Zhitong Decision Reference | Continuous inflow of foreign capital is the hard truth, intelligent driving and robotics may continue to catalyze

[Editor’s Market View]

Last week, it was mentioned that Hong Kong stocks have entered a technical bull market, and the trend speaks for itself; the continuous influx of foreign capital is the hard truth.

On February 14th, the three major AMCs, China Cinda, Dongfang Asset, and Great Wall Asset, successively announced that their controlling shareholder, the Ministry of Finance, plans to transfer its shares to Central Huijin through a non-compensatory transfer. This means that the state has taken another key step in debt reduction.

This week, the market is focused on NATO Secretary-General: he has met with the President of Ukraine to discuss ending the Russia-Ukraine conflict; additionally, Germany has started early elections. Attention is on related developments.

As for the Federal Reserve's January meeting minutes on Wednesday, there is no need to pay too much attention; the expectation for interest rate cuts this year is not high. The market is focused on new expectations brought about by the end of the Russia-Ukraine conflict. The Hang Seng Index is expected to challenge 23,241 points this week.

In terms of hot topics, the impact brought by DeepSeek is profound. DeepSeek-R1 has surpassed 10 million downloads, becoming the most popular open-source large model, and AI applications are once again booming, such as AI + healthcare. Elon Musk announced that Grok's three major models will be released. WeChat has also integrated DeepSeek, and in terms of computing power, banned GPU inventory models are being snapped up.

AI empowers intelligent driving: WenYuan ZhiXing (WRD.US) skyrocketed by 83%, and NVIDIA (NVDA.US) has been exposed after seven years of lurking. Intelligent driving continues to catalyze.

In the robotics sector, U.S. listed Chinese robotics stocks surged over 350% due to LiFu's three-day rally; Yushu Technology's "Any Dance" humanoid robot is accelerating mass production. This is expected to stimulate the robotics sector again.

[This Week's Golden Stock]

Fourth Paradigm (06682)

The company announced that the new share placement project has been successfully settled. This placement added a total of 27.92 million shares, with an issue price of HKD 50.20 per share, raising approximately HKD 1.4 billion. The company expects its annual net profit to increase by about 130% to 145%.

The new share placement project has brought ample funds to the company, aiding its continuous development in the AI field. The company's business performance has been impressive in recent years, with sustained high revenue growth, a continuous narrowing of net losses, and a significant improvement in profitability. In the first three quarters of 2024, the company achieved revenue of 3.218 billion yuan, a year-on-year increase of 26.1%, and a gross profit of 1.35 billion yuan, a year-on-year increase of 12.5%. Among them, the core business "Prophet AI Platform" achieved revenue of 2.171 billion yuan, a year-on-year increase of 50.2%, accounting for over 67% of total revenue. The significant growth in the company's profits is mainly attributed to the recovery of the global smartphone market and the trend of upgrading, which has driven the optimization of product combinations across multiple product segments and the continuous improvement of operational efficiency. The company has maintained its position as the market leader in China's machine learning platform market for six consecutive years. In addition to the Prophet platform, the company has continuously optimized several key skills such as AIAgent and GPU resource pooling, efficiently creating over 40 artificial intelligence products. The average revenue of the company's benchmark customers is 14.87 million yuan, with 98 benchmark users, accounting for 44% of the total. It is worth mentioning that the large model and AIGS service platform launched by Fourth Paradigm last year have opened up the generative AI market space for the company. Relying on the company's accumulation in enterprise-level data and strong software capabilities, Fourth Paradigm has achieved technological breakthroughs in the generative AI field, which is expected to further enhance the company's market share in the industry 【Industry Observation】

Weekend WeChat integration with DS news fermentation. Below are investment recommendations from a certain institution, excerpted here for investors' reference:

2025 is the first year of Tencent's AI to C, with subsequent products being released in succession. In comparison to Meta AI, the possible path is: first, AI search and Chatbot embedded in the friend chat interface, then opening permissions for Moments/chat history/local file reading, after which WeChat will officially become an agent for work and life. Tencent's core business, gaming, has huge transformation potential, with three directions currently favored.

(1) Tencent/Alibaba system - computing power + platform

Tencent Holdings (00700): In comparison to Meta's 2025 28x PE, Tencent's AI revaluation looks at over 20x, with a market value above 5 trillion, upside 30%+.

Alibaba (09988): In addition to cloud business revaluation, the to C ambition is in Quark/recent good data.

ST Huadong: Tencent system computing power. Provides IDC for Tencent, with this year's gaming main business performing excellently at less than 15x.

China Ru Yi (00136): Tencent holds shares, Tencent games + Pumpkin streaming media.

Tencent Music (01698): AI music/recommendation algorithm + 500 million MAU.

(2) Revaluation of other internet companies with users/scenarios/data

Kuaishou (01024): Possible valuation of 4-6 billion USD + algorithm optimization pushing up January's MAU, currently at a low position, corresponding to a 10x valuation in 2025.

Bilibili (09626): AI creation/community imagination.

(3) Strengthening AI gaming logic

If deepseek launches its own "Sora," AI multimodal stories will be retold, while several gaming companies have product cycles this year + policies in Hangzhou/Shanghai for gaming are warming up. Related companies include: Xindong Company/JuRen/Kaiying/Perfect/Dianhun/Taiyue/Zhangqu.

【Data Monitoring】

The Hong Kong Stock Exchange announced that the total number of open contracts for the Hang Seng Index futures (February) is 120,281, with a net open position of 40,119. The settlement date for the Hang Seng Index futures is February 27, 2024.

From the distribution of bull and bear certificates for the Hang Seng Index at the 22,620 point position, the bear certificate dense area is close to the central axis, indicating that the Hang Seng Index has sustained bullish momentum. The value of Chinese technology assets is being revalued by global investors, and the valuation gap between China and the US is expected to converge. The Hang Seng Index is bullish this week.

【Editor's Remarks】

The recent rise in Hong Kong stocks, in addition to macro liquidity, policy support, and improved geopolitical environment, has deeper reasons rooted in breakthroughs in artificial intelligence technology, revaluation of Chinese technology asset values, and the resonance formed by global capital's strategic allocation to Chinese assets. In terms of funds, the scale of southbound inflows increased last week, but divergences intensified, with passive/trading foreign capital still being the main driving force Market sentiment is aligned with corresponding overseas stocks as a trend, and from a structural perspective, the current cost-effectiveness of Hong Kong stocks in the TMT/domestic consumption/pharmaceutical segments still surpasses that of overseas leaders. With technology leading the way, hotspots are expected to expand, presenting numerous investment opportunities.

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