Daily Brief China: Xiaomi Corp, China National Building Material, Alibaba Group Holding , DeepSeek, Hua Hong Semiconductor, New China Life Insurance, Chifeng Jilong Gold Mining and more

• Hang Seng Indexes announces changes to the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index, HSIII Index and HSCI Index (among others) post market close today. 
• The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.
• Capping will lead to most inflows to Meituan (3690 HK) while the largest outflows will be from Alibaba Group Holding (9988 HK) and Xiaomi Corp (1810 HK). 

• On the 6th December 2024, China National Building Material (3323 HK) (CNBM), China’s leading building materials company, offered to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
• This elevated CNBM’s parent’s stake to 50.01% of total shares from 45.02% currently, necessitating  a whitewash waiver so the parent would not be obliged to make a full blown offer.  
• Independent H-shareholder overwhelmingly approved the waiver yesterday, the 19th February. Tendering closes on the 5th March. Minimum pro-ration is 19.24%. I’m estimating at least 35%. The Offer is now unconditional.

• Total revenue growth rate continued to rise in 3Q25 ending March 2025.
• Also, the growth rate of the largest business line, customer management, was close to double digits.
• The upside for the next twelve months was narrowed to 18%, as Alibaba’s stock surged after our preview note.

• Liang Wanfang became a celebrity overnight, with visitors from all over Guangdong coming to pay their respects
• Liang has been praised for his contributions to China’s tech sector, surpassing competitors and boosting national pride
• China’s tech sector has faced challenges, including regulatory crackdowns and decreased foreign investment, leading to a shift towards state-backed funding and increased risk for entrepreneurs.

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• Hong Kong’s secular bull market continues this year with record buying from mainland investors through the Southbound Connect platform.
• AAC Technologies Holdings (2018 HK) announced a positive profit alert of of 150% increase in profit for 2024.  The AI, phone and auto segments saw value content increases.
• Hua Hong Semiconductor (1347 HK) is well-positioned to cater to China’s increasing demand for locally designed and produced chips, especially in the EV, smart home appliances and wearables industries.

• After rallying ~50% from its lows, Alibaba rallied another ~10% after reporting in-line result, despite saying it would spend more capex in the next 3 years than the previous 10; 
• Behind this performance is a sudden clarification of AI’s monetization future in China. Alibaba’s vision certainly has itself at the center of beneficiary, but a few other readings also exist;
• Alibaba suggested that partial replacement of human worker is possible in a platform with structured workflow, allowing AI users to reap benefits earlier than we have anticipated. 

• APAC investors are welcoming rate cuts, with Hong Kong remaining a buyers’ market, according to Colliers.
• KKR & M&G invest $509M in an Aussie Warehouse Portfolio, while PGIM JV acquires Queensland sheds.
• Vanke partners with government insurers for a $220M housing JV, demonstrating state support in the real estate sector.

• China National Building Material (3323 HK)‘s proposed H-share buyback has been approved. We continue to support existing shareholders to tender their holdings to accept the offer. 
• The buyback will enhance FY25 and FY26 EPS by 4.8% and 8.2%, respectively. Its book value will increase by 11% compared to without a buyback.
• The post-buyback FY25 PER of 9.6x is at a premium to the sector median of 7.6x. The proposal has led to significant outperformance, and we anticipate downside risks on completion. 

• The emergence of DeepSeek, a Chinese AI company, has sparked widespread discussion across industries, as evidenced by recent earnings calls from major corporations.
• From tech giants to industrial leaders, executives have weighed in on DeepSeek’s innovations, its potential to reshape AI development, and its broader market implications.

• The following synthesizes key insights from earnings calls between January and February 2025.

• Chifeng Jilong Gold Mining (600988 CH), a company owning multiple gold mines across the world, aims to raise around US$500m in its H-share listing.
• It is principally engaged in the mining, processing and sales of gold.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.