Daily Brief Equity Bottom-Up: BUY/SELL/HOLD: Hong Kong Market Update (October 5) and more

• Materials, Healthcare and Tech sectors continue to lead the Hong Kong Secular Bull Market higher. The tech sector has been re-rating since Alibaba (9988 HK) announced its AI chip.
• Momentum, Growth, and Liquidity factors have led the Hong Kong market performance year-to-date.  Southbound flows into the Hong Kong market continue at historically high levels.
• Kingsoft Cloud Holdings (3896 HK) was rated a BUY by Deutsche Bank with its initial target price of HK$11.  Shenwan Hongyuan initiates coverage of CaoCao (2643 HK) a BUY.

• Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
• Highlights: Currently nine pair trade opportunities across four markets and five sectors persist.
• Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.

• An agreement to supply OpenAI with energy-saving electric power equipment should be accretive to Hitachi’s sales and profits as long as the AI boom continues.
• Hitachi is also building an “AI Factory” based on Nvidia technology. This should accelerate the growth of Hitachi’s Lumada digital services platform, also boosting sales and profits.
• Hitachi’s share price jumped 10.3% on the OpenAI news. Data center news flow and AI sentiment now drive the share price. 

• What is happening with Advanced Micro Devices (AMD US) and Intel Corp (INTC US)?
• Intel’s stock price has risen about 50% from its April 8 low. However, we have yet to see any tangible progress in its manufacturing technology.  
• Intel’s stock price has risen about 50% from its April 8 low. However, we have yet to see any tangible progress in its manufacturing technology.  

• Severe Financial Distress: Vinfast is operating with deeply negative gross and net margins, leading to significant cash burn and a high degree of uncertainty regarding its path to profitability. The company is critically dependent on the financial support of its parent, Vingroup, and its founder for survival.
• Ambitious but Risky Global Expansion: The company is pursuing an aggressive and costly expansion strategy, pivoting from a challenging entry into the US and European markets to focus on high-growth potential markets in Asia, such as India and Indonesia. Execution in these highly competitive regions remains a key uncertainty.
• High-Stakes Bet on an Unproven Brand: While revenue is growing rapidly, this is off a low base and has been achieved through substantial losses. The company faces intense competition from established global automakers and new EV players, and its brand has limited recognition outside of Vietnam, posing a significant hurdle to capturing market share.

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• Chow Tai Fook Jewellery (1929 HK) is one of the best-performing Hang Seng Index (HSI INDEX) constituents YTD, but it is time to take some money off the table.
• At 5%, its 12-month forward dividend yield is about the lowest in the last five years, implying limited share price upside. Valuations have run ahead of earnings momentum.
• The recent recovery in Hong Kong jewellery retail sales is partly due to the low base effect. Additionally, a higher gold price will weigh on demand for gold products. 

• Fermi is a pre-revenue advanced energy and hyperscaler development company structured as a Real Estate Investment Trust (REIT), planning to build one of the world’s largest data center campuses, Project Matador, with its own dedicated power grid in Texas.
• The company aims to capitalize on the exponential growth in demand for data centers driven by artificial intelligence, offering an integrated solution of up to 15 million square feet of AI computing space and up to 11 gigawatts of low-carbon, on-demand power.
• Led by a management team with deep experience in the energy and government sectors, including former U.S. Energy Secretary Rick Perry, Fermi recently completed a successful IPO, raising approximately $683 million, despite having no revenue-generating operations to date.

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• CP ALL is expected to benefit from the government’s copayment stimulus program, set to launch in October, directly through Makro, which supplies mom-and-pop stores and indirectly through 7-Eleven. 
• The company remains optimistic about a pick-up in growth in 2H2025, driven by promotions in 3Q2025 and government stimulus, along with improving margins driven by an improved product mix. 
• 7-Eleven remains on track to expand its store network by 700 new outlets in FY2025, is gravitating toward slightly larger stores, allowing an increased number of SKUs. Valuations remain attractive.

• Saint Bella (2508 HK) achieved 1H25 revenue of RMB 449.5M (up 26% YoY) driven by higher sales from postpartum business (up 25% YoY) as number of postpartum centers increased.
• The company opened 36 stores in 1H25 and average contract value of postpartum recovery sales at all service brands witnessed rise (Bella Isla saw highest increase, up 36% YoY).
• With no major growth hurdles visible for Saint Bella, secular demand in place and with consistent capacity additions it is worth to buy the stock at this point of time.

• eFishery, once a celebrated Indonesian agritech unicorn valued at over USD 1.4 billion, has collapsed following the discovery of a massive financial fraud scandal in late 2024.
• Investigations revealed that the company had grossly inflated its revenue and user metrics for years, leading to the suspension and arrest of its co-founders and the appointment of interim management to oversee the company’s remnants.
• The company is now considered commercially unviable in its current form, with investors facing near-total loss and the firm’s future highly uncertain. The scandal serves as a stark cautionary tale regarding corporate governance and due diligence within the regional startup ecosystem.

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