research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>Tencent reported C4Q24 revenue, IFRS op. profit, and IFRS net income in-line, (5.3%), 6.0% vs. our est. and 2.1%, (12.6%), 5.3% vs. cons. </li>
<li>We shifted our game TOP PICK from Tencent to NetEase on January 16 2025, due to pipeline gaps. </li>
<li>We reiterate our BUY rating and raise TP to HK$545 on Tencent. We expect game pipeline to fill the gap with the launch of two blockbusters in C3Q25.</li>
</ul>


Tencent reported C4Q24 revenue, IFRS op. profit, and IFRS net income in-line, (5.3%), 6.0% vs. our est. and 2.1%, (12.6%), 5.3% vs. cons. 
We shifted our game TOP PICK from Tencent to NetEase on January 16 2025, due to pipeline gaps. 
We reiterate our BUY rating and raise TP to HK$545 on Tencent. We expect game pipeline to fill the gap with the launch of two blockbusters in C3Q25.


[Tencent (700 HK, BUY, TP HK$545) Target Price Change]: C4Q24 Review: Good Time to Pick up Shares

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Tencent announced 4Q24 financial results: total revenue grew by 11% YoY to RMB172.4bn, 3/2% ahead of our/Bloomberg consensus estimates, mainly due to better-than-expected growth of games &amp; marketing revenue.</li><li>During the period, non-IFRS net income was up by 30% YoY to RMB55.3bn, in line with our estimate; but net margin is slightly below our estimate, due to the increased R&amp;D expenses including staff costs and depreciation expenses related to AI investment.</li><li>Tencent plans to further step up AI investment in FY25 (RMB80- 100bn capex with more R&amp;D and marketing support to AI), which may drag the pace of margin expansion but unlock long-term growth opportunities of AI cloud, marketing and games businesses in our view. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Tencent announced 4Q24 financial results: total revenue grew by 11% YoY to RMB172.4bn, 3/2% ahead of our/Bloomberg consensus estimates, mainly due to better-than-expected growth of games &amp; marketing revenue.During the period, non-IFRS net income was up by 30% YoY to RMB55.3bn, in line with our estimate; but net margin is slightly below our estimate, due to the increased R&amp;D expenses including staff costs and depreciation expenses related to AI investment.Tencent plans to further step up AI investment in FY25 (RMB80- 100bn capex with more R&amp;D and marketing support to AI), which may drag the pace of margin expansion but unlock long-term growth opportunities of AI cloud, marketing and games businesses in our view. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent (700 HK) - Stepping up AI Investment to Unleash Growth Opportunities

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent (700 HK)

Tencent (700 HK): Volatility Plays and Skew Top Trades

Strategies show dominance of long volatility approaches with a mix of bullish and bearish positions, taking advantage of longer expiration dates...

Gaudenz Schneider

China & HK: Rebuild Slows Amid Heavy Sector and Stock Rotation

China & HK allocations are recovering, yet remain a major EM underweight. Rotation is active but cautious—Industrial inflows rise, while high...

Steven Holden

Tencent/Netease: One Game Approved Each in March

We analyzed the game approval issued by NPPA for Chinese online game players for the month of March. Game approvals for large players are slow so...

Ke Yan, CFA, FRM

[Tencent (700 HK, BUY, TP HK$545) Target Price Change]: C4Q24 Review: Good Time to Pick up Shares

Tencent reports solid financials, but game pipeline concerns lead to shift in top pick to NetEase. Analysts maintain BUY rating and raise target...

Blue Lotus Research Institute

Tencent (700 HK) - Stepping up AI Investment to Unleash Growth Opportunities

We lift our FY25-26E total revenue forecast by 1%, and raise our SOTP-derived TP to HK$625.0 (previous: HK$525.0) given the rerating of several...

CMB International

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52-week Range

Market Cap (USDm)

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Dividend (Yield)

Tencent (700 HK): Volatility Plays and Skew Top Trades

Strategies show dominance of long volatility approaches with a mix of bullish and bearish positions, taking advantage of longer expiration dates...

Gaudenz Schneider

China & HK: Rebuild Slows Amid Heavy Sector and Stock Rotation

China & HK allocations are recovering, yet remain a major EM underweight. Rotation is active but cautious—Industrial inflows rise, while high...

Steven Holden

Tencent/Netease: One Game Approved Each in March

We analyzed the game approval issued by NPPA for Chinese online game players for the month of March. Game approvals for large players are slow so...

Ke Yan, CFA, FRM

[Tencent (700 HK, BUY, TP HK$545) Target Price Change]: C4Q24 Review: Good Time to Pick up Shares

​Tencent reports solid financials, but game pipeline concerns lead to shift in top pick to NetEase. Analysts maintain BUY rating and raise target...

Blue Lotus Research Institute

Tencent (700 HK) - Stepping up AI Investment to Unleash Growth Opportunities

We lift our FY25-26E total revenue forecast by 1%, and raise our SOTP-derived TP to HK$625.0 (previous: HK$525.0) given the rerating of several...

CMB International

Tencent reports solid financials, but game pipeline concerns lead to shift in top pick to NetEase. Analysts maintain BUY rating and raise target...