Daily Brief China: HKT Ltd, Fibocom Wireless , TOP TOY International Group, Alibaba, China Water Affairs, Chongqing Hongjiu Fruit and more

• First it was the Li family’s, via CK Hutchison Holdings (1 HK), investment in two Panama ports, which raised the ire of the U.S. government. And remains unresolved.
• Now the U.S.’s Federal Communication Commission (FCC) has taken the initial step to “expel Hong Kong Telecom” – i.e. HKT Ltd (6823 HK) – from the US telecommunication network.
• The FCC order cites HKT’s affiliation with black-listed China Unicom (762 HK). Unicom holds a 18.4% stake in PCCW (8 HK), HKT’s parent.  A stake it acquired twenty years ago.

• Fibocom Wireless (300638 CH) is looking to raise up to US$380m in its upcoming Hong Kong IPO.
• It was founded in Nov 1999, and is a leading wireless communication module provider. The firm’s module products include i) data transmission modules, ii) smart modules, and iii) AI modules.
• In this note, we examine the IPO dynamics, and look at the firm’s valuation.

• TOP TOY International Group (TOYTOY HK)  is looking to raise at least US$300m in its upcoming Hong Kong IPO. The deal will be run by JPM, UBS and CITIC.
• TOP TOY International Group is China’s largest and fastest-growing pop toy collection brand.
• The company achieved a GMV of RMB2.4 billion in mainland China in 2024, securing its rank as the largest pop toy collection brand in the country by this metric.

• Context: Volatility cones provide a straightforward framework to evaluate whether options are trading cheap or rich. This Insight provides volatility analysis for eight prominent Hong Kong stocks and the HSI Index.
• Highlights: Recent market turbulence moderately lifted implied volatility for many stocks, but not to extreme levels. The approaching earnings season impacts October and November implied volatility.
• Why Read: Spot opportunities, assess regime shifts, and manage risk effectively — volatility cones turn complex data into actionable insights for traders and investors.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: China Water Affairs
• The UST curve twisted slightly flatter yesterday, largely undoing Tuesday’s steepening. The yield on the 2Y UST rose 2 bps to 3.50%, while the yield on the 10Y UST was stable at 4.03%. Equities ended higher, despite choppy price action during the day. The S&P 500 increased 0.4% to 6,671, and the Nasdaq was up 0.7% at 22,670.
• The Fed Beige Book stated that US economy activity was little changed from the previous month’s report, with three districts reporting slight to modest growth in activity, five reporting no change and four noting a slight softening.

• Chongqing Hongjiu Fruit is a leading Chinese fruit distributor with a historically strong market position, particularly in durians and other Southeast Asian fruits, built on an end-to-end supply chain. The company has demonstrated rapid revenue growth, leveraging a multi-brand strategy to capture a significant share of China’s expanding fresh fruit market.
• The company is facing existential threats. Trading in its shares was suspended in March 2024, followed by the resignation of its auditor, KPMG. Authorities in Chongqing have imposed restrictive measures and key executives, including the Chairman, are under criminal investigation for suspected loan fraud and false tax invoices, leading to significant operational disruptions.
• Due to a failure to publish required financial results and address regulatory concerns about management integrity, the Hong Kong Stock Exchange has initiated the process to delist the company’s shares. This, combined with the ongoing investigation and lack of financial transparency, creates an extremely high-risk profile for investors.

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