[Editor's Market View] The new Federal Reserve Chairman, Walsh, is now in position, with his pragmatic approach earning recognition from Wall Street, leading to a firm stance on the weak dollar and a containment of gold's upward momentum. Last week, stimulus measures in the property sector led the Hang Seng Index to break out of its end-of-month volatility. Geopolitically, the situation in Iran remains tense. A US aircraft carrier, three littoral combat ships, and six destroyers have arrived in the Middle East. Iran's Supreme Leader stated that if the US initiates war, it will trigger a regional conflict: Iran claims to be in a state of full combat readiness, vowing to resolutely counterattack once war is provoked. Starting this Monday, the CME significantly increased margins for gold and silver, with the SHFE following suit; one must be vigilant about liquidity risks triggered by strong deleveraging in the precious metals market. This storm requires time to settle. This week, attention should be paid to Japan's House of Representatives general election on February 8th, which will have some impact on the Asia-Pacific situation. The US will release its January non-farm payroll data on Friday. Market expectations are for an increase of approximately 60,000 to 80,000 jobs, providing insight into its economic condition. The overall situation leans negative, requiring careful risk control.
The hot topic over the weekend was the first day (February 1st) of Tencent Yuanbao's Spring Festival red envelope campaign, with the Tencent Yuanbao App rising to the top free App position on the Apple App Store. Related partners are expected to be sought after. Reports indicate that transformer factories are already operating at full capacity, with some orders for data center-related business scheduled out to 2027. The explosive growth of global AI computing centers has made transformers a scarce resource, with delivery lead times in the US market extending from 50 weeks to 127 weeks. Power equipment exports to the US continue to maintain high growth. On February 1st, new automakers Leapmotor, Li Auto, NIO, and XPeng successively released their January delivery figures. All four automakers achieved year-on-year growth, but delivery performance showed a significant decline compared to December of last year. The automotive sector has been weak for some time, and fundamentally sound players are expected to gradually emerge from this weakness.
In the first month after the Hainan customs closure policy during the New Year, inbound and outbound passenger traffic increased by 31.8% year-on-year, with the duty-free concept being the first to benefit.
[Stock of the Week] China Tourism Group Duty Free Corporation Limited (01880) previously announced plans to subscribe for up to USD 395 million to acquire DFS's core business in Greater China and intangible assets including brand ownership and IP assets; upon completion of the transaction, it intends to privately issue up to 7.33 million and 4.64 million H-shares respectively to LVMH's indirect wholly-owned subsidiary Delphine SAS and the Miller family beneficiary trust, Shoppers Holdings HK Limited. This acquisition targets DFS's core store assets in Greater China, primarily including two flagship stores in prime Hong Kong locations—Tsim Sha Tsui and Causeway Bay—as well as seven stores located within core Macau casino resorts, covering Sands Londoner, Galaxy Macau, and MGM Cotai. Financially, alongside the recovery in high-end consumption in Greater China, the target assets showed continuous improvement in the first three quarters of 2024-2025, with net profits of RMB 127 million and RMB 133 million respectively, with Macau stores contributing the majority of revenue and profit. As both Hong Kong and Macau are core regions for global tourist spending on high-end consumption and services in Greater China, and considering the deep ties with the LVMH group, this acquisition will further strengthen the company's high-end positioning in the duty-free shopping sector. While benefiting from the high-end consumption recovery, it will also serve as an important window for Mainland China's opening to the international community, favoring the company's efforts to attract domestic brands and promote the overseas expansion of premium Chinese goods. The transaction pricing, based on EV/EBITDA and EV/Sales multiples, is lower than comparable and median benchmarks; however, given the current losses at the Hong Kong stores, assuming an annualized 2025 profit of RMB 150 million for DFS Hong Kong and Macau, the PE valuation implied by the maximum acquisition price of USD 395 million is approximately 18.3x, slightly higher than valuations seen in previous A-share market duty-free restructuring cases. In summary, based on the upside potential for Hainan duty-free sales from the high-end consumption recovery, and clear policies positioning the duty-free industry as a key channel for boosting consumption and expanding domestic demand, the company, as an industry leader, is expected to fully benefit in the future, with institutions maintaining a "recommend" rating.
[Industry Observation] Recent reports from CCTV Finance highlight overwhelming order books at Chinese transformer factories. Power equipment transformers are being upgraded to become core components of computing infrastructure. Investigations in Guangdong, Jiangsu, and other Chinese provinces reveal that numerous transformer factories are operating at full capacity, with some orders for data center-related business scheduled out to 2027. The explosive growth of global AI computing centers has made transformers a scarce resource, with delivery lead times in the US market extending from 50 weeks to 127 weeks. Data shows there are approximately 3,000 enterprises in China's transformer industry. In 2025, China's total transformer exports reached RMB 64.6 billion, a growth of nearly 36% compared to 2024. China has become the world's largest transformer producer, boasting the most complete transformer production system globally with fully independent and controllable hard power across the entire industry chain, accounting for about 60% of global capacity. Hong Kong stocks to focus on include Chongqing Machinery & Electric (02722), Tenpao Holdings (01979), Harbin Electric (01133), Wasion Holdings (03393), and Solargiga Energy (00580).
[Data Review] HKEX data shows the total open interest for Hang Seng Index Futures (February) is 122,163 contracts, with a net open interest of 49,083 contracts. The settlement date for Hang Seng Index Futures is February 26, 2026. With the Hang Seng Index at the 27,387 point level, and a dense concentration of bull contracts below near the central axis, the index shows a downward inclination. Last weekend, gold led a significant decline in precious metal prices, and US stocks fell noticeably, reflecting a global reconsideration of US dollar credit. The outlook for the Hang Seng Index this week is bearish.
[Editor's Remarks] Gold surged by 25% within just one month, a first since the 1980s; then, after briefly exceeding $5,500 per ounce, it plummeted, with a single-day drop exceeding 10%, also unprecedented since 1984. This extreme volatility, intertwining sharp rises and crashes, indicates that gold prices have evidently moved beyond being solely driven by fundamentals. At this juncture, investment opportunities in gold jewelry stocks appear more prominent compared to gold mining stocks. This is because, despite the pullback in international gold prices, consumer sentiment towards gold jewelry has fundamentally shifted. The transmission of gold price fluctuations to consumer sentiment for gold jewelry involves a relatively long feedback loop. Furthermore, the focus of gold jewelry sales is on sales revenue rather than consumption tonnage, and the inventory gains from gold jewelry are realized through sales, which also entails a lag.
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