Core Viewpoint - The current valuation of the Hang Seng Index and the Hang Seng Tech Index remains significantly lower than their peaks in 2021, indicating potential investment opportunities in the Hong Kong tech sector [1][6]. Valuation Analysis - As of late September, the price-to-earnings ratios for the Hang Seng Index and the Hang Seng Tech Index were approximately 11.8 times and 23.7 times, respectively, compared to their peak values of 17.6 times and 70 times in 2021 [1][6]. - The Hang Seng Tech Index is still about 40% lower than its historical high [6]. Market Performance - Since October, the Hang Seng Tech Index has experienced a significant downturn, with a maximum drawdown exceeding 15% in less than two months, and a recent streak of four consecutive trading days of decline [3][4]. - Prior to October, nine out of thirty tech stocks in the Hang Seng Tech Index had gains exceeding 100%, with the top performer, Hua Hong Semiconductor, rising nearly 270% [4]. Investment Sentiment - Despite the recent short-term adjustments, analysts believe the long-term investment logic for leading tech stocks in Hong Kong remains intact, driven by AI applications and the potential for a second growth phase for internet companies [3][6]. - The market is increasingly focused on the tangible effects of AI implementation on driving growth for internet enterprises [3][8]. Capital Flow Trends - There has been a noticeable outflow of southbound capital from certain Hang Seng Tech constituents, with Alibaba experiencing a net sell-off of 2.5 billion Hong Kong dollars in the past month [4][5]. - The shift in investment style towards high-yield defensive assets as the year-end approaches has led to a preference for traditional economic stocks over high-volatility tech stocks [5]. AI and Market Dynamics - The narrative around AI has shifted from speculative storytelling to a focus on financial performance, with companies like Tencent and Alibaba demonstrating significant revenue growth attributed to AI integration [8][9]. - The global market has seen a correction in AI stock valuations, with a focus on companies that can demonstrate verifiable profits rather than just AI capabilities [9]. Future Outlook - The tech sector in Hong Kong is viewed as a crucial area for investment in China's new economy, particularly under the dual drivers of AI and globalization [2][7]. - The ongoing support for technological innovation from policy initiatives is expected to translate into actual performance over the next two to three years, enhancing the sustainability of tech stock growth [9].

Core Viewpoint - The current valuation of the Hang Seng Index and the Hang Seng Tech Index remains significantly lower than their peaks in 2021, indicating potential investment opportunities in Hong Kong tech stocks driven by AI and globalization [1][4]. Valuation Analysis - As of late September, the price-to-earnings ratios for the Hang Seng Index and Hang Seng Tech Index were approximately 11.8 times and 23.7 times, respectively, compared to their peak values of 17.6 times and 70 times in 2021 [1][5]. - The Hang Seng Tech Index has experienced a significant bull market since 2025, with gains exceeding 30% for the Hang Seng Index and over 50% for the Hang Seng Tech Index [1]. Recent Market Trends - Since October, the Hang Seng Tech Index has faced a sharp decline, with a maximum drawdown exceeding 15% and a series of four consecutive trading days of losses [1][2]. - Prior to October, nine out of thirty constituent stocks in the Hang Seng Tech Index had gains exceeding 100%, with the top performer, Hua Hong Semiconductor, rising nearly 270% [2]. Fund Flow and Investor Behavior - There has been a noticeable outflow of southbound funds from certain Hang Seng Tech constituents, with Alibaba experiencing a net sell-off of 2.5 billion HKD and Li Auto seeing 1.2 billion HKD in net sales [2][3]. - Investors are increasingly shifting their focus towards dividend-paying assets like banks and non-bank financials as the year-end approaches, leading to a rotation away from high-volatility tech stocks [3]. Long-term Investment Logic - Despite short-term fluctuations, the long-term investment logic for the Hang Seng Tech Index remains intact, as it includes internet giants and companies in semiconductors and new energy vehicles that are considered scarce assets for both domestic and global investors [4][5]. - Analysts believe that the adjustment in the Hang Seng Tech Index is a short-term phenomenon, with expectations of a sustained bull market over the next two to three years [5]. AI and Market Dynamics - The focus has shifted from speculative narratives to tangible financial performance, with companies like Tencent and Alibaba demonstrating significant revenue growth attributed to AI applications [6][7]. - The market is now prioritizing companies that can translate AI advancements into profits, indicating a structural revaluation where only those with solid ecosystems will thrive [7]. Policy Support and Future Outlook - The Chinese government's emphasis on technology innovation in its 14th Five-Year Plan is expected to translate into actual performance over the next few years, providing a more sustainable growth trajectory for tech stocks [7].

Core Viewpoint - DBS Bank maintains a "Buy" rating on Tencent Holdings (00700.HK) and raises the 12-month target price from HKD 786 to HKD 800, citing the strong support from AI applications for Tencent's core business segments: online gaming and online advertising [1] Group 1: Advertising Business - Tencent has launched an automated advertising solution named "AIM+", which shows early data indicating a higher return on investment (ROI) compared to traditional manual advertising methods due to more precise targeting and creative generation [1] - The bank expects that AI-driven improvements in advertising will enhance Tencent's revenue generation capabilities [1] Group 2: Gaming Business - In the gaming sector, AI-driven non-player characters (NPCs), more efficient content creation processes, and precise marketing tools are anticipated to deepen user engagement and improve monetization [1] - Based on the expected business improvements from AI technology, DBS has raised Tencent's adjusted profit forecasts for the fiscal years 2025 to 2027 by 4%, 5%, and 8% respectively [1] Group 3: Capital Expenditure and Supply Chain - Tencent's management has indicated that despite adjustments to the capital expenditure plan for fiscal year 2025 due to chip supply constraints, the company has sufficient chip reserves to meet internal AI application needs, ensuring that long-term revenue growth driven by AI remains unaffected [1] Group 4: Valuation - DBS employs a sum-of-the-parts (SOTP) valuation method, assigning a 20x price-to-earnings ratio to Tencent's core business for fiscal year 2026, resulting in the target price of HKD 800, which corresponds to a 25x price-to-earnings ratio for fiscal year 2026, slightly above the past five-year average of 20x [2]

Market Overview - On November 19, the Hang Seng Index fell by 0.38%, closing at 25,830.65 points, with a total net inflow of HKD 6.591 billion through the southbound trading channel [1] - The total trading volume for the southbound trading was HKD 83.946 billion, with a net buy of HKD 6.591 billion [1] Trading Activity - In the Shanghai-Hong Kong Stock Connect, the total trading amount was HKD 49.962 billion, with a net buy of HKD 2.489 billion; in the Shenzhen-Hong Kong Stock Connect, the trading amount was HKD 33.983 billion, with a net buy of HKD 4.101 billion [1] - The most actively traded stock in the Shanghai-Hong Kong Stock Connect was Xiaomi Group-W, with a trading volume of HKD 63.43 billion, followed by Alibaba-W and Tencent Holdings, with trading volumes of HKD 43.48 billion and HKD 23.65 billion, respectively [1] Stock Performance - Xiaomi Group-W had the highest net buy amount of HKD 2.160 billion, despite a closing price drop of 4.81% [1] - The stock with the highest net sell amount was the Tracker Fund of Hong Kong, with a net sell of HKD 0.977 billion, closing down by 0.31% [1] - In the Shenzhen-Hong Kong Stock Connect, Xiaomi Group-W also led in trading volume with HKD 42.435 billion, while Alibaba-W and SMIC followed with HKD 28.43 billion and HKD 14.45 billion, respectively [2] - Alibaba-W recorded the highest net buy amount of HKD 1.144 billion, closing up by 1.16% [2] - The Tracker Fund of Hong Kong again had the highest net sell amount of HKD 0.507 billion, closing down by 0.31% [2]

Core Points - Tencent Holdings has conducted share buybacks, repurchasing 1.018 million shares on November 19 at prices ranging from HKD 619.500 to HKD 630.500, totaling HKD 635.5 million [1] - The stock closed at HKD 622.500 on the same day, reflecting a slight decline of 0.16%, with total trading volume reaching HKD 8.713 billion [1] - Since November 18, the company has repurchased a total of 2.031 million shares, amounting to HKD 1.271 billion, with the stock experiencing a cumulative decline of 2.20% during this period [1] - Year-to-date, Tencent has executed 102 buybacks, totaling 12.436 million shares and an aggregate buyback amount of HKD 62.236 billion [1] Buyback Details - On November 19, Tencent repurchased 101.80 thousand shares at a maximum price of HKD 630.500 and a minimum price of HKD 619.500, with a total expenditure of HKD 63.55 million [1] - On November 18, the company bought back 101.30 thousand shares at a maximum price of HKD 640.500 and a minimum price of HKD 620.500, costing HKD 63.56 million [1] - The buyback activity has been consistent, with multiple transactions recorded throughout the year, indicating a strategic approach to managing share value [1][2][3]

Core Viewpoint - The article highlights the significant inflow of southbound capital into the Hong Kong stock market, driven by the increasing presence of high-quality Chinese companies and the attractiveness of valuations, which is expected to support a long-term "slow bull" market trend in Hong Kong stocks [3][10][16]. Group 1: Southbound Capital Inflow - As of November 10, southbound capital's cumulative net purchase of Hong Kong stocks exceeded 5 trillion HKD, continuing to grow [3]. - By November 19, southbound capital net inflow through the Stock Connect reached 65.91 million HKD, bringing the total net purchase for the year to over 1.34 trillion HKD, a 66% increase compared to the total inflow of 807.8 billion HKD in 2024 [5][6]. - The proportion of southbound capital in the total trading volume of the Hong Kong market has steadily increased from 15.6% at the beginning of 2024 to 23.6% in the third quarter of 2025 [6]. Group 2: Investment Trends and Sector Focus - The composition of southbound capital has shifted significantly, with technology and dividend-paying stocks becoming the primary focus, moving away from the banking sector, which previously dominated [7][8]. - The top ten holdings of southbound capital are now split between technology and high-dividend stocks, with Tencent Holdings and Alibaba being major players [8]. - Insurance funds and public funds are the main contributors to southbound capital, with insurance holdings surpassing 1 trillion RMB by the end of the third quarter [9]. Group 3: Future Growth Potential - Analysts predict that the southbound capital inflow could increase by 1.4 trillion RMB (approximately 1.54 trillion HKD) by the end of next year, with a potential growth of 10 trillion RMB (about 11 trillion HKD) over the next five years [11][13]. - The continuous inflow of long-term capital is expected to enhance market liquidity and optimize the capital market structure, supporting a sustainable "slow bull" market [13][14]. Group 4: Quality of Listed Companies - The article notes that more high-quality Chinese companies are choosing to list in Hong Kong, which enhances the market's attractiveness to both domestic and foreign investors [15][17]. - As of November 19, 2025, 88 companies have gone public in Hong Kong, raising a total of 250.5 billion HKD, a 172.44% increase from the previous year [17]. - The increasing number of globally competitive companies listed in Hong Kong is expected to attract more capital inflow, creating a positive feedback loop [18].

Core Insights - The Hong Kong stock market is becoming a crucial platform for global investors to share in the growth dividends of China's core assets, with significant inflows of southbound capital [1][12] - As of November 10, southbound capital's cumulative net purchases of Hong Kong stocks exceeded 5 trillion HKD, continuing to grow [1] - The influx of long-term mainland funds, primarily from insurance and public offerings, is expected to support a "slow bull" market in Hong Kong [1][8] Southbound Capital Inflows - As of November 19, southbound capital net inflows through the Stock Connect reached 65.91 million HKD, bringing the total for the year to over 1.34 trillion HKD, a 66% increase compared to the total inflow of 807.8 billion HKD in 2024 [2] - Cumulative net inflows since the launch of the Stock Connect have surpassed 5 trillion HKD [2][3] Market Dynamics - Southbound capital has become a core driver of liquidity in the Hong Kong stock market, with its share of total market turnover rising from 15.6% at the beginning of 2024 to 23.6% by the third quarter of 2025 [3] - The total market value of southbound capital holdings exceeded 6.3 trillion HKD by the end of the third quarter, representing a year-on-year increase of over 90% [3] Sector and Stock Preferences - The allocation of southbound capital has shifted significantly, with the banking sector previously dominating but now more evenly distributed across industries, including media, pharmaceuticals, and technology [3][4] - The top ten holdings of southbound capital are now characterized by a "technology + dividend" strategy, with Tencent Holdings and Alibaba being major beneficiaries [4] Fund Composition - Insurance funds and public funds constitute the majority of southbound capital, with insurance holdings surpassing 1 trillion RMB (approximately 1.4 trillion HKD) by the end of the third quarter [7] - Public fund holdings reached 1.01 trillion RMB, accounting for about 18% of total southbound capital [7] Future Projections - Predictions indicate that southbound capital could see an additional inflow of 1.4 trillion RMB (approximately 1.54 trillion HKD) by the end of next year, with a potential total increase of 10 trillion RMB (approximately 11 trillion HKD) over the next five years [8] - The continuous inflow of long-term capital is expected to enhance market fundamentals and support a "slow bull" market [8][9] Market Valuation and Asset Supply - The Hong Kong stock market is viewed as having significant allocation value, with lower valuation levels compared to other major global markets [11] - The influx of quality companies listing in Hong Kong is creating a virtuous cycle, enhancing market liquidity and attracting more capital [12][13] Historical Context - Historical analysis indicates that periods of outperformance in the Hong Kong stock market have been driven by the scarcity of assets, with current trends reflecting similar dynamics as seen in previous advantageous periods [14]

Core Viewpoint - WeBank's flagship product, WeLiDai, which once thrived on rapid loan disbursement, is now facing challenges such as declining personal consumption loan data, high user complaints, and a loss of Tencent's support, raising questions about its core competitiveness for the next decade [2][8][29] Group 1: Historical Context and Growth - WeBank was established in December 2014 with Tencent as a major shareholder, leveraging its vast user base to launch WeLiDai, which quickly gained popularity due to its efficiency and accessibility [9][11] - By the end of 2019, WeLiDai had issued loans totaling 3.7 trillion yuan, marking a 900-fold increase in less than four years [12] - WeBank's revenue grew from 230 million yuan in 2015 to 14.87 billion yuan by the end of 2019, a 65-fold increase, while its total assets reached 291.2 billion yuan [12][13] Group 2: Current Challenges - WeLiDai is experiencing "traffic anxiety" as user growth slows, with the number of effective personal loan customers decreasing from 49 million in 2021 to 25 million in 2024 [21][24] - The average loan amount per transaction has declined from 8,000 yuan in 2021 to 7,200 yuan in 2024, indicating a shift in customer demographics towards lower-income borrowers [24] - Complaints against WeBank have surged, with over 56,000 complaints reported, highlighting issues such as aggressive debt collection and data privacy concerns [26] Group 3: Strategic Shifts - In 2025, WeBank initiated a "new decade" strategy, shifting focus from growth to risk management and profitability, which includes transforming WeLiDai into a loan marketplace [29][30] - The company aims to filter high-risk customers and hopes to expand its B2B loan business, which has grown from 37.19% of total loans in 2021 to 49.44% by the end of 2024 [30] - Tencent's recent stock reduction and the introduction of its own lending product, "WeChat Fenfu," signal a potential competitive threat to WeLiDai's market position [31][32]

Core Viewpoint - Tencent Holdings reported strong financial performance for Q3 2025, with significant year-on-year growth in revenue, operating profit, and net profit, indicating robust business fundamentals and growth potential in key segments [1][4]. Group 1: Financial Performance - In Q3 2025, Tencent achieved operating revenue of 192.87 billion yuan, a year-on-year increase of 15.36% [1] - The gross margin was 56.41%, up by 3.28 percentage points year-on-year [1] - Adjusted operating profit reached 72.57 billion yuan, growing 18.44% year-on-year, with an operating profit margin of 37.63% [1] - Adjusted net profit attributable to shareholders was 70.55 billion yuan, reflecting a year-on-year increase of 17.95%, corresponding to a profit margin of 36.58% [1] Group 2: Gaming Revenue - Domestic gaming revenue for Q3 2025 was 42.8 billion yuan, up 15% year-on-year, driven by the success of new titles like "Delta Action" and the growth of established games such as "Honor of Kings" and "Peacekeeper Elite" [2] - International gaming revenue reached 20.8 billion yuan, a 43% year-on-year increase (42% at constant exchange rates), supported by revenue growth from Supercell games and new PC and console releases [2] - The agreement with Apple regarding a 15% fee on WeChat mini-program games is expected to enhance payment conversion rates and expand the mini-program market [2] Group 3: Advertising Revenue - Advertising and marketing revenue for Q3 2025 was 36.2 billion yuan, a year-on-year increase of 21% [3] - The launch of the AIM+ advertising product matrix has improved ad targeting and ROI for advertisers, contributing to revenue growth [3] - Enhanced recommendation algorithms and increased user engagement in platforms like Video Accounts have driven higher ad loading rates and eCPM [3] Group 4: Future Outlook - Tencent is developing AI capabilities within the WeChat ecosystem, aiming to create an AI operating system applicable across various sectors such as e-commerce and payments [4] - The company maintains a strong focus on AI investments, with expectations for revenue growth reaching 750.4 billion yuan by 2027, alongside adjusted net profits of 258.9 billion yuan [4] - The projected PE ratios for 2025-2027 are 21.1, 18.4, and 17.2 times, indicating a favorable valuation outlook [4]

Core Viewpoint - Tencent's Q3 2025 performance significantly exceeded expectations, driven by a strong recovery in the gaming business and effective monetization of AI technology in advertising [1] Financial Performance - Tencent reported total revenue of 192.9 billion RMB, a year-on-year increase of 15%, surpassing market expectations by 2% [1] - Non-IFRS net profit attributable to shareholders reached 70.6 billion RMB, up 18% year-on-year, exceeding market expectations by 7% [1] - The gaming business grew by 23% year-on-year, with domestic growth at 15% and international growth at 43%, both significantly exceeding expectations [2][3] - Advertising revenue increased by 21% year-on-year, with a gross margin improvement of 3.7 percentage points to 56.4% [1] Gaming Business Insights - Domestic gaming revenue reached 42.8 billion RMB, with notable performances from long-standing games like "Honor of Kings" and "Peacekeeper Elite" [2] - The new game "Delta Action" achieved over 30 million daily active users in September, ranking among the top three in revenue [2] - International gaming revenue reached 20.8 billion RMB, driven by strong performances from "PUBG Mobile" and new titles [2][3] - Despite a projected slowdown in international gaming growth in Q4 2025 due to high base effects, a robust pipeline of games for 2026 is expected to support long-term growth [2][3] AI and Advertising Performance - AI significantly enhanced advertising eCPM and inventory release efficiency, contributing to a 21% year-on-year increase in advertising revenue, totaling 36.2 billion RMB [3] - The gross margin for advertising improved from 53% to 57% year-on-year, driven by AI advancements [3] - AI-driven advertising targeting and technology upgrades contributed 40-50% of the eCPM increase [3] Other Business Segments - Financial Technology Services (FBS) revenue was 58.2 billion RMB, a 10% year-on-year increase, with a gross margin improvement of 2.4 percentage points to 50.2% [4] - The company experienced robust growth in online payments and improvements in offline retail and transportation sectors [4] - Cash capital expenditure for Q3 2025 was 20 billion RMB, with a downward adjustment in 2025 CapEx guidance due to temporary chip supply constraints rather than a strategic reduction [4] Investment Outlook - Tencent's Q3 performance highlights strong growth in gaming and AI-driven profit release, with a commitment to high-quality growth strategies [5] - The company maintains a "buy" rating, reflecting confidence in its strategic position in the consumer sector and healthy profit growth [5]