00:00Cherry Automobile shares have jumped over 11% in their Hong Kong debut as the company enters the electric and smart vehicle market.
00:08The battery maker, CATL, rose 6% to a record high, becoming China's third largest locally listed company.
00:15It now has a market value of $257 billion amid rising battery demand.
00:21Let's talk to Fiona Sincotta, the market analyst at Citi Index.
00:25Fiona, welcome back. Lovely to see you.
00:27So Cherry's strong debut in Hong Kong.
00:30What does all this tell us about investor sentiment towards China's car makers?
00:36Well, as you noted, I mean, we had that really impressive performance.
00:40And if we just have a look at those IPO figures, delve a little bit deeper,
00:44we know that on the IPO, the institutional tranche was actually 11 times oversubscribed.
00:50The retail tranche was 308 times oversubscribed.
00:54So, you know, these numbers are really giving us a sense that there is strong demand for this stock,
01:02but more broadly for the automobile and the EV sector in China.
01:08Given this rise in CATL and other battery and clean energy names,
01:13I mean, do you see a broader shift in capital allocation inside the Chinese equity market,
01:19or is this more of a short-term rally?
01:24No, you know, I think if we look at the fundamentals here, they do appear to be very supportive.
01:31I mean, just having a look at, as you said, CATL, they are up 90% year-to-date, the share price.
01:37And as I said, fundamentals are supportive here.
01:39You know, you've got Beijing backing, you've got subsidies, you've got clean energy targets.
01:44And that, I think, really gives confidence towards the sector.
01:49And then you've also got massive investment infrastructure, which is also adding to this sort of bullish case.
01:56Obviously, there are always risks that one needs to be aware of.
02:00You know, I think, you know, rising costs of raw materials, supplied bottlenecks,
02:04they could all be risks that would affect this.
02:06But I think, broadly speaking, the fundamental backdrop here is really encouraging.
02:09And I promise I won't play this back if it all goes pear-shaped,
02:13but what's your view on whether the tech and the artificial intelligence rally in China is going to go on and on?
02:20I mean, is it sustainable?
02:22Yeah, again, you know, I think structurally there are sort of strong fundamentals behind this as a structure to this rally.
02:30Again, we're seeing, you know, very much state support for it,
02:34the use of AI in industry and embedding that into the economy.
02:40Then you've also got really high investments, large investments from those AI big tech companies.
02:47You know, we're thinking Alibaba, Beidu.
02:49They are investing very heavily here, which should result in revenue growth and profitability.
02:55So, you know, I think with those factors,
02:57and then there's also the fact that there is that difference in valuations at the moment.
03:01So you've got U.S. tech stocks, which are really, you know,
03:03there is a sense that they are very much overvalued right now.
03:06So that could indeed encourage the rotation towards the Chinese tech sector as well.
03:12Fiona, good to see you.
03:13Fiona Sincotta, the market analyst at Citi Index.
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