In today’s briefing:
- Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- Implication of Deepseek on China Data Centers: Buy GDS and VNET, Not Too Late to Chase the Rally!
- EQD| HSI: 99th Percentile 2-Week Move on Low Volatility. What’s Next?
- EQD| HSCEI Index Options Weekly (Feb 10-14): Tactical Hedges for an Extended Rally
- EQD| HSI Index Options Weekly (Feb 10-14): Reduce Positions with Short Volatility Edge
- EQD | China Mobile (941 HK) – Four Option Strategies for the Extended Bull Run.
- MIXUE Group IPO: The Leading Player that Justifies a Premium
- ECM Weekly (17th Feb 2025) – CATL, Hengrui, Mixue, Guming, Hexaware, Ajax, Aegis, Daiichi, Takasago
- Merger Arb Mondays (17 Feb) – HKBN, Fosun Tourism, Get Nice, 7&I, Shibaura, Kaonavi, Paragon
Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- Alibaba Group Holding (9988 HK) stock has rallied bigly over the last month and has gained 55% over that period.
- That has led to Alibaba‘s weight in the HSI INDEX, HSCEI INDEX, HSTECH INDEX and HSIII Index rising above the cap of 8%/12% and passives will sell on 7 March.
- We estimate passive trackers will need to sell US$1.2bn of stock due to capping. Shorts have been increasing, and quarterly results will be announced on 20 February.
Implication of Deepseek on China Data Centers: Buy GDS and VNET, Not Too Late to Chase the Rally!
- We believe the recent launches of AI Model will challenge the assumptions of AI training costs, and we are still in early stages of AI revolution
- It will maintain a sustainable growth of AI infrastructure like data centers, instead of reducing the demand. GDS and VNET are well positioned to capture this tailwind
- VNET and GDS were up 303% and 268% for last 12 months, we think it is not too late to chase the rally
EQD| HSI: 99th Percentile 2-Week Move on Low Volatility. What’s Next?
- HSI’s 10-day return of 11.84% ranks it just below the 99th percentile of all 10-day moves since 2000.
- This move has been unusual given the low level of historic volatility, ranking it as one of the lowest vol moves of this magnitude.
- The current move is abnormal for its return relative to volatility – we dig deeper into how returns and volatility are likely to evolve.
EQD| HSCEI Index Options Weekly (Feb 10-14): Tactical Hedges for an Extended Rally
- HSCEI sets new 52-week high by a hair. Rally over the last 10 days ranks in the 97th percentile since 2000.
- Spot and implied maintain a positive correlation which will see implieds come off should this rally reverse course.
- We recommend two trades for those looking to tactically lighten positions into the rally.
EQD| HSI Index Options Weekly (Feb 10-14): Reduce Positions with Short Volatility Edge
- Rally over the past 2 weeks has landed it in the 99th percentile since 2000 and has also been accompanied by low volatility.
- The up-trend has a number of characteristics similar to the 21% rally in May 2024 and is in line with levels from which market has failed to advance.
- Given how price and vol are likely to evolve over the next month we suggest tactical positions to reduce position size
EQD | China Mobile (941 HK) – Four Option Strategies for the Extended Bull Run.
- China Mobile (941 HK) experienced a 6.8% increase over five consecutive positive weeks. This Insight builds on the work of quantitative analysis identifying resistance and support levels.
- This Insight presents four different options strategies to combine quantitative insights with volatility and option analysis.
- Option strategies cater for both bullish, bearish, or neutral views, and can be tailored to fit a given risk budget.
MIXUE Group IPO: The Leading Player that Justifies a Premium
- Mixue Group (MIX HK) has a whopping market share of 32.7% in 2023, based on number of cups sold. It also has the highest profit in the sector.
- With a strong profit record and net cash, it is a leader that captures industry growth. Its extensive network targets low-tier cities’ potential and the franchise model drives expansion.
- It justifies trading on a premium to sector average PER of 19.6x for FY25. If aligning P/B with ROE on the best-fit line, it should be priced at 5.1x pre-money.
ECM Weekly (17th Feb 2025) – CATL, Hengrui, Mixue, Guming, Hexaware, Ajax, Aegis, Daiichi, Takasago
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, while Guming Holdings (1364 HK) added to the list of disaapointing tea chain, MIXUE is said to be gearing up for a launch soon.
- On the placements front, there were two smallish deals in Japan.
Merger Arb Mondays (17 Feb) – HKBN, Fosun Tourism, Get Nice, 7&I, Shibaura, Kaonavi, Paragon
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Kaonavi Inc (4435 JP), Lifestyle China (2136 HK), Seven & I Holdings (3382 JP), Smart Share Global (EM US), ESR Group (1821 HK), Vesync (2148 HK).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Millennium & Copthorne Hotels Nz (MCK NZ), Avjennings Ltd (AVJ AU), Insignia Financial (IFL AU).
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