Since February 14, 2023, Neway Group has emerged as a beacon of investor interest in the Hong Kong stock market, experiencing a substantial bull run over multiple trading days, with its stock price doubling in less than ten trading daysBy February 21, the closing price of Neway Group reached HKD 9.28, representing a remarkable increase of 25.75%, while the trading volume surged to an astounding 112 million shares, pushing the total market cap to HKD 21.71 billionNotably, the stock had a staggering month-to-date rise of 147.5%, showcasing a truly phenomenal performance.

In recent news, Alibaba released its financial results for the third quarter of the fiscal year 2025 last nightTheir revenue for the third quarter showed an 8% year-on-year growth, while cloud revenue grew by 13%, and capital expenditure reached HKD 31.4 billion—all surpassing market expectationsAlibaba Group's CEO, Wu Yongming, remarked, "Looking ahead, the revenue growth of our cloud intelligence sector driven by AI will continue to accelerateWe will maintain our focus on e-commerce and cloud computing, investing continuously to drive long-term growth." Among this strategic push, Neway Group is reportedly closely tied to Alibaba Cloud’s data centers in China.

Neway Group stands as the largest data center service provider in Hong Kong, with their enormous MEGA Gateway data center in Tsuen Wan officially opening in March 2023, marking the seventh high-end data center within their portfolio.

Additionally, the company is set to announce its performance for the first half of the fiscal year 2025 on February 25. According to Jiaoyun International, it is anticipated that the company's revenue will achieve high single-digit year-over-year growth, while EBITDA is expected to rise by low double digits, primarily benefiting from the operational contributions of the MEGAIDC project, increased utilization rates of both existing and new data centers, and price hikes in current projects alongside rising electricity usage

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Given the substantial demand for data centers driven by generative AI, Neway Group's performance in utilization, energy consumption, and pricing is viewed as having considerable potential for upward growth.

In just nine trading days, the stock price escalated nearly 125%, supported by close to 100 million shares purchased via Hong Kong Stock Connect.

But what has driven the surge in capital for Neway Group at this opportune moment? Let me elaborate.

Before any notable price increase, substantial investors typically engage in various strategies to accumulate shares, transitioning from light control to medium and eventually, to significant controlOften, during this accumulation phase, the volume and price movements are relatively stablePrior to February 11, for instance, Neway Group experienced mere fluctuations with an increase of only 0.72% from January 3 to February 7, coupled with a turnover rate of only 1.68%. The average daily trading volume hovered around 1.7 million shares.

The dramatic price performance of Neway Group began on February 11, where from February 11 to February 21, the stock surged by 124.7%, with a total trading volume reaching 498 million sharesThe average daily volume soared to 55.3 million shares—representing nearly 33 times the previous average.

What types of capital are behind this massive trading volume?

Looking at the data from the top ten net buyers and sellers, brokers such as Hong Kong Stock Connect (Shanghai), Hong Kong Stock Connect (Shenzhen), Citibank, and CICC emerged as crucial players driving up Neway's stock price

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In the five trading days leading up to February 20, Hong Kong Stock Connect (Shanghai) and Hong Kong Stock Connect (Shenzhen) collectively net bought 92.27 million shares of Neway Group, while during the same period, net purchasing by Citibank, CICC, and China Merchants Yonglong Bank amounted to 2.33 million shares, 1.31 million shares, and 1.07 million shares respectively.

Extending this timeline to the last 20 days, Hong Kong Stock Connect (Shanghai), Hong Kong Stock Connect (Shenzhen), and Citibank continued to be primary buying entitiesIn total, Hong Kong Stock Connect has acquired 96.19 million shares, enhancing the company's month-to-date increase to over 147%.

It’s worth noting that during this rally, the distribution of Neway Group's shares has transitioned from a concentration at lower levels to a multi-peak distributionAs the stock price rises, the cost of low shares gradually shifts to higher levelsWhen most chips aggregate at the peak, it may indicate that those holding low shares have begun to cash outIn the last 20 days, the primary selling brokers for Neway Group were reported as Hong Kong Shanghai HSBC, Morgan Stanley, BNP Paribas, and UBS, which sold 46.85 million shares, 10.53 million shares, 10.31 million shares, and 7.37 million shares respectivelyNotably, new buyers at the high end included significant participation from Hong Kong Stock Connect.

As of February 20, the top five brokers for Neway Group were Hong Kong Shanghai HSBC, Hong Kong Stock Connect (Shanghai), Hong Kong Stock Connect (Shenzhen), Citibank, and Bank of China (Hong Kong), holding 8.7%, 3.03%, 1.61%, 1.28%, and 0.96% of the shares respectivelyRemarkably, amidst this significant price increase, the holdings of the top five brokers only saw declines in Hong Kong Shanghai HSBC and Bank of China (Hong Kong), with reductions of 1.95% and 0.24% respectively

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The identities of the capital backing these transactions remain unclearFor instance, Hong Kong Shanghai HSBC sold a total of 45 million shares over eight trading days, potentially realizing profits of HKD 143 million based on an average price of HKD 7.18.

With capital continuously flowing out and substantial profits being taken, the question remains: how long can nearly 100 million shares bought through Hong Kong Stock Connect "support" Neway Group?

A New Era for Deepseek: Positive Signals from Multiple Institutions

According to company information, the MEGA-i data center under Neway Group has been rated one of the most interconnected data centers in the world, boasting over 15,000 cross-connectionsMEGA-i provides a robust ecosystem for network access, setting Neway Group apart as a leader in the industryLeveraging the outstanding performance of the MEGA-i data center, Neway has successfully established itself among the top 15 providers globally, holding significant market share in connectivity and data center services, effectively enhancing the operational capacity of mainland enterprises.

Looking at the financial performance, Neway Group's revenues for the 2023/2024 fiscal year reached HKD 2.674 billion, marking a 14% increase year-on-year; net profit attributable to the parent was HKD 907 million, almost flat compared to the same period last yearFurthermore, cash flow from operating activities amounted to HKD 1.590 billion, a 7.9% year-on-year increaseBy the end of the 2024 fiscal year, the company's cash and cash equivalents reached HKD 499 million—significantly improving from HKD 237 million in the same period last year

The various enhancements in financial data point towards a strengthening fundamental position for the company.

As mentioned earlier, Jiaoyun International has expressed optimism regarding Neway Group's performanceThe firm anticipates a year-over-year net profit growth exceeding 20% for the first half of fiscal year 2025.

The underlying confidence for Jiaoyun International's outlook on Neway Group is rooted in a significant potential market expansion.

The Hong Kong data center market, sharply focused by Neway Group, is currently experiencing a robust growth phaseReports project that the size of the Hong Kong data center market will reach USD 2.1 billion by 2024, expected to rise to USD 3.5 billion by 2029, indicating a compound annual growth rate of 10.0% from 2024 to 2029. Amidst the flourishing development of data center hosting markets in the Asia-Pacific region, Hong Kong's unique advantages make it a favored choice for numerous enterprises establishing data centers.

Of course, the dramatic stock price increase is not without its catalysts, such as the intensive incorporation of AI enterprises both domestically and internationally into DeepseekRecently, Guosen Securities released a research report stating that DeepSeek, as a more efficient AI model, will offer new opportunities for IDC data center equipment and servicesThe firm noted that the energy consumption pressure faced by data center IDC service providers is somewhat alleviatedThe challenge of generating and distributing vast amounts of energy required for AI remains significant, but DeepSeek's substantial improvements in computational efficiency are expected to ease the energy consumption burden of IDCs.

Morgan Stanley shares a favorable outlook on the Chinese internet data center (IDC) sector, suggesting that REITs provide onshore financing channels for IDCs, thereby facilitating deleveraging and gathering future capital investments, while also offering valuation indicators for IDC assets

Private REITs are currently valued at 10-13 times earnings, which may trigger a market reevaluationMorgan Stanley has raised target prices for firms such as GDS and 21Vianet to USD 39 and USD 11.7, respectively, maintaining an "Overweight" rating for both, while expressing continued support for Neway Group with an "Add" rating.

Clearly, Neway Group stands out as a preferred option among several institutions in the Hong Kong data center landscapeInvestors on platforms like Xueqiu have even suggested that Neway Group could achieve a tenfold valuation from its current low.

In summary, under this new trend, buoyed by significant trading volume and solid fundamentals, Neway Group has achieved a strong gain of nearly 150% for the month, leading to profits exceeding HKD 100 million for some investorsHowever, for ordinary investors, the decision to dive into such a hot market requires careful consideration.