Daily Investment Strategy
Daily focus：HSBC Holdings（0005）
The company announced plans to privatize Hang Seng Bank (0011) for HK$155 per share in cash, representing a premium of approximately 30%. However, this move has raised serious market concerns about the company's short-term financials and valuation rationality. The transaction is expected to immediately reduce HSBC's CET1 capital adequacy ratio by 125 basis points to 13.4% and suspend share buybacks for at least three quarters, triggering a share price decline. From a valuation perspective, the acquisition of Hang Seng, whose return on equity (11.3%) is significantly lower than its core Hong Kong business (ROE over 30%), at a high premium of 1.8x its P/B, raises questions about its capital efficiency. While management emphasizes long-term synergies, the transaction will immediately dilute the return on equity, leading to a volatile short-term outlook. Investors are advised to exercise caution and not rush into the market.
China's Ministry of Commerce expanded its rare earth export controls
China's Ministry of Commerce expanded its rare earth export controls on Thursday, adding five new key rare earth elements and, for the first time, extending controls to production technology and overseas applications. This move clearly targets the semiconductor and defense sectors. These stricter rare earth controls, announced ahead of an expected meeting between Trump and Xi Jinping at the end of this month, signal Beijing's attempt to strengthen its leverage in trade negotiations. The new regulations require foreign companies to obtain a license if they use Chinese rare earth materials or technology, effectively applying the long-standing US "foreign direct product rule" in reverse to China. This move highlights how rare earths have become a crucial tool in geopolitical competition, with China leveraging its dominant position in the global rare earth processing market, exceeding 90%, to respond to US export restrictions on semiconductor equipment.
Hong Kong Stock Connect recorded a net inflow of HK$3 billion on Thursday, with Kuaishou (1024) receiving the largest net inflow of HK$1.09 billion, followed by ZTE (763). On the other hand, SMIC (981) recorded the largest net outflow of HK$2.4 billion, followed by Hua Hong Semiconductor (1347).
Leung Kai Tong is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to https://apps.sfc.hk/publicregWeb/indi/ADU276/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.
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