Chinese tech, which assets are worth watching?

Last week, the average price of new residential properties in China's 70 major cities fell by 5.4% in January, with the decline narrowing slightly, indicating that the Chinese government's policy measures have helped stabilize the embattled real estate market. The Standing Committee of the National People's Congress convened in Beijing this week.

Goldman Sachs strategists raised their target for the CSI 300 Index from 4,600 points to 4,700 points, implying an 18% upside from current levels. They estimate that the widespread adoption of AI could increase the average earnings per share of Chinese companies by 2.5% annually over the next decade.

During the Spring Festival, DeepSeek optimized its AI algorithm (DeepSeek: Making Americans Panic, Nvidia's Stock Price Crashes?), foreign media reassessed the valuation of A-shares and H-shares. Immediate valuation tracking and adjustments were also conducted.

Not just Goldman Sachs, Morgan Stanley's closed-door meeting also shifted focus to Chinese tech and consumer stocks (Morgan Stanley's Closed-Door Meeting: Which Chinese Tech and Consumer Stocks Were Mentioned?).

Due to foreign media's reassessment of A-shares, technological advancements, policy meeting expectations, earnings previews, and forecasts, the A-share and H-share markets experienced strong gains after the Spring Festival.

After the Spring Festival, Apple AAPL, Nvidia NVDA, and Alibaba BABA/09988 benefited from the "Sino-US marriage" model. The collaboration model: BABA can purchase a large number of Nvidia's GPUs, and data centers can be built either in Apple's data centers in China or in the US. This can help Apple attract more Chinese customers and serve them better, while BABA gains access to high-end GPUs.

Citi raised its target price for Xiaomi 01810 to 51.7HKD. This is the top holding in Hong Kong stocks, and it has endured significant volatility. The price aligns with my target range of 50-52.3HKD. The reason is the analysis of the expected Q4 2024 earnings report to be released on March 18: optimism about Xiaomi's ecosystem, increased sales of smartphones and cars, benefits from domestic consumption subsidies, and an overall gross margin increase to 21%, up 0.6% quarter-on-quarter. (Among these, smartphone gross margin fell to 12% due to declining memory prices, IoT gross margin remained at 20%, internet gross margin reached 76%, and electric vehicles achieved a 20% gross margin.) $XIAOMI-W(01810.HK)

Puyin International raised its target price for SMIC 688981/00981 to 55.6HKD. Its valuation analysis shows no new logic to raise the valuation ceiling post-earnings, similar to MS and JPM's valuation logic. My target price for SMIC is around 53HKD. If the RMB appreciates/depreciates, this price should be adjusted accordingly (SMIC: Valuation Logic and Foreign Targets); $SMIC(00981.HK)

Domestic brokerages released numerous reports on Hua Hong Semiconductor 01347.HK, but the fundamentals remain as stated in the earnings report, with no novel insights. Hua Hong Semiconductor's fundamentals are inferior to SMIC's, and prices above 29.33HKD are suitable for gradual selling. However, Hua Hong's parent company owns a 28nm wafer fab (Hua Hong Fab 5) and a 14nm wafer fab (Hua Hong Fab 6). According to Hua Hong's IPO prospectus, Hua Hong Fab will be injected into Hua Hong within three years of its STAR Market listing (August 7, 2023). Thus, Hua Hong's valuation ceiling is projected at 43.995HKD.$HUA HONG GRACE(01347.HK)

The above stocks were tracked for valuation and are also constituents of the Hang Seng Tech Index ETF (513180) (Hang Seng Tech ETF: A Different Perspective on Investment).

In addition to the Hang Seng Tech Index ETF, the end-application—Robotics ETF (562500) includes China's top AI stocks, covering sensors, servo systems, reducers, AI algorithms, and other core components. Unlike Tesla, which is driven by FSD and robotics valuations, China's market is policy-driven, such as the "Guiding Opinions on the Innovative Development of Humanoid Robots," which aims to achieve independent control of core components and mass production of complete machines by 2025, with unprecedented industry support.

Last week, Alibaba, Baidu, and NetEase released their earnings reports, but valuation analysis was delayed due to HKSI exams and illness. This week, Hong Kong Exchanges and Clearing, Ctrip, Nvidia, Dell, and Salesforce will release their earnings reports, and I will conduct valuation analysis on the knowledge platform.